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CMA Intermediate · Direct and Indirect Taxation · Registration

Ravi Enterprises, a registered person, has its registration cancelled with effect from 1 March. On the day immediately preceding cancellation it held inputs in stock on which ITC of Rs 40,000 was availed. The output tax payable on those inputs is Rs 52,000. What amount must Ravi pay under section 29(5)?

Ravi must pay Rs 52,000. Section 29(5) requires payment of the input tax credit on inputs in stock or the output tax payable on them, whichever is higher. Output tax of Rs 52,000 exceeds the ITC of Rs 40,000, so the higher figure is payable.

  1. ARs 40,000
  2. BRs 52,000Correct
  3. CRs 12,000
  4. DRs 92,000

Explanation

Section 29(5) requires payment of the credit of input tax on inputs held in stock or the output tax payable on such goods, whichever is higher. Higher of 40,000 and 52,000 is 52,000. The 40,000 option ignores the 'whichever is higher' rule.

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