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CA Final · Indirect Tax Laws · Registration

Ravi Traders, a registered regular taxpayer in Jaipur, discontinued its business on 31 March. It applied for cancellation of registration. On the day immediately preceding the date of cancellation it held inputs in stock on which input tax credit of Rs 40,000 was availed; the output tax payable on those inputs is Rs 52,000. What amount must Ravi Traders pay under section 29 on these inputs?

Ravi Traders must pay Rs 52,000. On cancellation, section 29(5) requires payment of the input tax credit on inputs in stock or the output tax on those goods, whichever is higher. The output tax of Rs 52,000 exceeds the credit of Rs 40,000.

  1. ARs 40,000, being the credit availed
  2. BRs 52,000, being the higher of the credit and the output taxCorrect
  3. CRs 12,000, being the difference between the two
  4. DRs 92,000, being the sum of both amounts

Explanation

Section 29(5) requires payment of an amount equivalent to the input tax credit on inputs held in stock or the output tax payable on such goods, whichever is higher. Here Rs 52,000 exceeds Rs 40,000, so Rs 52,000 is payable. Paying only the credit ignores the 'whichever is higher' rule.

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