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CA Final · Indirect Tax Laws · Registration

Rohan Pvt Ltd, a registered person, has its registration cancelled with effect from 1 March. On 28 February it held inputs in stock with ITC of ₹2,40,000. The output tax payable on those inputs, computed on the prescribed basis, is ₹2,10,000. Capital goods are ignored. Which amount must Rohan pay under section 29(5), and how?

Rohan must pay ₹2,40,000. Section 29(5) requires payment of the higher of the ITC on inputs held in stock on the day before cancellation and the output tax on those goods, and the payment is made by debit to the electronic credit or cash ledger.

  1. A₹2,40,000, being the higher of the ITC and the output tax, paid by debit to the electronic credit or cash ledgerCorrect
  2. B₹2,10,000, being the lower of the two amounts
  3. C₹30,000, being the difference between the two
  4. D₹4,50,000, being the sum of both amounts

Explanation

Section 29(5) requires payment of an amount equivalent to the ITC on inputs held in stock on the day immediately preceding cancellation, or the output tax on such goods, whichever is higher. Higher of 2,40,000 and 2,10,000 is 2,40,000, payable by debit in the electronic credit ledger or electronic cash ledger. Choosing the lower amount reverses the rule.

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