CA Final Paper 5: IDT common mistakes
CA Final Paper 5: IDT · Understand the traps and how to avoid them.
Computing the charge of tax without first fixing the correct place of supply, then applying CGST+SGST where IGST was due (or vice versa) and carrying that wrong tax split through the entire computation.
Candidates treat place of supply as a separate chapter and answer it in isolation; under exam pressure they jump to computation and pick the tax head by intuition ('both parties in India = CGST+SGST') without running the section 10/12/13 analysis for the actual fact pattern.
What to do instead
Adopt a fixed sequence: identify whether the supply is inter-State or intra-State, then apply sections 7/8 IGST Act and the relevant place-of-supply rule (s.10 general, s.12 B2B services, s.13 B2C services, s.10/11 immovable property and goods), state the section number in one line, and only then split the tax. In every computation answer write the place-of-supply conclusion as an explicit first step so the examiner can see the reasoning even if arithmetic slips.
Treating every receipt of money or every inter-branch transfer as a 'supply' and levying GST on reimbursements, branch stock transfers, and transactions between distinct persons without checking Schedule I and the distinct-person test.
Candidates memorise section 7(1)(a) 'sale, transfer, barter...' and forget the Schedule I deeming provisions and Schedule III exclusions; the phrase 'supply' feels broad, so they tax everything. They also miss that the same PAN with different registrations creates 'distinct persons'.
What to do instead
Build a three-gate checklist for every transaction: (1) Is it a supply under s.7(1) - made in the course or furtherance of business? (2) If not, does Schedule I deem it (permanent transfer of business assets, supplies between distinct persons, principal-agent)? (3) Does Schedule III exclude it (employee services, functions of constitutional bodies, actionable claims other than specified)? Apply the gates in order and cite the Schedule entry in the answer.
Claiming input tax credit on blocked items under section 17(5) - motor vehicles, food and beverages, club memberships, works contract for immovable property, employee benefits - and forgetting the 180-day payment rule and the 17(2) reversal for exempt supplies.
Candidates remember the positive conditions in section 16 (possession of invoice, receipt of goods, tax paid, return filed) and stop there, because section 16 is studied first and 17(5) is a long list that is skimmed rather than applied clause by clause.
What to do instead
Maintain a one-page negative list keyed to section 17(5) clauses (a) to (i) and run every credit through it before allowing it. Separately apply the 180-day rule under the second proviso to s.16(2) and the rule 42/43 proportional reversal for common credits. In answers, show allowed and blocked credits in two columns with the clause cited.
Computing value of supply at transaction value without testing the section 15 inclusions and exclusions - ignoring subsidies, non-monetary consideration, related-party transactions, and the valuation rules for the closest comparable.
Candidates equate 'value' with 'invoice amount' and skip the proviso to section 15(1) for related and distinct persons, and they forget that section 15(2) inclusions (taxes other than GST, incidental expenses, interest/late fee/penalty) change the base.
What to do instead
For each valuation question, first ask whether section 15(1) applies at all; if the supplier and recipient are related or distinct persons, or consideration is not wholly in money, move to rules 27–31 of the CGST Rules and state which rule you are using and why earlier rules fail. Then add section 15(2) items and deduct the section 15(3) discounts only where the conditions are met.
Filing and payment answers that ignore the statutory due dates and interest mechanics - quoting 20th for GSTR-3B in all cases, missing the 13th for GSTR-1, the 18% interest on delayed cash payment and 24% on excess ITC utilisation, and the 3-year time limit for refunds.
Dates are learned as a table and then mixed up under exam pressure; candidates also treat interest as a single rate and forget that interest on delayed payment under s.50(1) is computed only on the net cash portion, not on the whole liability.
What to do instead
Write the compliance calendar from memory weekly: GSTR-1 by the 11th (monthly filers), IFF by the 13th for QRMP, GSTR-3B by the 20th (monthly) and 22nd/24th for QRMP, CMP-08 quarterly, GSTR-9 by 31 December. For interest, state the base explicitly - tax paid in cash - and cite rule 88B for the 24% excess-ITC case. Practise one full late-filing computation end to end.
Drafting appeals without the pre-deposit arithmetic: paying the wrong percentage, applying it to the wrong amount (tax only vs. tax plus penalty), and missing the three-month limitation or the mandatory pre-deposit before the appeal is even entertained.
Candidates recall '10% pre-deposit' but not that for appellate authority it is 10% of the disputed tax subject to a cap of Rs.20 crore, and that the GST Appellate Tribunal requires an additional 10% (cap Rs.20 crore) with a different computation. They also confuse the appeal to the Appellate Authority with the revision power of the Commissioner.
What to do instead
Use a standard template: (1) order date, (2) 3-month limitation from communication, (3) pre-deposit = 10% of disputed tax, capped at Rs.20 crore, paid in cash, (4) grounds of appeal, (5) stay application. For tribunal appeals add the additional 10% with its own cap. Always state which amount is disputed - tax, interest or penalty - because the pre-deposit attaches to tax.
In Customs valuation, using the transaction value under rule 3 without testing the rule 3(2) conditions, and forgetting that landing charges, royalties, licence fees and assists must be added while post-importation costs and buying commission are excluded.
Candidates learn rule 3 as 'price actually paid or payable' and skip the six conditions and the additions/deductions list; they also confuse buying commission (not added) with selling commission (added).
What to do instead
For every valuation question, tick the rule 3(2) conditions in writing, then build the assessable value as: price + assists + royalties/licence fees related to imported goods + selling commission + cost of packing + cost of transport to port of import, less buying commission and post-importation installation. If any condition fails, state which of rules 4 to 9 you fall back to and why.
Confusing the Customs duty structure: applying BCD on the CIF value but then computing Social Welfare Surcharge, IGST and compensation cess on the wrong base, and treating the special CVD or anti-dumping duty as always applicable.
Each duty has a different base and candidates flatten them into 'duty on assessable value'. They also miss that IGST on imports is levied under section 3(7) of the Customs Tariff Act on the value plus BCD plus SWS, and that SWS is 10% of BCD (with exemptions for some goods).
What to do instead
Write the cascade explicitly for each import: Assessable value (CIF) → BCD at the tariff rate → SWS at 10% of BCD → IGST at the applicable rate on (AV + BCD + SWS) → compensation cess where notified. Show each line separately and check whether a notification exempts SWS or BCD for the specific goods before computing.
In FTP and SEZ answers, mixing up the scheme mechanics: treating EPCG and Advance Authorisation as interchangeable, ignoring the positive net foreign exchange obligation and the DTA sale rules for EOUs, and applying the wrong exemption route for SEZ supplies.
The schemes share vocabulary ('authorisation', 'obligation', 'deemed export') and candidates memorise names without the conditions; the DTA sale limits (50% of FOB value for EOUs, subject to duty) and the SEZ zero-rated supply route under section 16 IGST Act are commonly conflated.
What to do instead
Build a comparison table with columns: scheme, purpose, input allowed duty-free, export obligation (quantity/value/NFE), time period, and consequence of default. For SEZ, separately note that supplies to SEZ are zero-rated under s.16 IGST Act and that the DTA sale is permitted only with duty payment and within the prescribed ceiling. Cite the relevant FTP chapter and the IGST Act section together.
Answering professional ethics and tax-practice questions with generic statements ('be honest', 'follow the law') instead of applying the Chartered Accountants Act, the Code of Ethics and the specific penalty or disciplinary consequence for a GST or Customs practitioner.
Candidates treat this domain as filler and do not prepare fact patterns; they also do not know the distinction between 'professional misconduct' under the First and Second Schedules and the consequences of signing a false certificate or accepting an audit without communicating with the previous auditor.
What to do instead
Prepare five recurring fact patterns: signing a false GST return or certificate, accepting an assignment where the previous auditor was not communicated with, charging fees contingent on the outcome, holding an audit while disqualified, and representing a client before authorities while having a conflict. For each, state the relevant Schedule entry, the clause of the Code of Ethics and the disciplinary outcome. Practise writing a 4–5 line answer that names the clause rather than describing good behaviour.