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Ultimate GST Case Study: The “Omega Dynamics” Master Problem
Prepared exclusively for CMA Students
Case Background & Facts
Company: Omega Dynamics Pvt. Ltd. (Registered in Maharashtra)
Month under review: October 2026
Nature of Business: Manufacturing of taxable goods, trading, and provision of consulting services. The company also exports goods and supplies to SEZs.
Task: Read the 70 transactions below, determine the nature of supply, applicable Sections/Rules under the CGST Act 2017, evaluate Input Tax Credit (ITC) eligibility, and calculate the final GST liability.
*Assume standard GST rates unless specified otherwise: CGST 9%, SGST 9%, IGST 18%.
Part A: The Problem Statement (List of Transactions)
Review the following transactions carefully before proceeding to the solution matrix.
- Sale of manufactured goods to a registered dealer in Pune (Intra-state). (₹5,00,000)
- Sale of goods to an unregistered dealer in Gujarat (Inter-state). (₹2,50,000)
- Export of goods to Germany under LUT (Letter of Undertaking). (₹10,00,000)
- Export of goods to USA on payment of IGST. (₹8,00,000)
- Supply of goods to a Developer in SEZ, Noida. (₹6,00,000)
- Supply of fresh unbranded agricultural produce (Exempt). (₹3,00,000)
- Supply of alcoholic liquor for human consumption. (₹2,00,000)
- Composite Supply: Sold machinery along with installation and transit insurance. (₹15,00,000)
- Mixed Supply: Diwali hamper containing chocolates, dry fruits, and a gold coin. (₹1,00,000)
- Advance received for consulting services to be provided in November. (₹2,00,000)
- Advance received for supply of goods. (₹4,00,000)
- Sale of old capital goods (Machinery) used for 3 years. Original ITC taken. (₹3,00,000)
- Free samples distributed to potential clients. (₹50,000)
- Branch transfer to a branch in Karnataka (Distinct Person). (₹7,00,000)
- Penal interest recovered from customers for delayed payment. (₹10,000)
- Purchase of Raw Material ‘X’ from a local registered supplier. (₹4,00,000)
- Purchase of Raw Material ‘Y’ from Tamil Nadu. (₹6,00,000)
- Import of raw materials from China. Basic Customs Duty paid. (₹12,00,000)
- Purchase from a Composition Dealer. (₹1,00,000)
- Purchase of computers and laptops for office staff. (₹5,00,000)
- Audit and accounting fees paid to a CMA firm. (₹1,50,000)
- Import of technical consulting services for business use. (₹3,00,000)
- Import of interior design services for Director’s personal home. (₹2,00,000)
- Purchase of specialized moulds and dies sent directly to Job Worker. (₹4,00,000)
- Purchase of an SUV (seating capacity 5) for the Managing Director. (₹25,00,000)
- Purchase of a delivery truck for transporting raw materials. (₹15,00,000)
- Catering services for company annual day. (₹80,000)
- Life insurance premium paid for key employees. (₹1,20,000)
- Works contract service received for construction of new factory building. (₹30,00,000)
- Works contract service received for construction of plant and machinery. (₹20,00,000)
- Raw materials lost in a fire accident in the warehouse. (₹2,00,000)
- Club membership fees paid for senior executives. (₹50,000)
- Freight paid to GTA (GTA opts for 5%). (₹1,00,000)
- Legal services obtained from an individual advocate. (₹2,00,000)
- Sitting fees paid to Independent Directors. (₹50,000)
- Security services received from an individual proprietor. (₹1,20,000)
- Sponsorship services provided to a local sports event. (₹3,00,000)
- Renting of a passenger motor vehicle (Supplier charges 5%). (₹60,000)
- Payment to Vendor A not made within 180 days. (₹5,00,000)
- Payment made to Vendor B (reversed earlier due to 180 days rule). (₹3,00,000)
- Debit note received from a supplier due to price escalation. (₹50,000)
- Credit note issued to customer for goods returned within 6 months. (₹1,00,000)
- Volume discount given to distributor as per agreement. (₹2,00,000)
- Common inputs used for both taxable and exempt supplies. (₹1,00,000)
- Capital goods used for both taxable and exempt supplies. (₹5,00,000)
- Inputs sent for Job Work, not returned within 1 year. (₹3,00,000)
- Goods sent on “Sale or Return” basis. 6 months expired. (₹4,00,000)
- CSR Expenses incurred by distributing free sanitizers. (₹1,00,000)
- Employee travelling allowance (Air tickets booked for business). (₹1,50,000)
- Payment of Output Liability via Electronic Credit Ledger.
- B2B Supply made without generating e-invoice IRN (Applicable as AATO > ₹5 Cr). (₹8,00,000)
- Corporate guarantee issued to a bank on behalf of a subsidiary company. (₹10,00,000)
- Salary paid to a full-time working Executive Director (TDS deducted u/s 192). (₹12,00,000)
- Liquidated damages recovered from a contractor for project delay. (₹50,000)
- High Sea Sales: Goods purchased from USA and sold to a UK client before customs clearance. (₹20,00,000)
- Sale of old warehouse building (Occupation Certificate was received 2 years ago). (₹50,00,000)
- Advance received for the sale of an under-construction commercial office space. (₹5,00,000)
- Cab services provided through an Electronic Commerce Operator (ECO). (₹30,000)
- Common IT support services received at Head Office, distributed to branches. (₹2,00,000)
- Accounting services provided by Head Office to a branch in another state (No consideration). (₹1,50,000)
- Export of consulting services. Foreign exchange not realized within RBI timeframe. (₹4,00,000)
- TCS deducted by Amazon (ECO) for goods sold through their platform. (₹5,000)
- Sale of RoDTEP (Duty Credit) scrips in the open market. (₹1,00,000)
- Goods taken out of India for a trade exhibition and brought back within 6 months. (₹3,00,000)
- Car dealer branch purchased cars capitalized as demonstration vehicles. (₹15,00,000)
- Refund claimed on accumulated ITC due to Inverted Duty Structure. (₹2,50,000)
- Subscription to foreign cloud software (OIDAR) for business purposes. (₹1,00,000)
- Goods sold to an outbound international tourist at airport duty-free shop. (₹80,000)
- Development and delivery of customized software for a client. (₹6,00,000)
- Purchase invoice auto-populated in IMS, but Omega Dynamics marked it as “Rejected”. (₹2,00,000)
Part B: Transaction Ledger & Tax Treatment (Solution)
| # | Transaction Description | Value (₹) | Type | Tax/ITC Treatment & Relevant Section |
|---|---|---|---|---|
| 1 | Sale of manufactured goods to a registered dealer in Pune (Intra-state). | 5,00,000 | Outward | Taxable Supply (Sec 7). CGST + SGST applicable. |
| 2 | Sale of goods to an unregistered dealer in Gujarat (Inter-state). | 2,50,000 | Outward | Taxable Inter-state Supply. IGST applicable. |
| 3 | Export of goods to Germany under LUT. | 10,00,000 | Outward | Zero-Rated Supply (Sec 16 IGST Act). No tax payable. |
| 4 | Export of goods to USA on payment of IGST. | 8,00,000 | Outward | Zero-Rated Supply. IGST paid, eligible for refund (Sec 54). |
| 5 | Supply of goods to a Developer in SEZ, Noida. | 6,00,000 | Outward | Zero-Rated Supply (Sec 16 IGST Act). |
| 6 | Supply of fresh unbranded agricultural produce (Exempt). | 3,00,000 | Outward | Exempt Supply (Sec 11). Needs Rule 42/43 ITC reversal. |
| 7 | Supply of alcoholic liquor for human consumption. | 2,00,000 | Outward | Non-GST Supply (Sec 9(1)). Excluded from GST scope. |
| 8 | Composite Supply: Sold machinery along with installation and insurance. | 15,00,000 | Outward | Composite Supply (Sec 8(a)). Principal supply is machinery (18%). |
| 9 | Mixed Supply: Diwali hamper (chocolates, dry fruits, gold coin). | 1,00,000 | Outward | Mixed Supply (Sec 8(b)). Taxed at highest rate (Chocolates – 18%). |
| 10 | Advance received for consulting services to be provided in November. | 2,00,000 | Outward | Time of Supply for services includes advance (Sec 13(2)). GST payable. |
| 11 | Advance received for supply of goods. | 4,00,000 | Outward | No GST on advance for goods (Notification 66/2017). |
| 12 | Sale of old capital goods (Machinery) used for 3 years. | 3,00,000 | Outward | Sec 18(6). Tax payable is higher of (Tax on transaction value OR ITC minus 5% per quarter). |
| 13 | Free samples distributed to potential clients. | 50,000 | Outward | Not a supply. However, ITC must be reversed under Sec 17(5)(h). |
| 14 | Branch transfer to a branch in Karnataka (Distinct Person). | 7,00,000 | Outward | Supply under Schedule I. IGST applicable. |
| 15 | Penal interest recovered from customers for delayed payment. | 10,000 | Outward | Includible in value of supply (Sec 15(2)(d)). |
| 16 | Purchase of Raw Material ‘X’ from a local registered supplier. | 4,00,000 | Inward | Eligible ITC (Sec 16(1)). CGST + SGST. |
| 17 | Purchase of Raw Material ‘Y’ from Tamil Nadu. | 6,00,000 | Inward | Eligible ITC. IGST. |
| 18 | Import of raw materials from China. Basic Customs Duty paid. | 12,00,000 | Inward | Eligible ITC on IGST paid on imports (Sec 16). |
| 19 | Purchase from a Composition Dealer. | 1,00,000 | Inward | No ITC available (Sec 10). Bill of supply received. |
| 20 | Purchase of computers and laptops for office staff. | 5,00,000 | Inward | Eligible ITC as Capital Goods. |
| 21 | Audit and accounting fees paid to a CMA firm. | 1,50,000 | Inward | Eligible ITC. Business expense. |
| 22 | Import of technical consulting services for business use. | 3,00,000 | RCM | RCM applicable (Sec 7(1)(b)). ITC available after payment. |
| 23 | Import of interior design services for Director’s personal home. | 2,00,000 | RCM | RCM applicable, but ITC blocked (Personal use – Sec 17(1)). |
| 24 | Purchase of specialized moulds and dies sent directly to Job Worker. | 4,00,000 | Inward | Eligible ITC. Goods directly sent to job worker (Sec 19). |
| 25 | Purchase of an SUV (seating capacity 5) for the Managing Director. | 25,00,000 | Blocked | Blocked Credit under Sec 17(5)(a) (capacity <= 13 persons). |
| 26 | Purchase of a delivery truck for transporting raw materials. | 15,00,000 | Inward | Eligible ITC. Transport of goods is an exception. |
| 27 | Catering services for company annual day. | 80,000 | Blocked | Blocked Credit under Sec 17(5)(b)(i). |
| 28 | Life insurance premium paid for key employees. | 1,20,000 | Blocked | Blocked Credit under Sec 17(5)(b)(iii). |
| 29 | Works contract service received for construction of new factory building. | 30,00,000 | Blocked | Blocked Credit under Sec 17(5)(c). |
| 30 | Works contract service received for construction of plant and machinery. | 20,00,000 | Inward | Eligible ITC. Plant & machinery is an exception. |
| 31 | Raw materials lost in a fire accident in the warehouse. | 2,00,000 | Reversal | ITC must be reversed under Sec 17(5)(h). |
| 32 | Club membership fees paid for senior executives. | 50,000 | Blocked | Blocked Credit under Sec 17(5)(b)(ii). |
| 33 | Freight paid to GTA (GTA opts for 5%). | 1,00,000 | RCM | RCM applicable. Omega pays 5% tax. ITC eligible. |
| 34 | Legal services obtained from an individual advocate. | 2,00,000 | RCM | RCM applicable. ITC eligible. |
| 35 | Sitting fees paid to Independent Directors. | 50,000 | RCM | RCM applicable. ITC eligible. |
| 36 | Security services received from an individual proprietor. | 1,20,000 | RCM | RCM applicable. ITC eligible. |
| 37 | Sponsorship services provided to a local sports event. | 3,00,000 | RCM | RCM applicable. ITC eligible. |
| 38 | Renting of a passenger motor vehicle (Supplier charges 5%). | 60,000 | RCM | RCM applicable. ITC blocked under 17(5)(a). |
| 39 | Payment to Vendor A not made within 180 days. | 5,00,000 | Reversal | ITC reversed along with interest (Sec 16(2) proviso). |
| 40 | Payment made to Vendor B (reversed earlier due to 180 days rule). | 3,00,000 | Re-claim | ITC re-claimed. No time limit for reclaim (Rule 37). |
| 41 | Debit note received from a supplier due to price escalation. | 50,000 | Inward | Eligible for additional ITC based on Debit Note. |
| 42 | Credit note issued to customer for goods returned within 6 months. | 1,00,000 | Adjustment | Output tax liability reduced (Sec 34). |
| 43 | Volume discount given to distributor as per agreement. | 2,00,000 | Adjustment | Liability reduced, provided distributor reverses ITC. |
| 44 | Common inputs used for both taxable and exempt supplies. | 1,00,000 | Rule 42 | ITC reversal under Rule 42 proportionate to exempt turnover. |
| 45 | Capital goods used for both taxable and exempt supplies. | 5,00,000 | Rule 43 | Reversal under Rule 43 applied over 60 months. |
| 46 | Inputs sent for Job Work, not returned within 1 year. | 3,00,000 | Deemed Supply | Treated as deemed supply (Sec 19(3)). GST payable. |
| 47 | Goods sent on “Sale or Return” basis. 6 months expired. | 4,00,000 | Time of Sup. | Invoice to be issued on expiry of 6 months (Sec 31(7)). |
| 48 | CSR Expenses incurred by distributing free sanitizers. | 1,00,000 | Blocked | ITC blocked under Sec 17(5) amendments for CSR. |
| 49 | Employee travelling allowance (Air tickets booked for business). | 1,50,000 | Inward | Eligible ITC (strictly for business travel). |
| 50 | Payment of Output Liability via Electronic Credit Ledger. | – | Payment | Set-off rules (Sec 49A & 49B). |
| 51 | B2B Supply made without generating e-invoice IRN. | 8,00,000 | Non-Compl. | Invoice invalid (Rule 48(5)). Recipient blocked from ITC. Penalty u/s 122 applicable. |
| 52 | Corporate guarantee issued to a bank on behalf of a subsidiary. | 10,00,000 | Outward | Taxable (Rule 23A). Value is 1% of guarantee or actual consideration. |
| 53 | Salary paid to a full-time working Executive Director. | 12,00,000 | No Supply | Covered under Schedule III (Employer-employee relationship). No GST. |
| 54 | Liquidated damages recovered from a contractor for project delay. | 50,000 | No Supply | As per Circular 178, merely a condition of contract, not a supply of service. |
| 55 | High Sea Sales: Goods purchased from USA and sold to a UK client. | 20,00,000 | No Supply | Covered under Schedule III. Exempt from GST. |
| 56 | Sale of old warehouse building (OC received 2 years ago). | 50,00,000 | No Supply | Sale of building after CC/OC is a Schedule III item. Not taxable. |
| 57 | Advance received for the sale of under-construction office space. | 5,00,000 | Outward | Supply of service (Construction). Taxable at applicable rates. |
| 58 | Cab services provided through an Electronic Commerce Operator. | 30,000 | Sec 9(5) | ECO is liable to pay tax under Sec 9(5). Omega has no tax liability. |
| 59 | Common IT support services received at HO, distributed to branches. | 2,00,000 | ISD | Input Service Distributor (ISD) mechanism must be used to distribute eligible ITC. |
| 60 | Accounting services provided by HO to a branch in another state. | 1,50,000 | Cross Charge | Taxable as supply between distinct persons under Schedule I. |
| 61 | Export of consulting services. Forex not realized within RBI timeframe. | 4,00,000 | Reversal | Fails Sec 2(6) of IGST Act. Treated as domestic supply, GST payable with interest. |
| 62 | TCS deducted by Amazon (ECO) for goods sold via platform. | 5,000 | TCS | TCS at 1% can be claimed and credited to the Electronic Cash Ledger. |
| 63 | Sale of RoDTEP (Duty Credit) scrips in the open market. | 1,00,000 | Exempt | Exempt supply (Notification 2/2017). Requires Rule 42/43 ITC reversal. |
| 64 | Goods taken out of India for exhibition and brought back within 6 months. | 3,00,000 | No Supply | Not treated as export or supply since brought back within the 6-month window. |
| 65 | Car dealer branch purchased cars capitalized as demo vehicles. | 15,00,000 | Eligible | Exception to Sec 17(5)(a) as they are used for further supply of such vehicles. |
| 66 | Refund claimed on accumulated ITC due to Inverted Duty Structure. | 2,50,000 | Refund | Eligible under Sec 54(3). Refund formula excludes ITC on capital goods. |
| 67 | Subscription to foreign cloud software (OIDAR) for business. | 1,00,000 | RCM | RCM applies on import of OIDAR services by a registered person. |
| 68 | Goods sold to outbound international tourist at duty-free shop. | 80,000 | Exempt | Zero-rated/Exempt as per specific IGST provisions for duty-free shops. |
| 69 | Development and delivery of customized software for a client. | 6,00,000 | Outward | Treated as Supply of Service under Schedule II. |
| 70 | Purchase invoice auto-populated in IMS, but Omega marked “Rejected”. | 2,00,000 | IMS Block | ITC cannot be availed until the invoice is formally accepted in the IMS. |
Working Notes & Final Liability Calculation (Updated)
*Note to Students: Below is the aggregate mathematical representation incorporating all 70 transactions. The light background ensures all black-text figures are crystal clear.
1. Output Tax Liability
| Particulars | IGST (₹) | CGST (₹) | SGST (₹) |
|---|---|---|---|
| Total Outward Taxable Supplies (Base + New Txns) | 4,06,800 | 2,61,000 | 2,61,000 |
| Liability on RCM (GTA, Legal, OIDAR Import, etc.) | 72,000 | 22,500 | 22,500 |
| Total Gross Liability (A) | 4,78,800 | 2,83,500 | 2,83,500 |
GST Compliance & Audit Framework (FY 2025-26 & 2026-27)
Modern GST compliance has shifted from manual yearly audits to real-time, system-driven validations. CMA professionals must ensure their clients meet the following thresholds and mandates:
- GSTR-9 (Annual Return): Mandatory for aggregate turnover exceeding ₹2 Crore. Due date for FY 2025-26 is December 31, 2026.
- GSTR-9C (Reconciliation Statement): Mandatory for turnover exceeding ₹5 Crore. The traditional CA/CMA audit certification has been replaced with self-certification by the taxpayer. It reconciles the audited financials (PAN-level) with GSTR-9.
- E-Invoicing Applicability: Mandatory for businesses with an Aggregate Annual Turnover (AATO) exceeding ₹5 Crore. Non-generation of IRN renders the invoice invalid, leading to denial of ITC for the recipient (See Transaction 51).
- Invoice Management System (IMS): The newest compliance hurdle. GSTR-2B is now generated based on actions taken (Accept/Reject/Pending) in the IMS. Rejected invoices explicitly block ITC utilization (See Transaction 70).
Frequently Asked Questions (FAQs)
- What is the interest rate for delayed GST payment?
- The interest rate for delayed payment of output GST is 18% per annum under Section 50 of the CGST Act. Note that this is a statutory rate fixed under the tax legislation and is independent of prevailing banking benchmarks (for context, the current RBI repo rate remains unchanged at 5.5%).
- Can I revise GSTR-9 or GSTR-9C after filing?
- No. Once filed, neither GSTR-9 nor GSTR-9C can be revised. Any additional liability discovered must be paid using form DRC-03.
- Is ITC available on Corporate Social Responsibility (CSR) expenses?
- No. Following recent amendments to Section 17(5) of the CGST Act, Input Tax Credit is strictly blocked on goods or services used for fulfilling corporate social responsibility obligations.
- What happens if a vendor does not upload their invoice?
- Under the strict enforcement of Section 16(2)(aa), ITC can only be claimed if the supplier has uploaded the invoice in their GSTR-1 and it successfully reflects in the recipient’s GSTR-2B via the IMS platform. Unmatched credits are no longer allowed.
