GST and TDS Interview Questions and Answers: 60 Questions from Easy to Hard
This guide is for B.Com and M.Com freshers, CA, CMA and CS students, and accountants in India with 1 to 10 years of experience preparing for interviews as a GST executive, tax associate, accounts executive or TDS compliance officer. It has 60 questions with model answers in three levels: the basics (CGST, SGST and IGST, input tax credit, reverse charge, TAN and the common TDS sections), the monthly work of the first few years (place of supply cases, GSTR-2B reconciliation, interest, e-way bills, salary and rent TDS), and senior topics such as credit utilisation, reversals, ISD, defaults and the move to the Income-tax Act, 2025. Rates, limits and due dates change every year, so each one is given as an assumption or with its year, and every amount has been worked out. TDS sections use the Income-tax Act, 1961 numbers. Answer aloud first, then compare.
- 60 questions, 3 levels
- Updated
- CoreHRx Jobs
- 5,673 open Accounting and finance jobs
What GST and TDS interviews cover
- GST structure: CGST, SGST and IGST, place of supply, time and value of supply, and how tax invoices, credit notes and e-invoices work.
- Input tax credit: the conditions in section 16, blocked credits in section 17(5), reversals, and the monthly match with GSTR-2B.
- Compliance: GSTR-1 and GSTR-3B, reverse charge, the composition scheme, e-way bills, and how interest and late fees are worked out.
- TDS: who must deduct, TAN, the common sections (salary, contractors, professional fees, rent), deposit, quarterly statements, Form 16 and 16A, and Form 26AS.
- Practical sums: most interviews hand you a short invoice or ledger and ask for the GST, the TDS, the credit you can claim or the interest due.
How to prepare (freshers and experienced)
- Freshers: learn the vocabulary first (supply, place of supply, input tax credit, deductor, deductee) and explain each with a one-line example in rupees.
- Practise by hand: take five sample purchase and sales invoices, work out the GST, the TDS and the net payment, and pass the journal entries.
- Experienced candidates: be ready to walk through your month-end routine, a GSTR-2B reconciliation you ran, a TDS default you cleared on TRACES and a notice you answered.
- Read the latest notifications and Budget changes before the interview, because rates, limits and due dates change; quote each one with its year.
- Know the law change: the Income-tax Act, 2025 replaces the 1961 Act from 1 April 2026 and renumbers the TDS sections, so be ready to give both references.
Common mistakes and interview-day tips
- Do not quote a rate or due date as permanent. Say which year or assumption you are using, and where you would confirm it (the CBIC and income-tax websites).
- Do not compute TDS on the GST amount when GST is shown separately on the invoice, and do not claim input tax credit only because an invoice is in your books.
- Keep the two laws apart: GST is an indirect tax on supplies under the GST Acts, while TDS is a way of collecting income tax under the Income-tax Act.
- Show your working on a sum, state the assumption, and end with the action: the journal entry, the return table or the follow-up with the vendor.
- If you do not know a provision, say how you would find it (the Act, the rules, notifications, the GST or TRACES portal) instead of guessing a section number.
GST and TDS interview questions: Easy questions (freshers)
20 questions1. What is GST, and why does a sale within a state attract CGST and SGST while an inter-state sale attracts IGST?
GST is a destination-based tax on the supply of goods and services, in force since 1 July 2017. India runs a dual GST: on a supply within one state, the Centre levies CGST and the state levies SGST (UTGST in union territories without their own legislature); on a supply between states, the Centre levies IGST and later passes the state share to the consuming state. Assume an 18% rate: a Rs 10,000 sale from Pune to Nagpur carries CGST 900 and SGST 900, while the same sale from Pune to Indore carries IGST 1,800. The total is the same; who collects it differs.
2. What does each part of a 15-character GSTIN tell you?
The first two digits are the state code, such as 27 for Maharashtra, 29 for Karnataka and 33 for Tamil Nadu. The next ten characters are the PAN of the business, so all registrations of one PAN share them. The 13th character counts the registrations of that PAN in the same state (1 for the first), the 14th is Z by default, and the 15th is a check character. So 27ABCDE1234F1Z5 is the format of a Maharashtra GSTIN. Validate every vendor GSTIN on the GST portal before booking the bill: with a wrong GSTIN the invoice never reaches your GSTR-2B.
3. What is the difference between a composite supply and a mixed supply?
A composite supply is two or more supplies that are naturally bundled and sold together in the normal course of business, with one principal supply; the whole bundle is taxed at the rate of the principal supply. A laptop sold with its carry bag and charger is taxed as the laptop. A mixed supply is a set of items that could be sold separately but are sold together for one price, such as a Diwali hamper of sweets, dry fruits and a steel bottle; it is taxed at the highest rate among the items. The test is whether the bundling is natural, not how the invoice is worded.
4. What is the difference between a tax invoice, a bill of supply and a credit note?
A tax invoice is issued by a registered person for a taxable supply and shows both GSTINs, the place of supply, HSN or SAC codes, the taxable value and the tax under each head; the buyer claims input tax credit on it. A bill of supply is issued when no tax can be charged, for example by a composition dealer or for exempt goods, so the buyer gets no credit. A credit note is issued by the supplier after the invoice to reduce the value or tax, for goods returned, a lower final price or an agreed discount. A debit note does the opposite and increases them.
5. What is place of supply, and why does it matter?
Place of supply is the state where the law treats a supply as consumed. Compare it with the supplier's location: the same state means CGST plus SGST, and different states mean IGST. It also decides which state finally gets the tax. For goods that move, the place of supply is usually where the movement ends for delivery. For most services to a registered business it is the location of that business, but there are special rules: a hotel stay, for example, is taxed where the hotel stands. Charging the wrong head is costly, because the buyer cannot claim it and the supplier must correct it.
6. What is input tax credit, and how does it prevent tax on tax?
Input tax credit (ITC) lets a registered business set off the GST it paid on business purchases against the GST it owes on its sales, so tax is paid only on the value added at each stage. Assume 18%: a Coimbatore trader buys goods for Rs 50,000 plus GST 9,000 and sells them for Rs 80,000 plus GST 14,400. He pays only 14,400 - 9,000 = Rs 5,400 in cash, which is 18% of his value addition of 30,000. Without ITC the 9,000 would become a cost and be taxed again inside the selling price. ITC comes with conditions and a list of blocked items.
7. Which conditions must be met before you can claim input tax credit on a purchase?
Under section 16(2) of the CGST Act you need a valid tax invoice or debit note; the supplier must have reported that invoice in GSTR-1 so that it appears in your GSTR-2B; you must have received the goods or services; the supplier must have actually paid the tax to the government; and you must have filed your own GSTR-3B. The purchase must also be for business and not blocked under section 17(5). There is a time limit for claiming, and a rule on paying the supplier within a set period, so a booked invoice alone does not make the credit safe.
8. What are blocked credits under section 17(5) of the CGST Act? Give examples.
Section 17(5) lists purchases on which no input tax credit is allowed even when they are used in the business, mostly because they look like personal consumption. Common examples: motor vehicles for carrying people up to a set seating capacity (with exceptions such as a car dealer or taxi business), food and beverages, outdoor catering, beauty treatment, health services, club membership, life and health insurance, construction of a building on own account, goods given away as gifts or free samples, goods lost or destroyed, and tax paid under composition. Most items have exceptions.
9. What is reverse charge under GST? Give common examples.
Under reverse charge (RCM) the recipient, not the supplier, pays the GST to the government. It applies to supplies notified under section 9(3) of the CGST Act, such as legal services by an advocate to a business, services by a director to the company, sponsorship services and goods transport agency services in specified cases, and to the import of services. The recipient must pay RCM tax in cash, because input tax credit cannot be used for it, and then claims the same amount as credit if the purchase is for business and not blocked. So RCM is mostly a cash-flow matter, not a cost.
10. What is the composition scheme, and what does a composition dealer give up?
The composition scheme lets a small business pay GST at a low fixed rate on its turnover, with quarterly payments and an annual return, instead of normal compliance. Eligibility depends on a turnover limit set by law (assume Rs 1.5 crore for a trader). In return the dealer cannot claim input tax credit, cannot charge GST to customers (it issues a bill of supply), cannot make inter-state outward supplies, and must show that it is a composition taxable person on its bills and signboard. It suits a shop selling to consumers, and hurts one selling to GST-registered businesses, who get no credit.
11. What is an e-way bill, and what goes into its Part A and Part B?
An e-way bill is an electronic document generated on the e-way bill portal before goods move, when the consignment value crosses a set limit (assume Rs 50,000). Part A has the supply details: the GSTINs of supplier and recipient, the PIN code of the place of delivery, the document number and date, the value, the HSN code and the reason for transport. Part B has the transport details: the vehicle number for road, or the transport document number for rail, air or ship. The e-way bill number travels with the goods, and moving goods without a valid one can lead to detention and penalty.
12. What is the difference between GSTR-1 and GSTR-3B?
GSTR-1 is the statement of outward supplies: invoice-wise B2B sales, a summary of B2C sales, exports, credit and debit notes, and amendments. Your buyers' GSTR-2B is built from it, so a late or wrong GSTR-1 hurts their input tax credit. GSTR-3B is the summary return in which you declare total output tax, the input tax credit claimed and reversed, and actually pay the net tax. Both are filed monthly, or quarterly by small taxpayers under the QRMP scheme. The two should agree over time, and a gap between them is one of the first things a GST officer checks.
13. What is GSTR-2B, and how is it different from GSTR-2A?
Both are auto-drafted statements of the input tax credit your suppliers have reported. GSTR-2A is dynamic: it keeps changing whenever a supplier files or amends a return, even months later. GSTR-2B is a static statement generated for each return period, so it gives a fixed figure to claim against in GSTR-3B. It shows credit available and not available, credit notes, imports and ISD credit. Because the law links input tax credit to what suppliers report, accountants match the purchase register with GSTR-2B every month before filing GSTR-3B.
14. What is TDS, and what are the main duties of a deductor?
Tax deducted at source (TDS) is a way of collecting income tax: the payer deducts tax from certain payments, such as salary, contractor bills, professional fees and rent, and pays it to the government against the payee's PAN. The deductor must deduct at the right rate and time, deposit the tax by the due date, file the quarterly TDS statement, and issue a TDS certificate (Form 16 or 16A) to the payee. The payee then sees the credit in Form 26AS and claims it in the income-tax return. TDS is not an extra tax; it is an advance collection of the payee's own tax.
15. What is a TAN, and how is it different from a PAN?
TAN (tax deduction and collection account number) is a 10-character number that every person who deducts or collects tax at source must obtain, by applying in Form 49B. It must be quoted in TDS challans, statements and certificates. It has four letters, five digits and one letter, such as PNEA12345B, which shows only the format. PAN identifies a taxpayer for its own income, while TAN identifies a deductor for TDS work. A company may hold a separate TAN for each branch that deducts tax, and quoting the PAN instead of the TAN in a challan causes mismatches.
16. Under the Income-tax Act, 1961, when does a payment fall under section 194C and when under 194J?
Section 194C covers payments to a resident contractor for carrying out work, including supply of labour, transport of goods, catering, advertising, and manufacturing to the buyer's specification using material bought from the buyer. Section 194J covers fees for professional services (a CA, lawyer, architect or doctor, for example), fees for technical services, royalty, and fees to directors other than salary. So a housekeeping agency's monthly bill falls under 194C, while a CA firm's audit fee falls under 194J. Their rates and limits differ, so a wrong section usually means short deduction.
17. What are Forms 24Q, 26Q, 16 and 16A used for?
Form 24Q is the quarterly TDS statement for salary, and Form 26Q is the quarterly statement for other payments to residents, such as contractors, professionals and rent (Form 27Q is used for non-residents). Form 16 is the annual certificate an employer gives each employee: Part A shows the TDS deposited and Part B the salary and tax computation. Form 16A is the quarterly certificate for non-salary TDS, downloaded from the TRACES portal. Each deductee's credit depends on the statement being filed with the correct PAN, so the certificate is only as good as the statement behind it.
18. What is Form 26AS, and why should an employee or a vendor check it?
Form 26AS is the annual tax credit statement for a PAN, built from the TDS statements filed by deductors and from tax payment records. It shows TDS and TCS against the PAN, advance tax and self-assessment tax paid, and refunds. The Annual Information Statement (AIS) gives a wider view, including interest, dividends and high-value transactions. A payee should check it before filing the return, because credit is given only for what appears there. If a deduction is missing, the usual cause is a wrong PAN or an unfiled statement on the deductor's side, and only the deductor can correct it.
19. Why can GST interest and late fees not be paid from input tax credit?
Under section 49 of the CGST Act, the electronic credit ledger can be used only to pay output tax, while the electronic cash ledger can pay tax, interest, penalty, fees and other amounts. Interest and late fee are not output tax, so they must be paid in cash. Tax under reverse charge also has to be paid in cash, because the law keeps it out of the meaning of output tax. So even a business with a large credit balance needs cash for these items. A common mistake is to plan the GSTR-3B payment on the net tax alone and forget the interest due on a late return.
20. A Hyderabad consultant bills a company Rs 80,000 plus GST at an assumed 18%. Assume TDS under section 194J at 10%. How much TDS is deducted and what is paid to the consultant?
When GST is shown separately on the invoice, TDS is worked out on the amount excluding GST, as CBDT Circular 23/2017 clarifies. GST is 18% of 80,000 = Rs 14,400, so the invoice total is Rs 94,400. TDS is 10% of 80,000 = Rs 8,000, not 10% of 94,400. The company pays the consultant 94,400 - 8,000 = Rs 86,400 and deposits the 8,000 against the consultant's PAN. The entry books the full fee as expense, the GST as input credit, and splits the credit side between the consultant and TDS payable. Deducting on the GST-inclusive total over-deducts and leads to vendor disputes.
Professional fees A/c Dr 80,000
Input GST A/c Dr 14,400
To Consultant A/c 86,400
To TDS payable (194J) A/c 8,000Ready to check yourself? Take the free GST and TDS mock test
GST and TDS interview questions: Medium questions (1-3 years)
20 questions21. A Pune manufacturer sells goods to a dealer in Bengaluru, who asks for delivery straight to his customer in Nagpur. Which GST applies on each invoice?
There are two supplies. Pune to the Bengaluru dealer: the goods are delivered on the dealer's direction to a third person, so under section 10(1)(b) of the IGST Act the place of supply is the dealer's principal place of business, Karnataka. The supplier is in Maharashtra, so the manufacturer charges IGST even though the goods never leave Maharashtra. Bengaluru dealer to the Nagpur customer: the movement ends in Maharashtra and the dealer is in Karnataka, so the dealer also charges IGST. The common mistake is CGST and SGST on the first invoice because the truck stays within Maharashtra.
22. A Delhi company's employee stays in a Mumbai hotel for a client meeting, and the hotel charges CGST and SGST. Can the Delhi company claim this credit?
The hotel has charged correctly: for accommodation, section 12(3) of the IGST Act places the supply where the property is, so a Mumbai hotel charges Maharashtra CGST and SGST even to a Delhi GSTIN. The Delhi registration cannot use Maharashtra CGST and SGST, so the credit is lost there. If the company is also registered in Maharashtra, it can have the stay billed to that GSTIN and claim it, because lodging for business is not a blocked credit (the food on the bill is). Large companies route travel bills to the GSTIN of the state where the hotel stands for this reason.
23. Under the second proviso to section 16(2) of the CGST Act, as it applied in FY 2024-25, what happens if you do not pay a supplier within 180 days of the invoice?
If the recipient does not pay the supplier the value plus tax within 180 days from the invoice date, the input tax credit already claimed on it must be reversed in GSTR-3B, with interest. Example: a bill of Rs 1,00,000 plus GST 18,000 is still unpaid after 180 days, so 18,000 is reversed. When the bill is later paid, the credit can be claimed again. Part payment counts: the credit is reversed in proportion to the unpaid value. The rule does not apply to tax paid under reverse charge. Run a vendor ageing report every month so these bills are caught in time.
24. A supplier gives your company a year-end discount of Rs 10,000 plus GST at an assumed 18% through a credit note. What must each side do?
A post-sale discount reduces the taxable value only if it was agreed before the supply, is linked to specific invoices and is passed through a credit note under section 34 of the CGST Act, with the recipient reversing the matching input tax credit. Here the credit note is Rs 10,000 plus GST 1,800 = Rs 11,800. The supplier reports it in GSTR-1 and reduces its output tax by 1,800, and your company reverses 1,800 of credit, which GSTR-2B shows as a credit note. If the discount was not agreed in advance, the supplier issues a commercial credit note without GST, and the tax stays as it was.
25. A Chennai firm receives an advance of Rs 1,18,000, inclusive of GST at an assumed 18%. Is GST due now if the advance is for services, and if it is for goods?
For services, yes: under section 13 of the CGST Act the time of supply can be the date payment is received, if that comes first, so the advance is taxable when received. The tax inside a GST-inclusive amount is 1,18,000 x 18/118 = Rs 18,000 on a value of Rs 1,00,000. The firm issues a receipt voucher, pays the tax for that month and adjusts it when the invoice is raised. For goods, no: a 2017 notification removed GST on advances for goods for normal taxpayers, so tax arises with the invoice. Working out 18% of 1,18,000 is the common mistake.
26. Assume GST at 18%. Work out the taxable value and the GST for this invoice.
Taxable value = 2,00,000 - 10,000 + 3,000 + 5,000 = Rs 1,98,000, and GST at 18% = Rs 35,640, so the invoice total is Rs 2,33,640. Under section 15 of the CGST Act, a discount shown on the invoice at the time of supply is excluded from value. Packing and other incidental charges the supplier bills to the buyer are included. Freight is included here because the supplier delivers the goods: goods plus transport is a composite supply taxed at the rate of the goods. Interest the supplier later charges for late payment is also part of the value and attracts GST.
List price of machine parts 2,00,000
Trade discount shown on the invoice -10,000
Packing charged by the supplier 3,000
Freight to buyer's site, supplier's truck 5,00027. Your Ahmedabad company pays a local goods transport agency Rs 40,000 freight. Assume the GTA has not opted to pay tax itself and the reverse charge rate is 5%. How is it handled?
The company, as the recipient, pays GST of 5% of 40,000 = Rs 2,000 under reverse charge. The GTA and the company are both in Gujarat, so it is CGST 1,000 and SGST 1,000, paid through the cash ledger in that month's GSTR-3B. The GTA bills only Rs 40,000 and charges no tax. If the freight is for the business, the same 2,000 is claimed as input tax credit in the same GSTR-3B, so the net cost is nil. The usual error is trying to pay the 2,000 from the credit ledger, which the law does not allow for reverse charge tax.
Freight inward A/c Dr 40,000
To GTA A/c 40,000
Input CGST (RCM) A/c Dr 1,000
Input SGST (RCM) A/c Dr 1,000
To CGST payable (RCM) A/c 1,000
To SGST payable (RCM) A/c 1,00028. Which documents must a registered business issue when it pays reverse charge tax on a purchase from an unregistered supplier?
Because the supplier cannot issue a tax invoice, the recipient issues a self-invoice under section 31(3)(f) of the CGST Act for the goods or services received, and a payment voucher under section 31(3)(g) when it pays the supplier. The self-invoice carries the recipient's own GSTIN and is the document on which it claims input tax credit of the reverse charge tax. Example: a Kochi company hires security guards from an unregistered individual, which is a notified reverse charge supply. Keep a monthly RCM register so these documents and payments are not missed at return time.
29. Your Pune office has these purchases this month. Assume no exception applies to any item. Which input tax credit can it claim?
Claim Rs 61,200: the laptops (54,000) and office chairs (7,200) are business assets with no restriction. Block Rs 1,65,600. The car is a passenger vehicle within the seating limit of section 17(5)(a), and the company is not a car dealer, taxi operator or driving school. Staff lunch falls under food and beverages in section 17(5)(b), allowed only where a law obliges the employer to provide it. The gift boxes are goods disposed of by way of gift under section 17(5)(h). Blocked GST is not written off separately; it is added to the cost of the expense or the asset.
Item GST paid
Car (5 seats) for the director 1,44,000
Laptops for the sales team 54,000
Staff lunch from a caterer 9,000
Diwali gift boxes for customers 12,600
Office chairs 7,20030. Rakesh runs a Jaipur hardware shop with a turnover of Rs 60 lakh, half of it to GST-registered builders. Assume he is eligible for composition at 1% of turnover. What should he weigh before opting in?
Composition tax would be 1% of 60 lakh = Rs 60,000 a year, paid out of his own margin, with simpler quarterly compliance. Against that, he loses all input tax credit, so the GST on his purchases becomes a cost and pushes up his prices. He cannot charge GST to the builders, so they get no credit and may move to a supplier on normal GST. He also cannot sell to other states. With half his sales going to registered businesses, normal registration usually works out better. Composition suits shops that sell mostly to consumers, who cannot claim credit anyway.
31. How does e-invoicing work, and what can and cannot be done after an IRN is generated?
A business above the notified turnover limit (assume Rs 5 crore) uploads each B2B invoice, export invoice and credit or debit note as JSON to the Invoice Registration Portal (IRP). The IRP validates it, returns a unique invoice reference number (IRN) and a signed QR code, and passes the data to GSTR-1 and, if transport details are given, to the e-way bill system. For these supplies, an invoice without a valid IRN is not a valid tax invoice. The IRN can be cancelled in full within the IRP window (24 hours as of 2025) but never edited; after that, correct it with a credit note.
32. Assume e-way bill validity of one day for the first 200 km and one more day for each further 200 km or part of it. A truck carries normal cargo 850 km from a Surat mill to a buyer. What is the validity, and what if the truck breaks down?
The first 200 km gives 1 day. The remaining 650 km is 3.25 lots of 200 km, which rounds up to 4 more days, so the validity is 5 days. Validity runs from the time the e-way bill is generated, so generate it close to dispatch. If the truck breaks down and the goods are moved to another vehicle, update Part B with the new vehicle number before the goods move again. If the goods still cannot arrive in time, the e-way bill can be extended on the portal within the window the rules allow around expiry, with the reason recorded.
33. Your GSTR-1 shows Rs 2 lakh more output tax than your GSTR-3B for the year. How do you investigate and fix it?
List the difference invoice by invoice: export both returns month by month and compare them with the sales register. Usual causes are invoices reported in GSTR-1 but missed in GSTR-3B, credit notes in one and not the other, amendments made in later months, and advances or reverse charge entries reported differently. If tax was really short-paid, pay it with interest through Form DRC-03 or the next GSTR-3B, and keep the working. The portal can also send an intimation in Form DRC-01B when GSTR-1 tax exceeds GSTR-3B beyond a set limit, which must be answered by paying or explaining.
34. At month end your purchase register and GSTR-2B show the following. How much input tax credit do you claim this month, and what do you do about the rest?
Claim Rs 50,400: A101 in full (18,000) and C310 at the lower figure (32,400), since credit is allowed only to the extent the supplier has reported it. B205 is missing from GSTR-2B, so hold the 5,400, ask Nair Logistics to file or correct its GSTR-1, and claim it in the month it appears. Ask Patel Steels why it reported 3,600 less on C310. D415 is in GSTR-2B but not in your books: check whether the goods arrived and the invoice is genuine, then book it, or reject it on the portal. Never claim a figure only because it shows up.
Invoice Supplier ITC in books ITC in GSTR-2B
A101 Sharma Traders 18,000 18,000
B205 Nair Logistics 5,400 0
C310 Patel Steels 36,000 32,400
D415 Rao Packaging 0 9,00035. A Lucknow firm files GSTR-3B 60 days late. Tax due is Rs 1,50,000, of which Rs 90,000 is paid from credit and Rs 60,000 in cash. Assume interest at 18% a year. What is the interest?
For tax declared in a return filed late, section 50 of the CGST Act charges interest only on the part paid in cash, the net cash liability, because the credit was already available. So interest = 60,000 x 18% x 60/365 = Rs 1,775.34, about Rs 1,775. Charging it on the full 1,50,000 would give 4,438, which is wrong. Interest runs for each day of delay from the day after the due date, is paid in cash and is due even if no officer asks for it. A late fee for the late return is payable on top, also in cash, at the per-day rates notified for that period.
36. Assume section 194C (Income-tax Act, 1961) requires TDS when a single bill exceeds Rs 30,000 or the year's total exceeds Rs 1,00,000, at 2% for a company contractor. Bills in the year are Rs 25,000, 28,000, 29,000 and 24,000. What happens on the fourth bill?
No single bill crosses 30,000, so the first three bills, totalling 82,000, are paid without TDS. The fourth bill takes the year's total to Rs 1,06,000, above 1,00,000. Once the yearly limit is crossed, TDS applies to the whole amount credited in the year, not just the excess: 2% of 1,06,000 = Rs 2,120, deducted from the fourth bill. The contractor is paid 24,000 - 2,120 = Rs 21,880. Track vendor-wise yearly totals in the accounting system; otherwise the earlier bills are missed and the gap shows up later as a short deduction default.
37. Under section 192 (Income-tax Act, 1961), an employee's estimated tax for the year, under the regime she chose, is Rs 54,600. After six months her investment proofs fall short and the revised estimate is Rs 72,000. What is the monthly TDS before and after?
Salary TDS is spread over the year at the average rate on the estimated income. First half: 54,600 / 12 = Rs 4,550 a month, so 27,300 is deducted from April to September. After the revision, the balance is 72,000 - 27,300 = Rs 44,700, spread over the six remaining months: 44,700 / 6 = Rs 7,450 a month. Section 192(3) lets the employer adjust an excess or shortfall within the same year. Collect proofs early, by December or January, so the jump is smaller and employees are not surprised by a large cut in the last quarter.
38. A Kolkata company rents an office at Rs 75,000 a month plus GST at an assumed 18%, with a refundable security deposit of Rs 3,00,000. Assume TDS under section 194-I at 10% for buildings. What is deducted?
TDS is on the rent excluding GST, because the GST is shown separately: 10% of 75,000 = Rs 7,500 a month, or 90,000 for the year. The landlord's invoice is 75,000 + 13,500 GST = Rs 88,500, so the company pays 88,500 - 7,500 = Rs 81,000 each month. The refundable deposit is not rent, so no TDS is deducted on it. If part of the deposit is later adjusted against rent or kept by the landlord, TDS applies at that point. Hire of machinery falls under the same section at a different rate, so classify each lease correctly.
39. When must TDS be deducted: when the expense is booked or when it is paid? How does the year-end close affect it?
For most non-salary sections of the Income-tax Act, 1961, such as 194C, 194J and 194-I, TDS is due at the earlier of crediting the payee's account and paying, and a credit to a suspense or provision account counts as a credit. So an invoice booked on 25 March and paid on 10 April needs TDS in March, deposited by the March due date (assume 30 April). Year-end provisions for identified vendors with known amounts also attract TDS. Salary is different: TDS is deducted when salary is paid. Deducting only at payment is a common source of interest and default notices.
40. A vendor says the TDS you deducted is not in his Form 26AS. How do you trace and fix it?
First check your side: was the tax deposited (a challan with BSR code, date and serial number), and was the deduction included in the 26Q for that quarter with the vendor's correct PAN and section? Then check TRACES: the statement may have been rejected, the challan may not match, or the PAN may be invalid or inoperative. Fix it by filing a correction statement through TRACES, for example to correct the PAN or tag the right challan, after which the credit flows to the vendor's 26AS. Then download a fresh Form 16A from TRACES. An email or a manual certificate gives the vendor no credit.
Ready to check yourself? Take the free GST and TDS mock test
GST and TDS interview questions: Hard questions (experienced)
20 questions41. Using the utilisation order in section 49 of the CGST Act and rule 88A of the CGST Rules, how should this month's credit be used to keep the cash payment lowest?
IGST credit must be used first, and fully, before any CGST or SGST credit: first against IGST (40,000), then the remaining 60,000 against CGST and SGST in any order and proportion. CGST and SGST credit can never pay each other. So split the 60,000 to suit the other credits: 40,000 against CGST leaves 20,000, which the CGST credit clears, and 20,000 against SGST leaves 40,000 for the SGST credit, with 10,000 carried forward. Cash payable is nil. An even 30,000 and 30,000 split would leave 10,000 of CGST to pay in cash while 20,000 of SGST credit sits idle.
Head Output tax ITC available
IGST 40,000 1,00,000
CGST 60,000 20,000
SGST 60,000 50,00042. A Bengaluru firm has taxable and exempt sales. Using the rule 42 method with no non-business use, how much of this month's credit is available?
Credit used only for taxable supplies is fully available (1,50,000), and credit used only for exempt supplies is not available at all (50,000). Common credit is reversed in the ratio of exempt to total turnover: 3,00,000 x 40,00,000 / 2,00,00,000 = Rs 60,000 reversed, leaving 2,40,000. Total credit available = 1,50,000 + 2,40,000 = Rs 3,90,000 out of 5,00,000. The reversal is done each month on that month's figures and trued up on the full year's turnover after year end, with interest on any shortfall. Tag each purchase as taxable, exempt or common at entry, or the split cannot be defended.
ITC used only for taxable supplies 1,50,000
ITC used only for exempt supplies 50,000
Common ITC (rent, software, audit) 3,00,000
Exempt turnover in the state 40,00,000
Total turnover in the state 2,00,00,00043. A Pune company sends stock to its own branch in Chennai, which is registered separately. Is this a supply, and at what value?
Yes. Each GSTIN is a distinct person, and Schedule I of the CGST Act treats supplies between distinct persons in the course of business as supplies even without consideration. The transfer crosses states, so the Pune unit raises a tax invoice with IGST, and Chennai claims that IGST as credit. Value follows rule 28 of the CGST Rules: the open market value, or, where the receiving branch is eligible for full credit, the value declared on the invoice is accepted. So for a fully taxable branch the tax is revenue-neutral, and the risk lies in branches with exempt sales, where the value is tested.
44. How are exports and supplies to an SEZ unit treated under GST, and what choice does the supplier have?
Both are zero-rated supplies under section 16 of the IGST Act, so no tax stays in the cost. A supply to an SEZ unit or developer for its authorised operations is treated as inter-state even when the supplier is in the same state, so it carries IGST, not CGST and SGST. The supplier can supply under a letter of undertaking (LUT) without paying IGST and claim a refund of the unused input tax credit, or, where the law allows it for those goods and that supplier, pay IGST and claim that tax back. LUT avoids blocking cash, but refunds need clean export proof and records of payment realisation.
45. A Pune IT services firm hires 7-seater cabs for night-shift staff, pays group health insurance for employees and services its own company cars. Where does it stand on input tax credit?
All three start as blocked. Hiring a passenger vehicle within the seating limit of section 17(5)(a) is blocked under 17(5)(b), health insurance is blocked under 17(5)(b), and servicing and insurance of a blocked car is blocked under 17(5)(ab). The proviso to 17(5)(b) allows credit where a law obliges the employer to provide that item to employees; a company policy or an employment contract is not enough, so record the exact legal provision relied on. Hiring a bus with more seats than the limit is not blocked. The car servicing stays blocked unless the car itself qualifies for credit.
46. An individual advocate registered under GST charges your Mumbai company GST on his invoice for legal services. Assume your company is not covered by any small-business exemption. What is the correct treatment?
Legal services by an individual advocate or a firm of advocates to a business entity are notified under reverse charge, so the company must pay that tax itself in cash and then claim it as credit; the advocate should not charge GST even though he is registered. Tax wrongly collected by the advocate does not discharge the company's liability, and claiming credit of it invites a dispute. Ask for a revised invoice without GST or a credit note, pay the reverse charge tax with interest if the period has passed, and flag the vendor master so the next bill is routed correctly.
47. A Nashik composition dealer's turnover crosses the eligibility limit in November. Assume he may claim credit on stock held on the day before he leaves the scheme, except on invoices more than one year old. His stock carries Rs 72,000 of GST, of which Rs 12,000 is on invoices more than a year old. What happens?
The composition option lapses from the day the turnover crosses the limit, so he must inform the department within the time the rules set and start charging GST on tax invoices from then. Under section 18(1)(c) of the CGST Act he can claim credit on inputs held in stock, including inputs inside semi-finished and finished goods, on the day before he becomes a normal taxpayer, through Form ITC-01. The one-year bar in section 18(2) removes the older invoices, so he claims 72,000 - 12,000 = Rs 60,000. He moves to regular returns, and his billing software must switch on that date.
48. You are designing e-invoice integration for a Pune company's ERP. Which failure cases must the design handle?
First, duplicates: the IRP rejects a second IRN for the same document number, type and financial year, so the ERP must store each IRN and never resubmit blindly after a timeout; it should fetch the existing IRN by document details instead. Second, cancellation: allow it only within the IRP window (24 hours as of 2025) and route later corrections to credit notes. Third, validation errors such as a wrong buyer GSTIN, PIN code or HSN must stop printing and go to a work queue. Fourth, scope: B2C invoices are out, while exports and credit notes are in. Reconcile IRNs with GSTR-1 monthly.
49. Goods move from a Ludhiana factory to a transporter's hub, then in a different truck to a Bengaluru buyer along with other consignments. How is the e-way bill handled?
One e-way bill covers the whole journey; Part A is filled once by the supplier, or comes from the e-invoice. Each time the goods change vehicle, Part B is updated with the new vehicle number before the goods move, including the transhipment at the hub. If the supplier enters the transporter's ID, the transporter can update Part B itself. When many consignments travel in one truck, the transporter can generate a consolidated e-way bill listing their e-way bill numbers. If a delay means the bill will expire, it can be extended within the window around expiry the rules allow.
50. How do you prepare the annual return GSTR-9 and the reconciliation statement GSTR-9C, and what can and cannot be fixed there?
GSTR-9 summarises the year's outward supplies, input tax credit and tax paid as reported in the monthly returns, and GSTR-9C, for businesses above the notified turnover, reconciles the audited books with those returns. Start by reconciling the books, GSTR-1, GSTR-3B and GSTR-2B for all twelve months and explain every difference. Extra tax found can be paid through Form DRC-03 with interest. But GSTR-9 cannot be used to claim credit missed during the year once the section 16(4) time limit has passed, and it cannot reduce tax already paid; excess tax paid needs a refund claim instead.
51. As a GST lead, how would you design the monthly input tax credit process so that the credit claimed in GSTR-3B is defensible?
Start from GSTR-2B, not from the books. Before 2B is final, act on each supplier invoice in the Invoice Management System (IMS), live on the portal since October 2024: accept, reject or keep it pending. Then match 2B with the purchase register by GSTIN, invoice number and tax head, claim only matched credit, and give each break an owner. Hold vendor payments for invoices missing from 2B, rate vendors on filing discipline, and watch for portal intimations such as DRC-01C when claimed credit exceeds 2B. Keep a month-wise working file, because an audit will ask for the trail.
52. A Hyderabad supplier charged CGST and SGST on goods delivered to your Chennai factory, and the invoice appears in your GSTR-2B. What should you do?
The goods moved from Telangana to Tamil Nadu, so the place of supply is Tamil Nadu and the correct tax is IGST. Telangana CGST and SGST cannot be claimed by your Tamil Nadu registration, and GSTR-2B normally shows such an invoice as credit not available because of the place of supply. Ask the supplier to issue a credit note for the wrong invoice and a fresh invoice with IGST. The supplier pays the IGST and claims a refund of the wrongly paid CGST and SGST under section 77 of the CGST Act, with no interest on the IGST. Do not claim wrong-head tax just because it appears in 2B.
53. A Jaipur company wrongly availed Rs 2,00,000 of credit. Its credit ledger balance fell to Rs 1,20,000 on 20 June, and it reversed the credit on 30 September. Assume interest at 18% a year under section 50(3). What interest is due?
Interest under section 50(3) applies only to credit wrongly availed and utilised, a 2022 amendment with effect from 1 July 2017. Under rule 88B, credit counts as utilised when the ledger balance falls below the wrong amount, to the extent of the fall: 2,00,000 - 1,20,000 = Rs 80,000 from 20 June. Interest = 80,000 x 18% x 102/365 = Rs 4,024.11, for the 102 days to 30 September. Had the balance never fallen below 2,00,000, the reversal would carry no interest. If the balance had dropped further later, the utilised amount would grow from that date, so keep daily balances.
54. In FY 2025-26, under the Income-tax Act, 1961, a company credited a professional's fee on 5 November without deducting Rs 50,000 of TDS. It deducted on 20 February and deposited on 25 March. Assume interest of 1% a month for late deduction and 1.5% a month for late deposit, a part of a month counting as a full month. What is the interest?
Section 201(1A) charges two separate amounts. Late deduction: 1% for each month or part from 5 November to 20 February, which is 4 months, so 50,000 x 1% x 4 = Rs 2,000. Late deposit: 1.5% from deduction on 20 February to deposit on 25 March, 2 months, so 50,000 x 1.5% x 2 = Rs 1,500. Total interest = Rs 3,500, paid before filing the TDS statement. Because the tax was deducted and deposited within the year, the section 40(a)(ia) disallowance of the expense does not arise. Had it never deducted at all, the company would also be treated as an assessee in default.
55. Under the Income-tax Act, 1961, how do you decide the TDS section for manpower supply, an IT support contract and a software licence?
Look at what is actually bought, not the vendor's label. Supply of manpower, where the vendor provides people working under your control, is work under section 194C. IT support that needs technical skill, such as a vendor's engineers managing your servers, is usually fees for technical services under 194J, while routine hardware repair with parts is often treated as a contract under 194C. A software licence payment is royalty under 194J, though a notification exempts resold, unmodified software where tax was deducted earlier in the chain. Record the reasoning in the vendor master.
56. Neha joins a Gurugram company in August after earning Rs 6,00,000 at her previous job, where Rs 20,000 of TDS was deducted. Under section 192 (Income-tax Act, 1961), assume the tax on her total salary for the year, under the regime she chose, is Rs 1,30,000. What should the new employer deduct each month?
If Neha gives the previous salary and TDS in Form 12B, the new employer computes tax on her total salary for the year: 1,30,000 - 20,000 already deducted = Rs 1,10,000, spread over the eight months from August to March, which is Rs 13,750 a month. If she does not share it, the new employer deducts only on its own salary, starting again from the lowest slab, and Neha ends up with tax to pay when she files her return, because the slab benefit was used twice. Each employer's Form 16 then shows its own part, and she must report both in her return.
57. As TDS lead for a company with many vendors, how do you run the quarter-end TDS reconciliation and avoid TRACES defaults?
Reconcile three things before filing: the TDS ledger by section, the challans paid (matched by challan identification number to the status on the portal), and the deductee rows going into the 24Q and 26Q. Check PANs in bulk for validity and operative status, because an invalid or inoperative PAN attracts a higher rate under section 206AA. Quote lower deduction certificate numbers under section 197 for vendors who hold them. After filing, download the TRACES justification report for short deduction, short payment or late payment, pay any interest, and file a correction promptly.
58. Assume a late fee under section 234E of Rs 200 a day, capped at the TDS in the statement. A 26Q with TDS of Rs 6,500, due on 31 July, is filed on 14 September. What is the fee, and how is it different from interest?
The delay runs from 1 August to 14 September, which is 45 days, so the fee would be 200 x 45 = Rs 9,000, but it is capped at the TDS of 6,500, so the fee is Rs 6,500. It must be paid before or with the statement, and it applies even if all the tax was deposited on time. Interest under section 201(1A) is a separate charge for late deduction or late deposit of tax, not for late filing. A penalty for very late or incorrect statements is a further, separate risk. For small deductions, filing late can cost as much as the tax itself.
59. The Income-tax Act, 2025 applies from 1 April 2026. How should a company's finance team handle TDS through the change?
The duties stay the same in substance: deduct at the right time, deposit, file statements and issue certificates. What changes is the wording and numbering: the new Act uses a single tax year instead of previous year and assessment year, and gathers most TDS provisions into tables, so sections such as 194C and 194J get new references, and forms and portal codes follow the new rules. Update the ERP's tax-section master and vendor mapping. For credits and payments that straddle 31 March 2026, check the new Act's repeal and savings provisions before deciding which law applies.
60. A Mumbai head office buys an all-India software subscription used by branches in four states, with Rs 2,40,000 of CGST and SGST on the invoice. How should the credit reach the branches?
Since 1 April 2025, common input services from third parties used by several GSTINs must be billed to an Input Service Distributor (ISD) registration and distributed from it. The ISD splits the credit in the ratio of each branch's turnover in the relevant period, here the previous year: Maharashtra 1,20,000, Karnataka 60,000, Tamil Nadu 40,000 and Delhi 20,000. Branches in other states receive their share as IGST, while the Maharashtra branch receives CGST and SGST. The ISD files GSTR-6 monthly. Services by head-office staff to branches are a separate cross-charge question.
Branch (GSTIN) Turnover in previous FY
Maharashtra 6,00,00,000
Karnataka 3,00,00,000
Tamil Nadu 2,00,00,000
Delhi 1,00,00,000Practice questions for November 2026
New every month3 questions from the GST and TDS mock test, the way they appear in it. A new set comes on the 1st of every month. Pick your answer, then open it.
-
What is GSTR-1?
- A summary return used to pay the monthly tax
- An auto-drafted statement of input tax credit
- The annual return of a composition dealer
- A statement of outward supplies made by the taxpayer
Show the answer
Answer: A statement of outward supplies made by the taxpayer. GSTR-1 reports outward supplies invoice-wise for B2B and in summary for B2C, plus credit and debit notes and exports. Buyers' GSTR-2B is built from it, so a late or wrong GSTR-1 hurts customers' credit.
-
Assume a composition restaurant pays 5% of turnover, split equally into CGST and SGST. A Lucknow restaurant has a quarter's turnover of Rs 24,00,000. What is the CGST for the quarter?
- Rs 60,000
- Rs 1,20,000
- Rs 24,000
- Rs 2,16,000
Show the answer
Answer: Rs 60,000. 5% of 24,00,000 is 1,20,000 in all, half as CGST and half as SGST, so CGST is Rs 60,000. The restaurant cannot add this tax to the customer's bill and gets no ITC on its purchases.
-
Which statement shows a taxpayer a wider set of financial information, such as interest, dividends and securities trades, beyond TDS and TCS?
- Form 24Q
- The AIS
- Form 12BB
- Form 16A
Show the answer
Answer: The AIS. The AIS gathers information from many reporting entities, including interest, dividends, securities and property deals, along with TDS and TCS. Form 26AS stays focused on tax credits; Forms 16A, 24Q and 12BB serve other purposes.
Ready to apply?
There are 5,673 open Accounting and finance jobs on CoreHRx right now. Create a free profile once and apply with it.