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Standard e-invoicing system will eliminate need for manual data entry

Filed on February 9, 2020
Standard e-invoicing system will eliminate need for manual data entry

(KT file)

Q: I believe that there are still teething problems in the implementation of the Goods & Services Tax. I am told electronically generated invoices are going to be made mandatory. Will this really solve the problems?

A: Currently, businesses may voluntarily generate e-invoices. However, there is no standard procedure or form. Businesses use the format as provided in the billing software. The lack of standard format leads to a scenario where an e-invoice generated by the use of one billing software cannot be read by another billing software which requires manual data entry. Therefore, it is now proposed that from April 1, 2020, e-invoicing will be mandatory for all companies having a turnover of Rs.1 billion and above. A standard e-invoicing system will ensure complete interoperability of invoices across the entire GST ecosystem and will eliminate the need for manual data entry. Hence, the GST network will prescribe a standard format which is called Pan European Public Procurement Online which is interoperable across all IT applications. Several countries have adopted this standard, latest being Singapore.

Q: My family has been in business in Delhi for several years. The accounts of this business were under scrutiny by the tax department. The Assessing Officer has now directed that a special audit should be undertaken by a chartered accountant. Is there any ground for challenging this action of the Assessing Officer?

A: Under section 142(2-A) of the Income-tax Act, the Assessing Officer has the power to direct the tax payer to get the accounts audited by a special auditor. However, under the law, certain conditions are required to be satisfied to justify a special audit. This can be done by the Assessing Officer having regard to the complexity of the accounts, multiplicity of transactions, doubts about the correctness of the accounts, or specialized nature of business activities.The Supreme Court in interpreting this provision has held that the Assessing Officer must make a genuine and honest attempt to understand the accounts and form his opinion for special audit based on objective criteria. ?The powers cannot be used by the Assessing Officer merely to shift his responsibility of scrutinizing the accounts to the special auditor. Further, the previous approval of the Chief Commissioner has to be obtained before a special audit can be directed by the Assessing Officer. The approval granted by the Commissioner must reflect application of mind to the facts of the case. Hence, if you can show that in the case of your business in India, these conditions have not been fulfilled, your firm would be entitled to challenge the action of the tax department by filing a writ petition in the Delhi High Court.

Q: The foreign multinational with which I am connected wants to set up a research and development facility in India in view of the availability of scientific talent. I am told that there is some benefit available for setting up such a facility. Will you please throw some light on the same?

A: Any company, whether Indian or foreign, which is engaged in the business of manufacture or production of any article or thing is eligible for a deduction of one and one-half times the expenditure incurred by it on the in-house research and development facility which is set up. This weighted deduction is available only if the expenditure on in-house research and development facility is incurred by March 31, 2020. For expenditure incurred on or after April 1, 2020, the deduction would be 100 per cent of the expenditure incurred and not 150 per cent. The important condition to be satisfied is that the in-house research and development facility should be approved by the prescribed authority which is the Department of Scientific & Industrial Research, Government of India. Therefore, you should advise the multinational company to set up the facility by March 31, 2020, so that it can get the weighted deduction of 150 per cent of the expenditure incurred in setting up the facility. However, the cost of the land is not eligible for any deduction. Once the facility is set up by the aforesaid date, the benefit of the weighted deduction would be available though the prescribed authority may grant the approval even after March 31, 2020.

- H. P. Ranina is a practicing lawyer, specializing in tax and exchange management laws of India.

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