Utility of Printing in Taxation Landscape

Utility of Printing in Taxation Landscape

It was a typical day of lockdown when the sun shone brightly seemingly oblivious to the scaremongering in the virtual world and atmosphere of grimness in the real world.  

K Irfan, the professor in the Law school had just completed an online session, having graduated to the world of online education by the necessity of times. He was a storehouse of knowledge with more than three decades of experience; a teacher who was known to easily explain complicated legal theories with an inimitable deadpan expression. His pupils found him approachable at all times. One of his bright students was M. Parvathi. She was a versatile lawyer who earned her livelihood by being tax advisor.

Her client wanted to buy a printer and was not sure about the type of printer to invest in. He read news articles that told him that compliance process under the taxation laws was increasingly happening over the internet. Hence, he was getting swayed by thoughts that printing would be wholly unnecessary in the changed GST environment. Due to the pandemic, he was also hesitant to spend on new equipment.

Parvathi was confused and decided to knock at the door of Irfan to gain insights.

Irfan told her that finding the right answer requires tackling several questions.

Is need for documents passé under taxation laws?

Document is a written piece of evidence. Printing evolved historically way back in 3500 BC when the Persian and Mesopotamian civilisations used cylinder seals to certify documents written in clay. Thus printing is an evolutionary civilizational process to lend authenticity to a written document. It is proverbial to say that the written word carries more weight than the spoken word.

Written word gets an elevated status as document through the medium of printing. This essential feature of document has withstood the test of time and is relevant even in the world of cloud computing. Documents continue to carry evidentiary value under all taxation laws. The method of storing documents has undergone change with soft copies being stored in computer systems. Thus scanning feature of a printer becomes vital.

Parvathi concluded that a standalone printer without scanning feature has become passé but a multifunctional printer with scanning feature is now an indispensable equipment for a taxpayer.

What are the key documents under taxation laws?

Businesses have to pay goods and services tax on the value add and income tax on the profits generated. Value add represents the difference between the sales and purchases. Selling a product or a service is a long-drawn-out process and is evidenced by a series of documents starting with proposals, purchase/work orders from customers, agreements for providing services and culminating in invoices. Similarly purchasing a product or service is documented through purchase/work orders, indents, delivery challans and invoices of the supplier. All these documents are critical for making and sustaining claims before taxation authorities. Some of these documents have to be printed for a variety of reasons such as for remitting stamp duties, customers insisting for the same.

Apart from the above, there are documents that gets generated when the taxpayer interacts with various stakeholders such as employee, shareholders etc. These documents also have their utility value before taxation authorities.

Irfan was of the view that every document that evidences a transaction or an activity in the value chain has an evidentiary value and prudent taxpayer needs to archive them.

Parvathi could immediately remember the recent GST disputes where she had appeared before the GST authorities. Since she knew the GST law by heart, she immediately listed out the first four chapters and narrated the disputes.     

1.  Disputes relating to composite and mixed supply:- A composite supply is taxed at the rate of principal supply while a mixed supply is taxed at the highest applicable rate. When a tax officer disputes a composite supply and seeks to tax it as mixed supply, the tax payer has to confront the tax officer with hard facts which can be agreements, work order, the modus operandi of supply etc 
2.  Disputes relating to time of supply:- are countered by the tax payer by providing documents such as invoice, delivery challan, transportation document, agreement copies for services, bank challans for receipt of amounts etc. 
3. Disputes relating to value of supply:- The tax payer has to bank on documents that proves the genesis of the transactions when value of supply becomes the bone of contention.

Parvathi tersely remarked that a taxpayer who ventures into business without investing in multifunctional printer would be like a person getting into a waterbody without knowing its depth. Irfan replied that a taxpayer who wants to defer the decision to buy a multifunctional printer due to budgetary constraints would really be penny wise and pound foolish or rather paise wise and rupee foolish!.

Content by:- 

Pradeep S

Chief Financial Officer
WeP Digital Services Limited 

Dt. 03-05-2020