Electronic Signature on Tax Invoice

[Kashish Gupta]

Introduction:

These days usage of Information Technololgy (IT) is rapidly increasing in most of the large enterprises and also to a great extent covering all key aspects of business processes. Invoices are also getting generated online and sent to the recipients through electronic media.

Under GST, ‘invoice’ or ‘tax invoice’ is an important document. It not only evidences the supply of goods or services but is also an essential document for the recipient to avail Input Tax Credit (ITC). A registered person cannot avail ITC unless he is in possession of a tax invoice. It is the primary document for availing the input tax credit.

As invoices are being generated online, assessee does not find any signature in most of these. Rather, a statement is mentioned at the end of the invoice which is - This is software generated invoice, signature not required.

Question for Consideration

Whether an invoice with a remark "This is software generated invoice, signature not required" qualifies as a valid document for the purpose of availing ITC for the recipient?

Provisions of GST Law

Rule 36. Documentary requirements and conditions for claiming input tax credit

1. …………..
2. Input tax credit shall be availed by a registered person only if all the applicable particulars as specified in the provisions of Chapter VI [Tax invoice, credit and debit notes] are contained in the said document……………..”

Rule 46. Tax invoice. – Subject to rule 54, a tax invoice referred to in section 31 shall be issued by the registered person containing the following particulars, namely, -

(q)  signature or digital signature of the supplier or his authorised representative

……………………

Provided also that the signature or digital signature of the supplier or his authorised representative shall not be required in the case of issuance of an electronic invoice in accordance with the provisions of the Information Technology Act, 2000 (21 of 2000).

What does Information Technology Act says?

The IT Act provides various definitions of different technological terms; some of the key definitions are given below:

"Electronic Record" means data, record or data generated, image or sound stored, received or sent in an electronic form or micro film or computer generated micro fiche.

"Electronic Signature" means authentication of any electronic record by a subscriber by means of the electronic technique specified in the second schedule and includes digital signature.

“Second Schedule” - Authentication of an electronic record by e-authentication Technique which shall be done by-

1. the applicable use of e-authentication, hash, and asymmetric crypto system techniques, leading to issuance of Digital Signature Certificate by Certifying Authority.
2. a trusted third-party service by subscriber's key pair-generation, storing of key pairs and creation of digital signature.
3. Issuance of Digital Signature Certificate by Certifying Authority shall be based on e-authentication, particulars specified in Form C of Schedule IV of the Information Technology (Certifying Authorities) Rules, 2000, digitally signed verified information from Aadhaar e-KYC services and electronic consent of Digital Signature Certificate applicant.
4. The manner and requirements for e-authentication shall be as issued by the Controller from time to time.
5. The security procedure for creating the subscriber’s key pair shall be in accordance with the e-authentication guidelines issued by the Controller.
6. The standards referred to in rule 6 of the Information Technology (Certifying Authorities) Rules, 2000 shall be complied with, in so far as they relate to the certification function of public key of Digital Signature Certificate applicant.
7. The manner in which the information is authenticated by means of digital signature shall comply with the manner and standards specified in rules 3 to 12 of the Digital Signature (End entity) Rules 2015 in so far as they relate to the creation, storage and verification of Digital Signature

Section 5:  Legal recognition of Electronic Signatures

Where any law requires that any information or matter shall be authenticated by affixing the signature or any document shall be signed or bear the signature of any person, then, notwithstanding anything contained in such law, such requirement shall be deemed to have been satisfied if such information or matter is authenticated by means of electronic signature affixed in such manner as may be prescribed by the Central Government.

Section 3A:  Electronic Signature

Notwithstanding anything contained in section 3, but subject to the provisions of sub- section (2) a subscriber may authenticate any electronic record by such electronic signature or electronic authentication technique which-

1. 1. is considered reliable; and
   2. may be specified in the Second Schedule

Chapter V sets out the conditions that would apply to qualify electronic records and digital signatures as being secure.

Section 14: Secure Electronic Record

Where any security procedure has been applied to an electronic record at a specific point of time, then such record shall be deemed to  be  a secure electronic record from  such point of  time to the time of verification.

Interpretation:

GST law requires the tax invoice to be authenticated by the issuer of such a document by affixing signature or digital signature. However, the signature or digital signature is not made irremissible in the case of an electronic invoice. The Information Technology Act makes it unclouded that an electronic record shall be authenticated by any reliable technique so as to make it a secure document. This will enable anybody to verify whether the electronic record is retained intact or has been tampered with.

So, as per IT Act, an electronic signature is a must on an electronic record so as to give it legal recognition.

Unlike electronically transmitted messages, which can be traced and established, other documents that are printed out cannot be proved unless they are signed. Relying on such unsigned documents can lead to disputes. So, in order that documents have evidentiary value, they must be thoroughly scrutinized to see they are properly prepared and signed.

One might also argue that signature is not a mandatory particular for availing Input tax credit as the proviso to Rule 36(2) provides a relaxation –“Provided that if the said document does not contain all the specified particulars but contains the details of the amount of tax charged, description of goods or services, total value of supply of goods or services or both, GSTIN of the supplier and recipient and place of supply in case of inter-State supply, input tax credit may be availed by such registered person.”

It is pertinent to be noted that this proviso has been incorporated in law because a strict construction of the first condition of Rule 36(2) would have led denial of the input tax credit for minor technical lapses by way of exclusions of the details in an invoice like non-mentioning of the HSN, address of the recipient, etc. Accordingly, it was proposed that the supra mentioned proviso may be inserted in rule 36(2) of the CGST Rules, 2017, on the lines of the provisions as contained in rule 9(2) of the erstwhile CENVAT Credit Rules, 2004.

However, this proviso should not replace the main provision as the proviso was introduced to ensure that the substantive rights cannot be denied for minor procedural lapses and such lapses were curable defects. One should not take the shelter of this proviso for not mentioning the mandatory particulars in the invoice as required under rule 36(2) and take undue advantage. Otherwise, what would have been the relevance of laying this provision.

Conclusion:

An authentication by way of signature is must on an invoice to avail Input tax credit. An electronic invoice containing a remark “This is software generated invoice, signature not required” does not qualify to be a valid document for the purpose of availing ITC.

Also, scanned image of signature inbuilt in a billing software should not be a valid signature unless it is with an electronic signature.

Recipient should ensure that they receive properly signed invoice to claim ITC in GST.

(Article assisted by: CA Swati Goyal)

Discussions to this article

[Gnanamuthu samidurai]

Digital signature in Tax Invoice

While I am thanking the expert Mr.Kashish Gupta who offered an opportunity to discuss the Article written by him in the section provided by TMI, I would like to put my discussion as below:

In the Article the Author, after referring rule 36 and 46 of the CGST Rules and also the relevant provisions available under the Information Technology Act 2000,came to the conclusion that

“An authentication by way of signature is must on an invoice to avail Input tax credit. An electronic invoice containing a remark “This is software generated invoice, signature not required” does not qualify to be a valid document for the purpose of availing ITC.Also, scanned image of signature inbuilt in a billing software should not be a valid signature unless it is with an electronic signature.Recipient should ensure that they receive properly signed invoice to claim ITC in GST.”

At the out set I would like to refer the relevant provision under the Indian Evidence Act 1872 in which the provisions were amended with reference to the electronic records and the electronic signature, other wise called as digital signature. According to the Special provision as to evidence relating to electronic record and its’ admissibility as below:

1[65A. Special provisions as to evidence relating to electronic record.-The contents of electronic records may be proved in accordance with the provisions of section 65B.]

1[65B. Admissibility of electronic records.-

(1) Notwithstanding anything contained in this Act, any information contained in an electronic record which is printed on a paper, stored, recorded or copied in optical or magnetic media produced by a computer (hereinafter referred to as the computer output) shall be deemed to be also a document, if the conditions mentioned in this section are satisfied in relation to the information and computer in question and shall be admissible in any proceedings, without further proof or production of the original, as evidence of any contents of the original or of any fact stated therein of which direct evidence would be admissible.

(2) The conditions referred to in sub-section (1) in respect of a computer output shall be the following, namely:-

(a) the computer output containing the information was produced by the computer during the period over which the computer was used regularly to store or process information for the purposes of any activities regularly carried on over that period by the person having lawful control over the use of the computer;

(b) during the said period, information of the kind contained in the electronic record or of the kind from which the information so contained is derived was regularly fed into the computer in the ordinary course of the said activities;

(c) throughout the material part of the said period, the computer was operating properly or, if not, then in respect of any period in which it was not operating properly or was out of operation during that part of the period, was not such as to affect the electronic record or the accuracy of its contents; and

(d) the information contained in the electronic record reproduces or is derived from such information fed into the computer in the ordinary course of the said activities.

(3) Where over any period, the function of storing or processing information for the purposes of any activities regularly carried on over that period as mentioned in clause (a) of sub-section (2) was regularly performed by computers, whether-

(a) by a combination of computers operating over that period; or

(b) by different computers operating in succession over that period; or

(c) by different combinations of computers operating in succession over that period; or

(d) in any other manner involving the successive operation over that period, in whatever order, of one or more computers and one or more combinations of computers, all the computers used for that purpose during that period shall be treated for the purposes of this section as constituting a single computer; and references in this section to a computer shall be construed accordingly.

(4) In any proceedings where it is desired to give a statement in evidence by virtue of this section, a certificate doing any of the following things, that is to say,-

(a) identifying the electronic record containing the statement and describing the manner in which it was produced;

(b) giving such particulars of any device involved in the production of that electronic record as may be appropriate for the purpose of showing that the electronic record was produced by a computer;

(c) dealing with any of the matters to which the conditions mentioned in sub-section (2) relate, and purporting to be signed by a person occupying a responsible official position in relation to the operation of the relevant device or the management of the relevant activities (whichever is appropriate) shall be evidence of any matter stated in the certificate; and for the purposes of this sub-section it shall be sufficient for a matter to be stated to the best of the knowledge and belief of the person stating it.

(5) For the purposes of this section,-

(a) information shall be taken to be supplied to a computer if it is supplied thereto in any appropriate form and whether it is so supplied directly or (with or without human intervention) by means of any appropriate equipment;

(b) whether in the course of activities carried on by any official information is supplied with a view to its being stored or processed for the purposes of those activities by a computer operated otherwise than in the course of those activities, that information, if duly supplied to that computer, shall be taken to be supplied to it in the course of those activities;

(c) a computer output shall be taken to have been produced by a computer whether it was produced by it directly or (with or without human intervention) by means of any appropriate equipment. Explanation.-For the purposes of this section any reference to information being derived from other information shall be a reference to its being derived therefrom by calculation, comparison or any other process.]

Further it is stated that under the Indian Evidence Act 1872 section 47-A says that when the Court has to form an opinion as to the ³⁹ [electronic signature] of any person, the opinion of the Certifying Authority which has issued the ⁴⁰ [Electronic Signature Certificate] is a relevant fact.]More provisions relating to the electronic signature as available in the Indian Evidence Act 1872 are also reproduced below:-

[ 67A Proof as to [electronic signature]. -Except in the case of a secure [electronic signature], if the [electronic signature] of any subscriber is alleged to have been affixed to an electronic record the fact that such [electronic signature] is the [electronic signature] of the subscriber must be proved.]

[73A. Proof as to verification of digital signature.-In order to ascertain whether a digital signature is that of the person by whom it purports to have been affixed, the Court may direct-2[73A. Proof as to verification of digital signature.-In order to ascertain whether a digital signature is that of the person by whom it purports to have been affixed, the Court may direct-"

(a) that person or the Controller or the Certifying Authority to produce the Digital Signature Certificate;

(b) any other person to apply the public key listed in the Digital Signature Certificate and verify the digital signature purported to have been affixed by that person. Explanation.-For the purposes of this section, “Controller” means the Controller appointed under sub-section (1) of section 17 of the Information Technology Act, 2000.]

1[81A. Presumption as to Gazettes in electronic forms.-The Court shall presume the genuineness of every electronic record purporting to be the Official Gazette or purporting to be electronic record directed by any law to be kept by any person, if such electronic record is kept substantially in the form required by law and is produced from proper custody.]3[81A. Presumption as to Gazettes in electronic forms.-The Court shall presume the genuineness of every electronic record purporting to be the Official Gazette or purporting to be electronic record directed by any law to be kept by any person, if such electronic record is kept substantially in the form required by law and is produced from proper custody.]"

[ 85B Presumption as to electronic records and 6 [electronic signatures]. -

(1) In any proceedings involving a secure electronic record, the Court shall presume unless contrary is proved, that the secure electronic record has not been altered since the specific point of time to which the secure status relates.

(2) In any proceedings, involving secure [electronic signature], the Court shall presume unless the contrary is proved that-

(a) the secure [electronic signature] is affixed by subscriber with the intention of signing or approving the electronic record;

(b) except in the case of a secure electronic record or a secure [electronic signature], nothing in this section shall cerate any presumption, relating to authenticity and integrity of the electronic record or any [electronic signature.]]

85 [ 85C Presumption as to 86 [Electronic Signature Certificates]. -The Court shall presume, unless contrary is proved, that the information listed in a ⁸⁶ [Electronic Signature Certificate] is correct, except for information specified as subscriber information which has not been verified, if the certificate was accepted by the subscriber.]

[ 90A Presumption as to electronic records five years old. -Where any electronic record, purporting or proved to be five years old, is produced from any custody which the Court in the particular case considers proper, the Court may presume that the ⁹⁸ [electronic signature] which purports to be the ⁹⁸ [electronic signature] of any particular person was so affixed by him or any person authorised by him in this behalf. Explanation. -Electronic records are said to be in proper custody if they are in the place in which, and under the care of the person with whom, they naturally be; but no custody is improper if it is proved to have had a legitimate origin, or the circumstances of the particular case are such as to render such an origin probable. This Explanation applies also to section 81A.]

It is important to note that the Information Technology Act, 2000 validates the electronic signatures only of the issuer has following reliable process (this process is mentioned in Section 3-A o the Information Technology Act, 2000),

(a) the signature creation data or the authentication data are, within the context in which they are used, linked to the signatory or , as the case may be, the authenticator and of no other person;

(b) the signature creation data or the authentication data were, at the time of signing, under the control of the signatory or, as the case may be, the authenticator and of no other person;

(c) any alteration to the electronic signature made after affixing such signature is detectable

(d) any alteration to the information made after its authentication by electronic signature is detectable; and

(e) it fulfills such other conditions which may be prescribed

The above aided provisions with no doubt would say that the issuance of tax invoice as prescribed under rule 46 read with section 31 and in accordance with the conditions laid down under the provisions of the information Technology Act 2000 since it is a documentary evidences fully protected by the Indian Evidence Act 1872 as given supra. As such, there is nothing wrong in the proviso given therein which prescribed with a non -mandatory requirement of the signature or the digital signature of the supplier or his authorized representative when the tax invoice was issued in accordance with Information Technology Act 2000

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By

Samidurai

Deputy Commissioner(CT)(Tamilnadu)&

Regd.GST Practitioner