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CA Final · Indirect Tax Laws · Accounts and Records; E-way Bill

Ganga Components Ltd's data centre in Chennai is flooded, destroying its servers. It had maintained no off-site electronic back-up, but retained hard copies of invoices only. The officer demands the electronic accounts, which the company cannot restore for several months. Which statement best reflects the position under the CGST Rules, 2017?

The company has not complied. The Rules require proper electronic back-up to be maintained so that, if records are destroyed by accidents or natural causes such as a flood, information can be restored within a reasonable period. Having no back-up and only invoice hard copies does not satisfy this.

  1. AThere is no default, since destruction was due to a natural cause
  2. BThe company has complied, as hard copies of invoices are enough to meet the back-up requirement
  3. CThe company has not met the requirement, because proper electronic back-up must be maintained so that information can be restored within a reasonable period, even where destruction is by natural causesCorrect
  4. DThe requirement applies only when records are destroyed by the person's own act

Explanation

The back-up rule is designed precisely for destruction by accidents or natural causes; it requires back-up such that information can be restored within a reasonable period. Natural cause is therefore not an excuse for having no back-up, and invoice hard copies do not substitute for electronic records.

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