What is a Subsidiary?

A subsidiary company is defined under Section 2(87) of the Companies Act, 2013 as a company where another company (holding company) meets either of the following conditions:
✅ Owns more than 50% of its total share capital; or
✅ Controls the composition of its Board of Directors.

The parent (holding) company has significant control over the subsidiary’s operations, decision-making, and financial reporting.

What is a Joint Venture (JV)?

A joint venture is a business partnership where two or more companies collaborate for a common goal. Although the Companies Act, 2013 does not explicitly define a JV, it is generally understood as a strategic alliance where parties:
✔️ Contribute capital, resources, and expertise
✔️ Share risks and profits
✔️ Make joint decisions as per the JV agreement

A JV can be structured as a company, partnership, or contractual arrangement, depending on the agreement between the parties.

Key Differences Between a Subsidiary and a Joint Venture

Real-Life Examples

🚗 Subsidiary Example:
Maruti Suzuki India Ltd. is a subsidiary of Suzuki Motor Corporation, Japan, where Suzuki holds a majority stake and controls its operations.

🔩 Joint Venture Example:
Tata Steel and Nippon Steel formed a JV in India to manufacture high-quality steel, sharing expertise, investment, and control.

As per Section 3(1) of the Act, labour cess is levied at 1% of the “cost of construction.”

Cost of Construction Includes (Rule 3 of the Cess Rules, 1998)

✅ Material Cost – Cost of raw materials used in construction
✅ Labour Cost – Wages and salaries paid to workers
✅ Hire Charges – Rent for machinery and equipment
✅ Architectural & Design Fees – Payments to consultants, engineers, and designers
✅ Contractor’s Bills – Total contract value for civil work

Cost of Construction Excludes

❌ Land Cost – Purchase price or lease rent of land
❌ Compensation to Workers – Paid under the Workmen’s Compensation Act
❌ GST Component – Indirect taxes levied under GST

Labour Cess on Supply and Service Cost with GST

• Labour Cess is not levied on GST; it is calculated on the pre-tax cost of construction.
• If a construction contract includes both supply and services, the cess is applied to the total contract value before adding GST.
• Example Calculation:
  • Supply Cost (Materials): ₹50,00,000
  • Service Cost (Labour, Machinery, etc.): ₹30,00,000
  • Total Cost (before GST): ₹80,00,000
  • GST @ 18% (if applicable): ₹14,40,000
  • Labour Cess @ 1% on ₹80,00,000 = ₹80,000

Many businesses in India wonder whether an invoice must be signed or if a system-generated invoice is legally valid. Let’s break it down from both GST and Income Tax perspectives.

1. GST Rules on Invoice Signatures

As per Rule 46 of the CGST Rules, 2017, an invoice must contain specific details such as:
✅ Supplier’s Name & Address
✅ GSTIN
✅ Invoice Number & Date
✅ Description of Goods/Services
✅ Taxable Value & GST Amount

However, a physical signature is NOT mandatory if the invoice is issued electronically. Businesses can simply add a note stating:
📝 “This is a system-generated invoice and does not require a signature.” Here Computer generated means generated through a computer System/application.

What About E-Invoicing?

For businesses with a turnover of ₹5 crore or more (from 1st August 2023), e-invoicing is mandatory. These invoices are digitally signed by the Invoice Registration Portal (IRP), making a physical signature unnecessary.

2. Income Tax Perspective on Invoice Signatures

The Income Tax Act, 1961, does not prescribe any format for invoices, nor does it require a signature. However, invoices should contain necessary details to support expenses or revenue for tax assessments.

• For Tax Audit Cases (Section 44AB): No requirement for a signature, but proper record-keeping is necessary.
• For TDS Deductions: A signed invoice is not mandatory, but details must be accurate for compliance.
• For Books of Accounts (Section 44AA): Invoices serve as supporting documents, but again, no signature is required.

3. When Should You Sign an Invoice?

Although signatures are not mandatory, some situations may require them:
✔️ Export Transactions: Foreign clients may request a signed invoice.
✔️ Government Contracts: Some government departments require physical signatures.
✔️ Legal Disputes: A signed invoice can provide stronger evidentiary value.

Conclusion: What Should You Do?

For most businesses, a computer-generated invoice with a disclaimer is legally valid. If required, businesses can use digital signatures (DSC) or scanned signatures instead of manual signing.

👉 Recommended Disclaimer for Your Invoices:
📌 “This is a system-generated invoice and does not require a signature.”

This ensures compliance while keeping your invoicing process efficient.