Accounts & Other Records in GST

The Importance of maintenance of books and records needs no emphasis. Accounts & Records are the backbone of any business. In GST Law, there is lot of emphasis placed on the books and records. It is presumed that all business entities are aware of the nature of books and records to be maintained. GST Law has set a common standard in relation to maintenance of the books of accounts.

Accounts and records are described in the Chapter VIII of Goods and Service Tax Act 2017.

Section 35: Accounts and other records

(1) Every registered person shall keep and maintain, at his principal place of business, as mentioned in the certificate of registration, a true and correct account of—

(a) production or manufacture of goods

(b) Inward and outward supply of goods or services or both

(c) Stock of goods

(d) Input tax credit availed

(e) Output tax payable and paid and

(f) Such other particulars as may be prescribed

Provided that where more than one place of business is specified in the certificate of

Registration, the accounts relating to each place of business shall be kept at such places of business.

Provided further that the registered person may keep and maintain such accounts and other particulars in electronic form in such manner as may be prescribed.

Person responsible to maintain accounts:

As per section 35 (1) of CGST Act identifies a ‘registered person’ to maintain the books of accounts and such other records. Section 2(94) defines registered person: “registered person means a person who is registered under section 25 but does not include a person having a Unique Identity Number”.

It is adhered that

A. As mandated under section 25, a person who is liable to get registered under section 22 or section 24, will be covered here. .

B. A person who is not required to register under section 22 or section 24 but voluntarily applied for registration will be covered here.

C. Holders of the unique identity number such as specialized agency of the United Nations Organisation, Multilateral Financial Institution and Organizations notified under the United Nations (Privileges and Immunities) Act, 1947, Consulate or Embassy of foreign countries etc. are not covered.

D. It is pertinent to note that, the requirement of maintaining accounts and records gets triggered from the day when a person becomes liable for registration, irrespective of the fact that, whether the person actually holds a GSTIN or not. Therefore, adequate care should be taken towards maintaining the required records from such triggering date itself.

E. As per section 35 of the CGST Act, 2017 read with 56 and 58 of the CGST Rules, 2017 following class of persons are also required to maintain books of accounts and specific records.

a. Owner or operator of storage facility i.e., warehouse, godown, etc.,

b. An agent as mentioned under section 2(5)

c. Clearing and forwarding agent.

d. Transporter

Location of the accounts

Section 35 of the CGST Act, 2017 mandates that every registered person shall maintain the accounts and records at his ‘principal place of business’, as defined under section 2(89).

“Principal place of business means the place of business specified as the principal place of business in the certificate of registration”.

Therefore, the address mentioned under the GST registration certificate as the principal place of business, shall be the location where the accounts and records are required to be maintained.

As per section 35 (1) of the CGST Act, 2017 read with first proviso

‘’Where more than one place of business is specified in the certificate of registration, the accounts relating to each place of business shall be kept at such places of business ‘’.

Place of the business is defined in the section 2 (85) of the CGST Act 2017.

Place of business” includes––

(a) a place from where the business is ordinarily carried on, and includes a warehouse, a godown or any other place where a taxable person stores his goods, supplies or receives goods or services or both; or

(b) a place where a taxable person maintains his books of account; or

(c) a place where a taxable person is engaged in business through an agent, by whatever name called.

In case a registered person has other place of business in addition to the principal place of business, say, for exp. multiple stores, manufacturing facility, godowns, branches, etc., under a common GSTIN and as mentioned in the GST registration certificate, then the records relating to such additional location(s) shall also be maintained at the respective location(s) and such books of account shall include any electronic form of data stored on any electronic device

True and Correct Accounts

By the concept of True and correct accounts, it is presumed by tax authorities that registered person is not only having knowledge regarding the nature and contents of the books and records required to be maintained under GST Law but also he maintains the same with complete accuracy with log details.

As per section 35 of the CGST Act, 2017 read with rule 56 of the CGST Rules, 2017 registered person is required to maintain a true and correct account of the records

A. Production/ Manufacturing of goods

B. Input tax credit

C. Output tax payable

D. Inward supplies

E. Outward Supplies

F. Stock of Goods

G. Such other particulars as may be prescribed (Rule 56)

Rule 56 of the CGST Rules, 2017: Registered person shall keep and maintain, in addition to the above mentioned in the section 35, true & correct accounts of the –

A. Goods or services imported or exported

B. Supplies attracting payment of tax on reverse charge along with relevant documents (Self-Generated Invoices)

C. Invoices (Tax invoices and Revised Tax Invoices)

D. Bill of Supply

E. Delivery Challan

F. Credit Notes

G. Debit Notes

H. Receipt Vouchers

I. Payment Vouchers

J. Refund Vouchers

K. Proper bifurcation of quantity and value of the stock records for raw materials, finished goods, scrap, wastages etc. A specimen format is given.

L. Accounts of stock in respect of goods received and supplied by him, and such accounts shall contain particulars of the opening balance, receipt, supply, goods lost, stolen, destroyed, written off or disposed of by way of gift or free sample and the balance of stock including raw materials, finished goods, scrap and wastage thereof.

M. An account of the advances received, paid, refunded or its adjustments.

N. An account of the tax payable, tax collected, tax paid.

O. Name and addresses of the suppliers and the customers.

P. Addresses of all the storage facilities, including for the goods in transit.

       Agent

In relation to the principal-agent relationship, apart from maintaining his own records in the regular course of business, an agent is also required to maintain the following details for the activities conducted on behalf of the principal.

• Authorization from the principal to receive or supply the goods or services.
• Particulars including description, value and quantity of goods or services received
• Particulars including description, value and quantity of goods or services supplied
• Tax paid on receipts or supply of the goods or services
• Accounts furnished to every principal

 Manufacturer

In case of manufacturing activity, a registered person shall ensure that the following are maintained in relation to the monthly production accounts in addition to the other regular records.

• Quantitative details of raw materials or services used in the manufacture
• Quantitative details of the goods so manufactured
• Quantitative details of the waste and by-products

.Service Provider

Incase of service provider, he shall maintain the following additional records.

• Quantitative details of the goods used to provide the service
• Details of input services utilised
• Details of the services supplied

Works Contractor

Incase of works contractor, additional records for each works contract should be maintained.

• Name and address of the person allotting the contract.
• Particulars like description, quantity, value of goods or services received for execution
• Particulars like description, quantity, value of goods or services utilized for execution
• Details of payments received towards the contract.
• Name and address of the suppliers of goods or services

Manner of Maintenance of Books of Accounts

Registered person may keep and maintain such accounts and other particulars in electronic form or Manual. In case of Manual of the books of the accounts, each volume of the books of the accounts are required to be serially numbered.

Incase of maintenance of the books of accounts in electronic form, following conditions should be compiled.

• The records shall be duly authenticated by a digital signature of the authorized signatory.
• Any entry in registers, accounts and documents shall not be erased, effaced or overwritten, and all incorrect entries, otherwise than those of clerical nature, shall be scored out under attestation and thereafter the correct entry shall be recorded and where the registers and other documents are maintained electronically, a log of every entry edited or deleted shall be maintained.
• Illegal changes of contents in records of preceding periods are not tolerable in the eyes of law and shall always be discouraged. However, any genuine alteration in the records shall be allowed, but the onus of proving the same shall always lie on the registered person.
• Proper electronic back-up of records shall be maintained and preserved in such manner that, in the event of destruction of such records due to accidents or natural causes, the information can be restored within a reasonable period of time.
• The registered person maintaining electronic records shall produce, on demand, the relevant records or documents, duly authenticated by him, in hard copy or in any electronically readable format.
• Where the accounts and records are stored electronically by any registered person, he shall, on demand, provide the details of such files, passwords of such files and explanation for codes used, where necessary, for access and any other information which is required for such access along with a sample copy in print form of the information stored in such files.

Period of Retention of Books of Accounts

As per Section 36 of the CGST Act 2017, every registered person is required to mandatorily retain the books of accounts and other records until the expiry of 72 months (6 years) from the due date for filing of Annual Return for the year, i.e., 81 months from the end of the financial year pertaining to such accounts and records.

In respect of persons involved in an appeal, revision or any proceedings before any appellate authority or revisionary authority or appellate tribunal or court, or investigation for an offence under Chapter XIX of the CGST Act, 2017, the accounts and records related to the subject involved shall be retained up to the date, whichever is later of the following:

Up to 72 months from the due date of furnishing of the annual return.

Up to 1 year from the final disposal of the appeal, revision, proceedings or investigation.

Issues

A. Books in respect of ‘non-monetary’ transactions: The law makes no concession in respect of transactions that are underlying for ‘non-monetary’ consideration. Schedule –I also covers those activities to be treated as supply which are even made without consideration. These transactions are to be treated as supply and to be considered in the turnover in the state and aggregate turnover both the purpose and to be reconciled with the turnover declared in the financial statements.

B. Separate Book Keeping for GST Laws: The registered person is liable to record the details of all supplies, whether or not the supplies are considered to be supplies under the accounting standards whereas there are various transactions which are having Nil impact on the books such as stock transfer from one branch to another branch, there are certain other transaction which do not form part of the revenue of the entity such as permanent disposal of the business assets without consideration or the sale of capital assets which is not credited in the profit and loss account which is valued as per the GST Valuation rules whereas the consideration received is actually different.

One must exercise utmost caution to attend to all such transactions with a view to ensure that the financial statements are not misreported with details relevant only from the GST-standpoint. E.g. Credit notes not fulfilling conditions under the GST law cannot reduce the value of supply, while the books of account would reflect reduction in the value.

C. Multiple Books of Accounts for the single entity: While the accounts of a person are required to be maintained for the entire business concern the GST law require separate book-keeping for every GSTIN. This will mean that every account maintained will repeat based on the number of GSTINs obtained under a single PAN.

There are various other cautions to be considered in the accounts and records under GST. There are various other provisions related to this point and aspects which has to be considered during day to day business operation and before finalization of the accounts.

Penalties :

• On failure to account for the goods or services or both, tax authorities can determine the tax payable on the same under section 73 or section 74 of the CGST Act, 2017, as if the said goods or services or both have been supplied by such registered person. (section 35(6) of the CGST Act, 2017)

• In case any taxable goods are found without valid documents at any place other than those mentioned under rule 56(5) then the tax authorities can determine tax liability on the said goods presuming that the goods have been supplied by the registered person.

• In case any documents, registers or books of accounts belonging to a registered person are found at a place other than those mentioned in the GST registration certificate, then tax authorities shall presume that the said records belong to the said registered person.

• As per section 122 (1)(xvi) of the CGST Act, 2017 if any taxable person who fails to keep, maintain or retain books of accounts and other documents in accordance with the provisions of this act or the rules then he shall be liable to penalty of twenty thousand rupees or the amount of tax involved whichever is higher.

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