Simplified GST Series- Section 35-36 /CGST ACT 2017– Part 17 – Article explains Section 35- Accounts and other records and Section 36-Period of retention of accounts.

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.

Analysis- Rules related to Accounts and records-

Rule 56 Maintenance of accounts by registered persons
Rule 57 Generation and maintenance of electronic records
Rule 58 Records to be maintained by owner or operator of godown or warehouse and transporters

1) This Section mandates the upkeep and maintenance of records, at the place(s) of business, in electronic or other forms.

2) This section emphasises “true and correct” account meaning –Actual records maintained by taxpayer.

3) Every registered person is required to keep and maintain accounts and records in that reflect the true and correct account of the transactions effected. In other words, in respect of each of the GSTINs operative during the year separate accounts required to be maintained reflecting-

  • Production / manufacture of goods;
  • Inward and outward supply of goods or services or both;
  • Stock records of goods;
  • Input tax credit availed output tax payable and paid; and
  • Such other particulars as may be prescribed in this behalf.

4) The accounts are to be maintained at the principal place of business (as mentioned in the certificate of registration). In case of multiple places of business (as specified in the certificate of registration), the accounts relating to each place of business shall be kept at the respective places of business concerned

5) The registered person has the option to keep and maintain accounts and other records in electronic form

(2) Every owner or operator of warehouse or godown or any other place used for storage of goods and every transporter, irrespective of whether he is a registered person or not, shall maintain records of the consigner, consignee and other relevant details of the goods in such manner as may be prescribed.

(3) The Commissioner may notify a class of taxable persons to maintain additional accounts or documents for such purpose as may be specified therein.

(4) Where the Commissioner considers that any class of taxable person is not in a position to keep and maintain accounts in accordance with the provisions of this section, he may, for reasons to be recorded in writing, permit such class of taxable persons to maintain accounts in such manner as may be prescribed.

(5) Every registered person whose turnover during a financial year exceeds the prescribed limit shall get his accounts audited by a chartered accountant or a cost accountant and shall submit a copy of the audited annual accounts, the reconciliation statement under sub-section (2) of section 44 and such other documents in such form and manner as may be prescribed.

Provided that nothing contained in this sub-section shall apply to any department of the Central Government or a State Government or a local authority, whose books of account are subject to audit by the Comptroller and Auditor-General of India or an auditor appointed for auditing the accounts of local authorities under any law for the time being in force.

(6) Subject to the provisions of clause (h) of sub-section (5) of section 17, where the registered person fails to account for the goods or services or both in accordance with the provisions of sub-section (1), the proper officer shall determine the amount of tax payable on the goods or services or both that are not accounted for, as if such goods or services or both had been supplied by such person and the provisions of section 73 or section 74, as the case may be, shall, mutatis mutandis, apply for determination of such tax.

Analysis- Section 35(2)-

  • The law mandates the following persons to maintain the records of the consigner, consignee and other relevant details of the goods, even if such persons are not registered under the Act:

√ A transporter of goods

√ Persons who own and operate, or persons who operate any warehouse, godown, etc. for storage of goods – the goods shall be stored in a manner in which they can be identified item-wise and owner-wise.

  • Section 35 (3) & (4)-

The Commissioner is empowered to:

(a) Notify a class of taxable persons to maintain additional accounts or documents for specified purpose – No notification has been issued in this regard as of date.

(b) Permit a class of taxable persons to maintain the records in any other manner – If he believes that they are not in a position to keep and maintain accounts in accordance with this Section.

  • Section 35(5)- There is no standalone Section that requires a registered person to get his accounts audited by a chartered accountant or a cost accountant. It is specified that every registered person whose turnover during a financials year exceeds prescribed limit shall get his accounts audited. Therefore, it is apparent that the audit under the provisions of the GST law should be undertaken for each registration viz., GSTIN-wise.

Presently threshold limit Rs 5 crore which is attributed to aggregate turnover(PAN BASED).

The registered person is required to make the following submissions to the proper officer:

(i) the annual return for the financial year;

(ii) a copy of the audited statement of accounts;

(iii) a reconciliation statement u/s 44(2), reconciling the value of supplies declared in the annual return with the audited annual financial statement, and

(iv) Other particulars as may be prescribed.

Note- It shall be noted that the provisions relating to audit of books of accounts are amended vide Central Goods and Service Tax (Amendment) Act, 2018 wherein the proviso is inserted to Section 35(5) to extend exemption from audit of books of accounts to the Central Government, State Government, local authority whose books of accounts are subject to audit by the Comptroller and Auditor General of India or an auditor appointed for auditing the accounts of local authorities under any law for the time being in force.

Section 35 (6)- In cases of requirement to reverse input tax credit availed, as provided under Section 16(2), Section 17(2) or Section 17(5)(h) – Where goods are lost, stolen, destroyed, written off, or disposed of as gifts or free samples, proportionate input tax credit should be reversed

Section 36-Period of retention of accounts –

Every registered person required to keep and maintain books of account or other records in accordance with the provisions of sub-section (1) of section 35 shall retain them until the expiry of seventy-two months from the due date of furnishing of annual return for the year pertaining to such accounts and records:

Provided that a registered person, who is a party to an appeal or revision or any other proceedings before any Appellate Authority or Revisional Authority or Appellate Tribunal or court, whether filed by him or by the Commissioner, or is under investigation for an offence under Chapter XIX, shall retain the books of account and other records pertaining to the subject matter of such appeal or revision or proceedings or investigation for a period of one year after final disposal of such appeal or revision or proceedings or investigation, or for the period specified above, whichever is later.

Analysis-

> 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.

> In case an appeal or revision or any other proceeding is pending before any Appellate Authority or Revisional Authority or Appellate Tribunal or Court, or in case the registered person is under investigation for an offence under Chapter XIX, he shall retain the books of account and other records pertaining to the subject matter of such appeal or revision or proceeding or investigation for a period of one year after final disposal of such appeal or revision or proceeding, even after the expiry of 72 months from the due date for furnishing the annual return.

> Where any disputes are involved, then records must be maintained until final disposal of those matters

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