ACCOUNTS & RECORDS – SECTION 35 – CGST ACT 2017– GST SERIES – PART 23
1. Maintenance of accounts and records is one of the important compliance under the GST Act. The term books of accounts include all the records maintained in respect of money, sales, purchases, assets, liabilities, and items of cost. Section 35 of the CGST Act read with Rule 56 prescribes accounts and records requirements for a registered person.
2. Statutory Provisions :
| Section 35(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 the followings –
(a) Production or manufacture of goods (b) Inward or outward supply of goods or/and services (c) Stock of goods (d) Input tax credit availed (e) Output tax payable and paid (f) Such other particulars as may be prescribed |
| Rule 56(1) | Every registered person shall keep and maintain a true and correct account of the following particulars:-
(a) The goods or services imported or exported. (b) Supplies attracting payment of tax on reverse charge. (c) The relevant documents including invoices, bills of supply, delivery challans, credit notes, debit notes, receipt vouchers, payment vouchers, and refund vouchers. |
2.1 Production and manufacture of goods :
| Rule 56(12) | Every registered person manufacturing goods shall maintain monthly production accounts, showing the quantitative details of raw materials or services used in the manufacture and quantitative details of the goods so manufactured including the waste and by-products thereof. |
2.2 Inward or outward supply of goods or/and services :
| Rule 56(5) | Every registered person shall keep the particulars of
(a) names and complete addresses of suppliers from whom he has received the goods or services (b) names and complete addresses of the persons to whom he has supplied the goods or services (c) the complete addresses of the premises where the goods are stored by him, including goods stored during transit along with the particulars of the stock stored therein. |
2.3 Stock of goods :
| Rule 56(2) | Every registered person shall maintain accounts of stock in respect of each commodity received and supplied.
The Stock Account shall contain particulars of the opening balance, receipt, supply, goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples and balance of stock including raw materials, finished goods, scrap and wastage thereof. A person paying tax under composition scheme is not required to maintain the stock account |
2.4 Tax payable, Tax collected, and Input Tax Credit (ITC) :
| Rule 56(4) | Every registered person shall keep and maintain an account, containing the details of
(a) tax collected and paid, input tax and input tax credit claimed. (b) tax payable and paid under reverse charge and purchases from unregistered persons. (c ) tax invoice, credit note, debit note, delivery challan issued or received during any tax period. A person paying tax under composition scheme is not required to maintain this account. |
2.5 Advances received and adjusted :
| Rule 56(3) | Every registered person shall keep and maintain a separate account of advances received, paid and adjustments made thereto |
2.6 Goods used for Provision of Services :
| Rule 56(13) | Every registered person supplying services shall maintain the accounts showing the quantitative details of goods used in the provision of each service, details of input services utilized and the services supplied |
3. Records for Work Contracts :
| Rule 56(14) | Every registered person executing works contract shall keep separate accounts for each works contract showing the following particulars:-
(a) The names and addresses of the persons on whose behalf the works contract is executed. (b) The description, value, and quantity (wherever applicable) of goods or services received for the execution of works contract. (c) The description, value and quantity (wherever applicable) of goods or services utilized in the execution of each works contract (d) The details of payment received in respect of each works contract (e) The names and addresses of suppliers from whom he has received goods or services |
4. Records maintained by an agent :
| Rule 56(17) | Any person having custody over the goods in the capacity of a carrier or a clearing and forwarding agent for delivery or dispatch thereof to a recipient on behalf of any registered person shall maintain true and correct records in respect of such goods handled by him on behalf of such registered person. |
| Rule 56(11) | Every agent shall maintain accounts depicting the following particulars:
(a) An authorization received by him from each principal to receive or supply goods or services on behalf of such principal separately. (b) Description, value, and quantity (wherever applicable) of goods or services received on behalf of every principal. (c) Description, value, and quantity (wherever applicable) of goods or services supplied on behalf of every principal. (d) Details of accounts furnished to every principal. (e) Tax paid on receipts or on the supply of goods or services effected on behalf of every principal. |
5. Maintenance of records by the transporter, owner/operator of warehouse/ godown
| Section 35(2) | Every transporter, owner/operator of warehouse/godown or any other place used for storage of goods irrespective of whether he is a registered person or not shall maintain records of consigner, consignee and other relevant details of the goods. |
| Rule 58(1) | The owner/operator of warehouse/godown, if not registered under the Act, shall submit the details regarding his business electronically on the Common Portal in form GST ENR-01. Upon validation of the details furnished, a unique enrolment number shall be generated and communicated to the said person. |
| Rule 58(2) | The person enrolled in any other State shall be deemed to be enrolled in the State. |
| Rule 58(3) | Every person who is enrolled shall, where required, amend the details furnished in form GST ENR-01 electronically on the Common Portal. |
| Rule 58(4)(a) | Any person engaged in the business of transporting goods shall maintain records of goods transported, delivered and goods stored in transit by him and for each of his branches. |
| Rule 58(4)(b) | Every owner or operator of a warehouse or godown shall maintain books of account, with respect to the period for which particular goods remain in the warehouse, including the particulars relating to dispatch, movement, receipt, and disposal of such goods. |
| Rule 58(5) | The owner or the operator of the godown shall store the goods in such a manner that they can be identified item wise and owner wise and shall facilitate any physical verification or inspection by the proper officer on demand. |
6. Maintenance of Accounts at the place of Business :
| first proviso to section 35(1) | 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. |
| Rule 56(10) | If any documents, registers, or any books of account belonging to a registered person are found at any premises other than those mentioned in the certificate of registration, they shall be presumed to be maintained by the said registered person, unless proved otherwise. |
| Rule 56(7) | Every registered person shall keep the books of account at the principal place of business and at every related place(s) of business mentioned in his certificate of registration.
The books of account shall include any electronic form of data stored on any electronic device |
7. Maintenance of Records in Electronic Form :
| Second proviso to section 35(1) | The registered person may keep and maintain such accounts and other particulars in the electronic form in the prescribed manner. |
| Rule 57(1) | 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 |
| Rule 56(15) | The records may be maintained in electronic form and the record so maintained shall be authenticated by means of a digital signature |
8. Alteration or overwriting of records :
| Rule 56(8) | The entries in registers, accounts, and documents shall not be erased, effaced or overwritten.
All incorrect entries shall be scored out under attestation and thereafter correct entry shall be recorded. Where the registers and other documents are maintained electronically, a log of every entry edited or deleted shall be maintained. |
| Rule 56(9) | Each volume of books of account maintained by the registered person shall be serially numbered. |
9. Production of records on-demand :
| Rule 56(18) | Every registered person shall, on-demand, produce the books of account which he is required to maintain under any law in force. |
| Rule 57(2) | 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 |
| Rule 57(3) | The registered person shall also provide, on-demand, details of files, passwords of files and explanation of codes used for access and any other information which is required to access along with sample copy in printed form of the information stored in the file |
10. Consequences of Non- Compliances :
| Section 35(6) | Goods and/or Services not accounted for:-If the registered person fails to account for goods or services or both, the proper officer shall determine the tax payable on such goods or services as if such goods or services or both have been supplied.
Provisions of sections 73 and 74 will apply mutatis mutandis for recovery of such tax |
| Rule 56(6) | Stored with valid documents: If any taxable goods are found to be stored at any place(s) other than those declared, without the cover of any valid documents, the proper officer shall determine the amount of tax payable on such goods as if such goods have been supplied by the registered person |
| The Superintendent of Central Tax has been designated as ‘proper officer’ for the purpose of raising demand- CBI&C circular No. 3/3/2017-GST dated 5-7-2017.
State Government will prescribe ‘proper officer’ for the purpose of SGST in the respective State. |
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11. Power of commissioner to notify additional requirement / provide relaxation:-
| Section 35(3) | The Commissioner may notify a class of taxable persons to maintain additional accounts or documents for such purpose as may be specified therein |
| Section 35(4) | Where the Commissioner considers that any class of taxable persons 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. |
| To ensure uniformity all over India, Such permission will be granted by Commissioner or Joint Secretary in Board – section 168(2) of CGST Act | |
12. Audit by Chartered/Cost Accountant :
| Section 35(5)
Rule 80(3) Section 44(2) |
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 section 44(2) of CGST Act and such other documents in such form and manner as may be prescribed.
Every registered person whose aggregate turnover during a financial year exceeds two crore rupees shall get his accounts audited as specified under section 35(5) of the CGST Act. He shall furnish a copy of audited annual accounts and a reconciliation statement, reconciling the value of supplies declared in the return furnished for the financial year with the audited annual financial statement, and such other particulars as may be prescribed, duly certified, in form GSTR-9C, electronically. Filing of GSTR 9 C for the financial year 2018-19 is waived off for businesses with an annual turnover of less than Rs 5 crores |
| proviso to section 35(5) | The Audit by Chartered/Cost Accountant is not required if the taxable person is any department of the Central Government/ State Government/ 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.
This relaxation does not apply to Government Companies as they are not departments of Government, even if their accounts are subject to audit by C&AG. The relaxation also does not apply to Governmental Authority or Government Entity, since they are not departments of Government or local authority. |
13. Preservation of Accounts :
| Section 36 | Every registered taxable person required to keep and maintain books of account or other records under section 35(1) of CGST Act shall retain them until the expiry of seventy-two months from the due date of filing of Annual Return for the year pertaining to such accounts and records |
| proviso to section 36 | A registered person, who is a party to an appeal /revision or any other proceedings before any Appellate Authority / Revisional Authority/ 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 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. |
| Rule 56(16) | Accounts maintained by the registered person together with all invoices, bills of supply, credit and debit notes, and delivery challans relating to stocks, deliveries, inward supply, and outward supply shall be preserved and shall be kept at every related place of business mentioned in the certificate of registration. |
14. Records and books of account for auctioned goods:
The commodities like tea, coffee, rubber etc. are kept in warehouses and auction takes place from such a warehouse.
CBE&C vide circular No. 23/23/2017-GST dated 21-12-2017 has clarified the following requirement to maintain records and books of accounts where goods are supplied through auctions.
14.1 The principal and the auctioneer should declare these warehouses as additional places of business. If the buyer intents to keep the goods in the warehouse after purchase, he should also declare the place as an additional place of business.
14.2 The principal, auctioneer and the buyer (if he has registered the place as an additional place of business) are required to keep books of account at the additional place of business. However, if they have difficulty in maintaining books of accounts at that additional place of business, they may keep books of account at Principal place of business. In that case, a declaration to jurisdictional officer of GST about maintaining books of account at the principal place of business needs to be submitted by them.
14.3 Principal and Auctioneer will be eligible to avail Input Tax Credit on fulfillment of provisions of GST Act and Rules.
15. All the registered persons must ensure to maintain proper books of account and other records prescribed under GST law for the specified period of time.
The author can be approached at [email protected].
Part 24 of the series will cover the topic “Furnishing details of outward supplies under Section 37 of CGST Act 2017.
Author Bio
Mam,
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