Accounts and Records

Maintenance of Books of accounts and records are very vital as it allows you to take control of business finances, business operation, correct analysis of business performance and better statutory compliance.

Is this a new requirement or compliance under GST?

No, this is not a new concept or compliance under GST law as same was also prevalent under the erstwhile laws like Central Excise, Sales Tax Laws, Service Tax Laws.

Rule 10 of the Central Excise Rules, 2002 obligates the maintenance of “Daily Stock Account” indicating the particulars regarding description of the goods produced or manufactured, opening balance, quantity produced or manufactured, inventory of goods, quantity removed, assessable value, the amount of duty payable and particulars regarding amount of duty paid.

Chapter 6 of the Central Excise Manual obligates every assessee to furnish to the Range Officer, a list in duplicate, of all the records prepared or maintained by him for accounting of transactions in regard to receipt, purchase, manufacture, storage, sales or delivery of the goods including inputs and capital goods

Rule 9 of Cenvat Credit Rules, 2004 provides for maintenance of various records for availment and utilization of CENVAT credit on inputs, input services and capital goods.

VAT laws of most States obligate every assessee to keep and maintain an up-to-date, true and correct account showing full and complete particulars of his business and such other records as may be prescribed. There is an option to maintain those records at other place or places as he may notify to the registering authority in advance.

Rule 5 of the services tax rules, 1994 provides that the records including computerized data as maintained by an assessee in accordance with the various laws in force from time to time shall be acceptable to the Department

Books of Accounts under GST Scenario

Section 35 of CGST Act 2017 deals with the upkeep and maintenance of books of accounts and records by every registered person* at his principal palace of business** from where business is being pursued. Generally such place is mentioned in Certificate of registration of registered person.

Further, the transporters, warehouse keepers are required to maintain records of consigner, consignee or any relevant details even if they are not registered in GST. They need to enrol for the purpose.

Furthermore, in case of supply of tea, coffee, rubber, etc. where the auctioneer claims ITC in respect of the supply made to him by the principal before the auction of such goods and the said goods are supplied only through auction. Then, both the principal and the auctioneer are required to maintain the books of accounts relating to the additional place(s) of business at their principal place of business instead of such additional place(s). [Refer Circular No.23/23/2017-GST dated 21.12.2017]

*Section 2(94) registered person” means a person who is registered under section 25 but does not include a person having a Unique Identity Number

**Section 2(85) “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;

If more than one place of business

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.

List of documents to be maintained by every registered person:

As per Section 35(1) of the CGST Act, 2017 read with the CGST Rules, 2017, every registered person shall keep and maintain the following accounts on a true and correct*** basis:

(a) Production or manufacture of goods;

(b) Inward or outward supply of goods or services;

(c) Stock of goods (Stock register);

(d) Input tax credit availed (Electronic credit ledger);

(e) Output tax payable and paid;

(f) Such other particulars as may be prescribed.

***true and correct means he financial statements are free from material misstatements and faithfully represent the financial performance and position of the entity. However Tax authorities would go by the actual records maintained and would not place much reliance on the concept of materiality.

Rule 56 of CGST Rules, 2017 prescribe maintaining additional records pertaining to:-

1) Goods or services imported or exported;

2) Supplies attracting payment of tax on reverse charge along with relevant documents, (including invoices, bills of supply, delivery challans, credit notes, debit notes, receipt vouchers, payment vouchers, refund vouchers and e-way bills) ;

3) Accounts of stock in respect of goods received and supplied – containing particulars of opening balance, receipt, supply, goods lost, stolen, destroyed, written off or disposed of by way of gift or free sample and balance of stock including raw materials, finished goods, scrap and wastage thereof (these details need not be maintained by a composition dealer) ;

4) Advances received, paid and adjustments made thereto;

5) Tax payable on reverse charge basis;

6) Tax payable, tax collected and paid, input tax, input tax credit claimed, together with a register of tax invoice, credit notes, debit notes, delivery challan issued or received during any tax period (Not applicable to composition dealer);

7) Names and complete addresses of suppliers from whom he has received the goods or services;

8) Names and complete addresses of the persons to whom he has supplied the goods or services; and

9) 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.

Books of Accounts-Special cases

For Agent under rule 56(11) Particulars of authorization received by him from each principal
Particulars including • description,• value and

  • quantity (wherever applicable) of goods or services received on behalf of every principal
Particulars including • description, • value and • quantity (wherever applicable) of goods or services supplied on behalf of every principal
Details of accounts furnished to every principal; and
Tax paid on receipts or on supply of goods or services effected on behalf of every principal.
For registered manufacturer u/r 56(12) Monthly production account showing:-

Quantitative details of raw materials or services used

Quantitative details of the goods so manufactured
Quantitative details of the waste and by products
Supplier of service under rule 56(13)
  • quantitative details of goods used in provision of services
  • details of input services utilized and services supplied
Works contract service under rule 56(14) Names and addresses of the persons on whose behalf the works contract is executed;
Description, value and quantity (wherever applicable) of goods or services received for the execution of works contract
Description, value and quantity (wherever applicable) of goods or services utilized in the execution of each works contract
Details of payment received in respect of each works contract
Names and addresses of suppliers from whom he has received goods or services.
custodian of goods under rule 56(17) Clearing and forwarding agent or the carrier of goods shall maintain true and correct records in respect of such goods handled by him on behalf of the registered person
For Transporter under rule 58****
  • GSTIN of registered consignor/consignee
  • Goods transported
  • Goods delivered
  • Goods stored in transit by him
For owner/ operator of a warehouse or godowns under rule 58
  • Accounts related to that period for which goods remain with him
  • Details of dispatch, movement, receipt and disposal of goods

He shall store goods in such manner that facilitate physical verification or inspection of goods stored owner wise by proper officer.

****Transporter

If he is not registered under this act,

– He shall submit the details regarding his business electronically in Form GST ENR-01.

– Upon validation, he shall be provided with unique enrolment number.

If transporter is registered in more than one state or union territory,

– He may apply for common enrolment number by submitting application in Form GST ENR-02.

– And upon validation, he shall be provided with unique common enrolment number.

– He shall not be eligible to use any GSTN for the purpose of this chapter.

Notification No. 28/2018 – Central Tax issued dated 19th June, 2018

Manner of maintaining the Accounts and records

Records may be maintained in electronic form. In such case, such records have to be authenticated digitally.

However, proper electronic back-up of records is to 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 reasonable period of time.

Registered person, on demand, provide the details of such files, passwords of such files and explanation for codes used where necessary, for access. (Rule 56(15) and 57 of the CGST Rules, 2017)

Can the entries in the registers be erased?

No, as per Rule 56(8) of the CGST Rules, 2017, any entry in the register, accounts and documents shall not be erased, effaced or overwritten.

What could be done by registered person to correct those entries If entry cannot be erased or overwritten?

As per Rule 56(8) of the CGST Rules, 2017, if incorrect entries (except those of clerical nature) are made in the registers, accounts or documents; they shall be scored out under attestation. Thereafter, the correct entry shall be recorded. Further, where the registers and other documents are maintained electronically, a log of every edited or deleted entry shall be maintained

What if documents, register or books of accounts belonging to registered person found at any premise other than those registered in Certificate of registration

As per Rule 56(10) of the CGST Rules, 2017, unless it is proved otherwise, if any document, register, or books of accounts 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.

Relaxation for maintenance of books of accounts and records

As per provisions of section 35(4), The Commissioner is empowered to 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

Audit of Books of Accounts under GST Provision

Every registered person whose aggregate turnover during a financial year exceeds the prescribed limit of 2 Crore, shall get his accounts audited by a chartered accountant or a cost accountant and shall submit to the proper officer

– a copy of the audited annual accounts,

– a copy of the audited statement of accounts

– the reconciliation statement (duly certified, in FORM GSTR-9C) reconciling the value of supplies declared in the annual return with the audited annual financial statement

– such other documents in the form and manner as may be prescribed.

Exemption from the provision of audit

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.

Consequences for not maintaining the Books of accounts and records

1. where the registered person fails to account for the goods and/or services in accordance with Section 35(1), the proper officer shall determine the amount of tax payable on the goods and/or services that are not accounted for, as if such goods and/or services had been supplied by such person, and the provisions of Sections 73 or 74, as the case may be, shall apply, mutatis mutandis, for determination of such tax.

Note:

Section 73 & 74 are the demand-related provisions under the Act.

2. In term of provision of Section 122 of CGST Act, where a registered person

– falsifies or

– substitutes financial records or

– produces fake accounts and/or documents or

– furnishes any false information or return with an intention to evade payment of tax due under this Act;

Such person shall be punished with a penalty that shall be higher of the amount of tax evaded or Rs. 10000 whichever is higher.

3. Section 122(3) of the CGST Act provides for levy of penalty extending to 25,000/- for any person who aids or abets any of the aforesaid offences.

4. Section 132 of CGST Act also provide where a registered person commits or abets in

– falsification or

– substitutes financial records or

– produces fake accounts and/or documents or

– furnishes any false information or return with an intention to evade payment of tax due under this Act;

Such person shall be punished with 6 month imprisonment or Fine or both.

Note: No person shall be prosecuted for any offence under this section without prior sanction of the Commissioner

Period of retention of accounts

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.

Where registered party is a party to appeal or revision or any other proceeding before the Appellate Authority, or investigation for an offence under this act, in such case, he shall retain the books of accounts and other records for a period of one year after final disposal of such appeal or revision or proceedings or investigation, or until the expiry of 72 months from the due date of filing of Annual Return for the year pertaining to such accounts and records, whichever is later.

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

DISCLAIMER: Every care has been taken in the preparation of this article to ensure its accuracy. The views contained in this article are personal views of the authors and meant for informational purpose. It does not constitute professional advice that may be required before acting on any matter. For any suggestion ,plz contact at capraveenbisht@yahoo.in

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