MAINTENANCE OF ACCOUNTS AND RECORDS UNDER GST
Recently you might be aware that, so many numbers of notices are received by a various registered persons from GST authorities both central and state for the period from 2017-18 to 2020-21. Most of the notices with respect to mismatch between a) Outward liability not discharged as per GSTR-1 as compared to GSTR-3B and b) mismatch of input tax credit availed in GSTR-3B as compared to input tax credit available in GSTR-2A/2B. Apart from the above certain notices are issued by GST authorities for mismatch of e-way of bill generated as compared to GSTR-1.
The biggest challenges while replying to the above said notices is non availability of certain records and documents with respect to a) inward supply i.e. invoices / debit notes / credit notes etc., and b) input tax credit availed but no particulars available i.e. input tax credit availed workings and no reconciliation statement were made while filing GSTR-3B.
Therefore, all the registered persons are required to keep the records and documents safely with proper tagging / flapping to produce before the GST authorities whenever they required in future.
Section 35(1) of CGST Act, 2017 read with Rule 56(7) of CGST Rules, 2017 provide that every registered person shall keep and maintain all records at his principle place of business and each other additional place of business, godowns etc., as mentioned in the certificate of registration i.e. REG-06.
A registered persons i.e. manufacturer, trader and service provider etc., shall keep and maintain a true and correct account of the following:
| Sl. No. | Books of Accounts / Records | Manufacturer | Trader | Service Provider | ||
| 1 | Production or manufacture of goods- | a. Monthly Quantitative details of raw materials or services used or consumed in the manufacture. | Not Applicable | Not Applicable | ||
| b. Monthly Quantitative details of goods so produced or manufactured including the waste and by-product thereof. | Not Applicable | Not Applicable | ||||
| 2 | Inward and outward supply of goods or services or both | Purchase Register, Sales Register, Journal Register, Payment Vouchers, Purchase / Expenses Bills, Sales Invoices, Debit Notes, Credit Notes, Delivery Challans and RCM Self Invoices etc., | Purchase Register, Sales Register, Journal Register, Payment Vouchers, Purchase / Expenses Bills, Sales Invoices, Debit Notes, Credit Notes, Delivery Challans and RCM Self Invoices etc., | Purchase Register, Service Income Register, Journal Register, Payment Vouchers, Advance Receipt Vouchers, Refund Vouchers, Purchase / Expenses Bills, Service Income Invoices, Debit Notes, Credit Notes and RCM Self Invoices etc., | ||
| 3 | Stock of Goods | Raw materials, packing materials, consumables and stores & spares, WIP and Finished Goods with opening balance, receipts/produced, issued/consumed/sold, lost, stolen, destroyed, written off or disposed of by way of gift or free sample, scrap and wastage etc., | all the traded goods with opening, receipts, issues/sold, lost, destroyed, written off or disposed of by way of gift or free sample and scrap etc., | consumables and stores & spares with opening, receipts, consumed, lost, destroyed, written off or disposed of by way of gift or free sample and scrap etc., | ||
| 4 | Input tax credit availed | Register to be maintained with the details of tax period, invoice no. & date, supplier name, GSTIN, Address of supplier, quantity, HSN, taxable value, tax rate, bifurcation of tax such as IGST, CGST & SGST and category of inward such as goods, services and capital goods, RCM, Import, SEZ, Eligible / Blocked etc., | ||||
| 5 | Output tax payable and paid | a) Register to be maintained with the details of tax period, invoice no. & date, customer name, GSTIN, Address of customer, quantity, HSN, taxable value, tax rate, bifurcation of tax such as IGST, CGST & SGST and category of outward such as goods, services, export, SEZ, stock transfer, recipient liable to pay RCM and Exempted etc., | ||||
| b) Register for output tax payable with tax period, adjustment of input tax credit & TDS, Adjustment of tax paid on advance received, and paid through electronic cash ledger etc. | ||||||
| 6 | Such other particulars as may be prescribed | a) The complete address of the premises where goods are stored by him, including goods stored during transit along with the particulars of the stock stored therein. | ||||
| b) Not Applicable | Not Applicable | Separate registers for advance received, refunded and adjustment made thereto. | ||||
| c) Any other additional records and accounts to be maintained by specified persons / business as notified by the Government by way of notification.
d) Section 35(3) of the CGST Act, The commissioner may notify a class of taxable persons to maintain additional accounts or documents for such purpose as may be specified. |
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Separate accounts to be maintained by the Works Contractor
In terms of rule 56(14) of the CGST Rules, 2017 every registered person executing works contract services shall keep separate accounts for works contract showing:
1. The names and address of persons on whose behalf the works contract is executed.
2. Description, value and quantity (where applicable) of goods or services received for the execution of works contract.
3. Description, value and quantity (where applicable) of goods or services utilised for the execution of works contract.
4. The details of payments received in respect of each works contract and
5. The names and addresses of suppliers from whom he has received goods or services.
Manner of Maintaining Accounts and Records
1. In terms of Rule 56(7) of the CGST Rules, 2017, every registered person shall keep the books of account at the principal and additional place of business mentioned in his registration certificate and such books of account include any electronic form of data stored on any electronic device and the dealer can maintain manual books of account in terms of Rule 56(9) and it should be serially numbered for each volume of books of accounts.
2. In terms of Rule 56(8) of the CGST Rules, 2017, any registered person shall not be erased, effaced or overwritten and all incorrect entries in the books of account maintained by him otherwise than those of clerical nature.
If any correction made on account of clerical nature in the manual books of account maintained by the registered person and they shall be scored out under attestation. A log of every entry edited or deleted shall be maintained if the books of accounts maintained electronically.
Books of Account to be produced on Demand
Rule 56(18) of the CGST Rules, 2017 mandates that every registered person shall, on demand, produce the books of accounts which he is required to maintain under any law for the time being in force.
Generation and Maintenance of Electronic Records
1. A registered person may keep and maintain accounts and other records in electronic form as per 2nd proviso to Section 35(1) of the CGST Act, 2017. However, rule 56(15) of the CGST Rules, 2017 requires that the records maintained electronic form shall be authenticated by means of a digital signature.
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(2)].
3. 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 explanations 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.
Preserved / Retention of Accounts
1. Normal Cases
1. Section 36 of CGST Act, 2017 mandates every registered person required to keep and maintain books of account or other records under section 35(1) of CGST Act, 2017 shall retain/preserve them until the expiry of seventy-two months from the due date of furnishing of annual return under section 44 of CGST Act, 2017 for the year pertaining to such accounts and records.
2. If, the due date for filing of annual return gets extended, correspondingly, the time period for maintaining accounts and records will also get extended.
Example:
| Sl. No. | Particulars | Normal Due Date | Extended Due Date |
| 1 | Financial Year | 2020-21 | 2020-21 |
| 2 | Due date for filing of Annual Return | 31.12.2021 | 28.02.2022 |
| 3 | Period upto such records and accounts are to be preserved / retained | 31.12.2027 (i.e. 72 months from 31.12.2021) | 28.02.2028 |
| 4 | Effective time period for which such records and accounts to be preserved / retained | 6 Years and 9 Months (i.e. From 01.04.2021 to 31.12.2027) | 6 Years and 11 months (i.e. From 01.04.2021 to 28.02.2028) |
Note: The due date for filing of annual return has been extended for the FY 2020-21 vide notification no.40/2021-Central Tax, dated 29.12.2021.
Special Case (i.e. Appeal / Revision)
Provisio to Section 36 of CGST Act, 2017, If a registered person is a party to an appeal or revision or any other proceedings before any Appellant Authority or Revisional Authority or Appellate Tribunal or Court, which is filed by him or by the Commissioner, or is under investigation for any offence under chapter XIX of the CGST Act, (i.e. Offences & Penalties vide Section 122 to 138 of CGST Act), he shall retain the records and books of accounts relating to the subject matter of such appeal or revision or proceedings or investigation, for a period of 1 year after final disposal of such appeal etc., or for the period specified in above i.e. 72 months from the due date of furnishing of annual return whichever is later.
Example:
| Sl. No. | Particulars | Situation-1 | Situation-2 |
| 1 | Financial Year | 2020-21 | 2020-21 |
| 2 | Due Date for filing of Annual Return | 31.12.2021 | 31.12.2021 |
| 3 | Period upto such records and accounts are to be preserved / retained | 31.12.2027 (i.e. 72 months from 31.12.2021) | 31.12.2027 (i.e. 72 months from 31.12.2021) |
| 4 | SCN Issued by Proper Officer | 30.06.2025 | 30.06.2027 |
| 5 | Order Passed by the Proper Officer | 31.08.2025 | 30.09.2027 |
| 6 | Appeal Filed by the Registered Person | 01.10.2025 | 01.11.2027 |
| 7 | Order Passed by the Appellant Authority | 01.07.2026 | 30.09.2028 |
| 8 | Date until the order passed by the relevant authority from One Year from the date of such order | 30.06.2027 | 30.09.2029 |
| 9 | Effective time period for which such records and accounts to be preserved / retained (i.e. whichever is later between due date of annual return order of appeal) | 6 Years 9 Months (i.e. From 01.04.2021 to 31.12.2027) | 8 Years 6 Months (i.e. From 01.04.2021 to 30.09.2029) |
Consequences of Not Maintaining Proper Accounts & Records
1. Determination of Tax Payable on Goods or Services or Both not accounted for
In terms of Section 35(6) of the CGST Act, 2017 where the registered person fails to account for the goods or services or both in accordance with provisions of section 35(1) of the CGST Act, the proper officer shall determine the tax payable on the goods or services or both that are not accounted for, on the presumption that such goods or services or both had been supplied by such person and the tax shall be determined by section 73 or 74 as the case may be mutatis mutandis.
| Section | Provision |
| 73 | Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any wilful misstatement or suppression of facts. |
| 74 | Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilful misstatement or suppression of facts |
Note
The above provisions is subject to Section 17(5)(h) of the CGST Act i.e. no input tax credit available on goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples.
2. Penalty for Irregular Maintenance Books of Accounts
1. In terms of Section 122(1)(xvi) of the CGST Act, 2017 failure to keep, maintain or retain books of account and other documents in accordance with provisions of the CGST Act or the rules made thereunder attracts penalty as higher of the following:
- 20,000/- (CGST+SGST / IGST) or
- an amount equivalent as applicable for offence-
- Tax evaded or
- Tax not deducted/collected or short deducted / collected U/s 51 & 52
- Input tax availed or passed on or distributed irregularly, or
- Refund claimed fraudulently.
2. In terms of Section 122(3)(d) of the CGST Act, 2017 fails to appear before the officer or central tax, when issued with a summon for appearance to give evidence or produce a document in an inquiry attract penalty Rs.50,000/- (CGST+SGST / IGST).
3. Punishment for Production of False accounts and records
In terms of Section 132(1)(f) of the CGST Act, 2017 prescribes that, whoever commits to retain the benefits arising out of falsifies or substitutes financial records or produces fake accounts or documents or furnishes any false information with an intention to evade payment of tax due under this Act, shall be punishable in the following manner:
| Amount of Tax evaded / erroneous refund / wrong ITC availed / utilized | Fine | Imprisonment |
| Exceeding Rs.5 Crores | Yes | Upto 5 Years |
| Rs. 2 Crore to Rs.5 Crores | Yes | Upto 3 Years |
| Rs. 1 Crore to Rs. 2 Crore | Yes | Upto 1 Year |
| Any amount | Yes | Upto 6 Month |
Others
Rule 56 (10) prescribes that, unless proved otherwise, 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.
Therefore, all the registered persons required to maintain proper books of accounts and records and relevant documents with workings for tax payable / paid and input tax credit availed / utilized to avoid unnecessary litigation time being and in future.
Note
The above article does not cover the book of accounts required to be maintained by C & F / Transporter / Warehouse Keeper etc.,
Author Bio
Very good content. Thankyou for the article.