Background

Maintenance of accounts and records has always been a redundant topic in every law. So, be it Income tax act, 1961, Companies Act, 2013, Central Excise Act, 1944, State VAT laws. Each law contains provisions for up keeping of accounts and records.

In our 12th GST article of the series, we will discuss about the provisions of accounts and records laid down under revised model GST law. Further, there is also a compliance to furnish the audit report in the specified format by a person having a turnover of above threshold limit to be specified.

Nature of accounts and records to be maintained

The law provides that a registered taxable person shall keep and maintain a true and correct account

  • Of Production or manufacture of goods;
  • Of inward and outward supply of goods and/or services;
  • Of input tax credit availed and output tax payable &paid;
  • Of stock of goods;
  • And such other particulars as may be prescribed,

Therefore, during updation of accounting software, please keep in mind the above requirements.

Unregistered person will also maintain the accounts and records

A registered taxable person is required to maintain accounts and records of such transactions specified above. There is no limit as such defined to exempt any class of taxable person. However, It is well provided in law that every owner or operator of Godown or warehouse or any other place used for storage of goods irrespective of whether he is registered taxable person or not shall maintain records of consignor, consignee and other relevant details of goods as may be prescribed.

Locations where the accounts to be maintained

As per the law, the accounts shall be kept at principal place of business. However, if a registered taxable person is having more than one place of business in a State then accounts shall be maintained at each place of business to which it belongs.

That means if a tax payer is having 2 place of business in a State then he will take one registration for such State but he shall be required to keep and maintain accounts and records at each such place of business pertaining to such place of business.

Period of maintenance of books of accounts

We are discussing about the maintenance of books of accounts and it is very important to know that for how much time we are required to preserve/retain the accounts. GST law provides that in normal situation a registered taxable person is required to retain such accounts and records till sixty months (60 Months/5 years) from the due date of filing of annual return for the year pertaining to such accounts and records.

However, in case the taxable person is a party to an appeal or revision then accounts and records shall be retained for a period of one year (1 year) after final disposal of such appeal or revision or period discussed above, whichever is later.

Annual audit of accounts maintained under GST law

Unlike Income tax act, the GST law also laid down the provisions with respect to audit of accounts maintained under this act. It is provided in the law that a registered taxable person having aggregate turnover during the year exceeds INR 1 Crores (INR 10 Million) shall be required to get its accounts, maintained under GST law, audited by a Chartered Accountant or Cost Accountant and such audit report (Form GSTR 9B) shall be required to be filed annually with GST authorities along with the Annual return (Form GSTR 9) by 31st December following the end of the financial year. This threshold limit shall be determined on PAN India basis.

This means that a person whose turnover during the financial year (FY) is more than INR 1 Crores shall be required to get its accounts audited. This will be required for each place of business. That means if a person having 4 branches in 4 different states, he must be having 4 separate registrations and the aggregate turnover of person is more than INR 1 Crore then he shall be required to get the accounts audited for each separate registered states.

To comply with this provision, the tax payers must be having stringent process/accounting software in place to support the audit reports, reconciliation requirements, etc. The tax payers would also need to appoint the auditors under GST law separately.

Non maintenance of accounts

It is very important to note that the law provides the powers to the commissioner or chief commissioner that if they consider that any class of taxable persons is not in a position to keep and maintain accounts in accordance with the provisions, they may, for reasons to be recorded in writing, permit such class of taxable persons to maintain accounts in such manner as may be prescribed.

Maintenance of additional accounts and records

It is provided in the law that certain class of taxable persons may be notified who shall maintain such additional accounts or documents.

Consequences of non-maintenance of accounts and records

Where a registered taxable person does not maintains the accounts and records for the goods and/or services, the designated officer shall determine the amount of tax payable on such goods and/or service that are not accounted for, as if such goods and/or services had been supplied by such person in this regard and the provisions of demand (Section 66 and 67) shall apply as it is for determination of such tax. Further, Non-maintenance of accounts and records is an offence under GST law and penalty of INR 10,000/- shall be levied under section 85 of the Model law.

Author’s comments

The accounts and records is a key process for every business and an additional cost as well. Only keeping of Accounts is not enough, it should be get audited by Chartered or Cost Accountant. It will bring a separate cost for the tax payers and hence one has to analyze the need and necessity of a place of business in a State. If one has 2 place of business in a State then separate accounts and records for each place of business shall be required.

Therefore, we advise to rethink on establishing and maintaining branches or units in a State and with respect to existing branches. Let us remind you that each branch is like a separate assessee and will bring a bunch of compliance burden. Apart from this the tax payers are also required to establish proper accounting processes so as to make them compatible with the requirements of GST law.

Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. The observations of the authors are personal view and this cannot be quoted before any authority without the written permission of the authors. This article is meant for general guidance and no responsibility for loss arising to any person acting or refraining from acting as a result of any material contained in this article will be accepted by authors. It is recommended that professional advice be sought based on the specific facts and circumstances. This article does not substitute the need to refer to the original pronouncements on GST.

(Authors – CA Neeraj Kumar and CA Deepak Arya, RAPG & Co. Chartered Accountants from Delhi and can be reached at info@rapg.in, 9999836182/9818449179)

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