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Published on:

April 7, 2025

Viraaj Vashishth

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GST Rules

Maintaining Books Of Accounts And Records Under GST

In India, adhering to the Goods and Services Tax (GST) comes with its own set of challenges. However, meticulously maintaining books of accounts and records is crucial for compliance and business management. Any person who is registered under GST must keep records of all transactions and inventories to ensure proper accountability.

Statutory Mandate for Record Maintenance

Section 35 of the Central Goods and Services Tax (CGST) Act, 2017, states that any registered individual must store accounts and records of business, to be accurate and precise, at their primary headquarters of operation such as:

1. The production or manufacturing processes of goods.

2. The inward supply or outward services and vice versa.

3. Any Inventory related stock of goods.

4. Claimable Input Tax Credit.

5. Tax Volume that is Output.

6. Other statements that relate to such parts as may be recommended.

They are a crucial part of taxation compliance and reporting to ensure accuracy.

Detailed Accounts to be Maintained

Apart from the above requirements, detailed accounts that are mentioned in CGST Rules, particularly Rule 56, tell which old records are enforceable:

1. Stock Registers: They contain exact details of stock received and supplied with particulars of the opening balance, receipts, supplies, losses, thefts, destructions, write offs or stock gifts, and samples along with the balances which consists of work in progress, finished products, scrap, and wastage.

2. Advance Records: Accounts of advances received, paid and adjustments thereof, separately kept.

3. Tax Liability Register: Maintains comprehensive details of taxes due, taxes assessed and collected, input tax, input tax credit claimed, as well as a register of tax invoices, credit notes, debit notes, and delivery challans issued or received during any taxation period.

4. Supplier and Customer Information: Names and complete addresses of all suppliers and customers to enhance traceability and verification.

5. Storage Details: Addresses of premises where goods if not delivered are kept including store during transit and particulars of the stock therein.

These records are necessary and sufficient since they cover all transactions of goods and services comprehensively and accurately.

Special Provisions for Specific Businesses

Some types of businesses may have additional recordkeeping obligations:

1. Agents: Agents must keep track of every principal’s details so they can recount the particular goods or services received and supplied, accounts, and tax paid on any receipts or supplies.

2. Manufacturers: Manufacturers must have a monthly account of their production with raw materials, services used and goods produced, waste, and any by-products involved.

3. Service Providers: Service providers have the obligation of maintaining quantitative accounts such as goods utilized for rendering services, input services used, and services provided.

4. Works Contractors: Works contractors must keep works contracts accounts separately identified by names and addresses of people on whose behalf the works contract is done with descriptions, values and quantities with regards to goods and services received and used, payment for each contract, and suppliers.

These specific requirements ensure that different business operations are adequately captured.

Electronic Record Maintenance

The framework enables the maintenance of electronic records, provided that they are authenticated by a digital signature. To help mitigate the effects of accidents and natural disasters, electronic backups have to be maintained sufficiently. Moreover, businesses must have the capacity to generate these records upon request in printed form or any other electronically readable format.

Retention Period for Records

In terms of retention, every registered person is required to retain the books of accounts or other records for a period of 72 months (6 years) from the due date of furnishing the annual return for the year pertaining to such accounts and records. Where the registered person is a party to an appeal, revision, or any other proceedings before an authority, or where he is under investigation, the records must be retained for one year after final action has been taken in such proceedings or for the period specified above, whichever is later.

Consequences of Non-Compliance

The keeping of accounts and records under GST is so crucial for tax compliance in India that it requires immense diligence. It facilitates compliance to legal requirements, but also promotes clarity and effectiveness in the running of the businesses. It is incumbent upon business to take full precautions in understanding and fulfilling these requirements to avoid being subjected to strict penalties while ensuring that they contribute towards the strengthening and transparency of tax systems in the country.

More Information on Difference between a Revaluation Account and a Realisation Account Here

Conclusion

Maintaining meticulous accounts and records under GST is a critical aspect of tax compliance in India. It not only ensures adherence to legal requirements but also fosters transparency and efficiency in business operations. Businesses must be vigilant in understanding and implementing these requirements to avoid potential penalties and to contribute to a robust and transparent tax ecosystem.

FAQs

1. What specific accounts and records are prescribed under GST to be maintained by registered businesses?

Purchases made by registered businesses are required to keep records of stock, input tax credit, tax liability, invoices, and transactions related to goods and services under GST.

2. Why do businesses need to maintain accounts of GST in their business activity?

Businesses need to maintain accounts of GST in their business activity to ensure compliance, accurate tax filings, and defenses against penalties for incorrectly or insufficiently specific records.

3. For how long are a business’s accounts and records under GST supposed to be kept for?

Businesses must keep accounts and records under GST for a minimum of 6 years from the end of the financial year to which they pertain to.

4. Is it possible to keep GST accounts in an electronic form?

Yes, the accounts of GST are required to be maintained in a computerized format. All of them should be controlled in such a way that they can be retrieved at any time.

5. What are the repercussions for not maintaining records as per the requirements of GST?

Like most of the regulations in GST, even the accounts and records are to be maintained as per the prescribed laws in GST and failing to do that may result in penalties, additional tax liabilities, or even getting sued.

6. Do small businesses also bear some GST accounts similar to larger enterprises?

Yes, all companies, no matter what their nature is, small or large, have to account for GST as the law stipulates.

7. What documents does a manufacturer registered under GST need to maintain?

A GST registered manufacturer has to maintain records of the production process, the stock, the invoices for purchases, and the output tax obligations.

8. Is it a requirement for all GST businesses to maintain a record of accounts at the registered business premises?

Yes, all businesses are required to maintain accounts of GST at the major place of business as provided during registration.

9. Should service sector professionals maintain documentation in some form under the provisions of GST?

Yes, service providers should keep the record of services rendered, the invoices raised, the input tax credits, and the payments received.

10. How do the accounts of GST assist during the audit and inspection of a business?

Well-kept accounts of GST expenses aid business during the audit and inspection as supporting documents for tax payments, tax credits, and other activities transactions.