Direct & Indirect Taxes, Tax Ready Reckoner, Tax Management, Tax Act. & Rules, Tax Planning & Tax Savings.

Direct & Indirect Taxes, Tax Ready Reckoner, Tax Management, Tax Act. & Rules, Tax Planning & Tax Savings.

Accounts and Records under GST [Section 35 of the CGST Act]

Accounts and other records play a very important role in GST Regime due to following reasons:

(i)         GST is an accounting-based law.

(ii)        Input Tax Credit of a large number of goods or services or both is available under GST Regime only if prescribed records are maintained.

(iii)       Every registered person is required to self-assess the taxes payable and furnish a return for each tax period (i.e., the period for which return is required to be filed).

(iv)       The compliance verification is done by the department through scrutiny of returns, audit and/or investigation. This requires certain obligations to be cast on the taxpayer for keeping and maintaining accounts and records.

(v)        It is the endeavour of the Government to minimise the human interface between the supplier and the administrator of law therefore importance of accounts and records further get enhanced.

Accounts and Records under GST

Table of Contents

(1) Accounts and other records to be maintained by the registered person at principal place of business [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—

(a) production or manufacture of goods;

(b) inward and outward supply of goods or services or both;

(c) stock of goods;

(d) input tax credit availed;

(e) output tax payable and paid; and

(f) such other particulars as may be prescribed (see below).

Rules Prescribed [Rule 56 of CGST Rules, 2017]

(i)      As per Rule 56(1), every registered person shall keep and maintain a true and correct account of: —

>          The goods or services imported or exported; or

>        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 and refund vouchers.

(ii)     Further, as per Rule 56(2), every registered person, other than a person paying tax under Composition Levy Scheme as per section 10, shall maintain accounts of stock in respect of goods received and supplied by him.

Further such account shall contain particulars of:

>          Opening balance,

>          Receipt,

>          Supply,

>          Goods lost, stolen, destroyed, written off or

>          Goods disposed of by way of gift or free sample; and

>          Balance of stock including raw material, finished goods, scrap and wastage thereof.

(iii)   Other Rules Regarding Maintenance of Accounts [Rule 56(3) to Rule 56(18) of the CGST Rules, 2017]

(A)     Keeping and Maintaining a Separate Account of Advances Received, Paid and Adjustments Made Thereto [Rule 56(3)]

Every registered person shall keep and maintain a separate account of advances received, paid and adjustments made thereto.

(B)     Keeping and Maintaining an Account of Tax Payable, Tax Collected and Paid, Input Tax, ITC Claimed [Rule 56(4)] 

Every registered person, other than a person paying tax under Composition Levy Scheme under section 10, shall keep and maintain an account, containing the details of tax payable (including tax payable on Reverse Charge principle in accordance with the provisions of section 9(3) & (4) of the Act), tax collected and paid, input tax, input tax credit claimed, together with a register of tax invoice, credit note, debit note, delivery challan issued or received during any tax period.

(C)     Keeping Specified Particulars of Suppliers, Recipients and Storage Premises [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 chargeable to tax under the Act;

(b)     Names and complete addresses of the persons to whom he has supplied goods or services, where required under these rules;

See also  Introduction of GST Law [Constitution (101st Amendment) Act, 2016]

(c)      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.

(D)       Determination of Tax Payable by the Proper Officer [Rule 56(6)] 

If any taxable goods are found to be stored at any place(s) other than those declared under rule 56(5) 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.

(E)        Keeping Books of Account at Principal of Business [Rule 56(7)] 

Every registered person shall keep the books of account at the principal place of business and books of account relating to additional place of business mentioned in his certificate of registration and such books of account shall include any electronic form of data stored on any electronic device.

(F)        Scoring out of Incorrect Entries and Recording of correct Entry [Rule 56(8)] 

Any entry in registers, accounts and documents shall not be erased, effaced or overwritten. Further, all incorrect entries, otherwise than those of clerical nature, shall be scored out under attestation and thereafter correct entry shall be recorded. Besides, where the registers and other documents are maintained electronically, a log of every entry edited or deleted shall be maintained.

(G)       Serial Numbering of Each Volume of Books of Account Maintained [Rule 56(9)] 

Each volume of books of account maintained manually by the registered person shall be serially numbered.

(H)     Presumption of Maintenance of Documents, Registers or Any Books of Account [Rule 56(10)] 

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, then aforesaid documents, registers or any books of account shall be presumed to be maintained by the said registered person.

Example:

Mr. Raj is a supplier of taxable goods in Delhi. Only two premises namely ‘A’ and ‘B’ are mentioned in his certificate of registration. If any books of account are found at another premises ‘C’, then it shall be presumed that such books of account are maintained by Mr. Raj. However, aforesaid presumption is rebuttable.

(I)         Contents of Books of Account Maintained by Agent [Rule 56(11)] 

As per section 2(5) of CGST Act “agent” means a person, including a factor, broker, commission agent, arhatia, del credere agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of supply or receipt of goods or services or both on behalf of another.

It is to be noted that the definition of agent is very wide it shall include every person who receive goods on behalf of another person in addition to the supply of goods on behalf of another person. In the opinion of author, it shall include clearing and forwarding agent also. Every such agent shall maintain accounts depicting the—

(a)     Particulars of authorization received by him from each principal to receive or supply goods or services on behalf of such principal separately;

(b)     Particulars including description, value and quantity (wherever applicable) of goods or services received on behalf of every principal;

(c)      Particulars including description, value and quantity (wherever applicable) of goods or services supplied on behalf of every principal;

(d)          Details of accounts furnished to every principal; and

(e)     Tax paid on receipts or on supply of goods or services effected on behalf of every principal.

(J)      Maintenance of Monthly Production Accounts by a Manufacturer of Goods [Rule 56(12)] 

Every registered person manufacturing good 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. However, the manner to maintain such records has not been specified and has been left to the discretion of supplier.

(K)        Maintenance of Accounts by Every Registered Person Supplying Services [Rule 56(13)] 

Every registered person supplying services shall maintain the accounts showing the quantitative details of goods used in the provision of services, details of input services utilised and the services supplied.

(L)      Keeping Separate Accounts for Each Works Contract and Contents of such Accounts [Rule 56(14)] 

Every registered person executing works contract shall keep separate accounts for works contract showing—

(a)     The names and addresses of the persons on whose behalf the works contract is executed;

(b)     Description, value and quantity (wherever applicable) of goods or services received for the execution of works contract;

(c)      Description, value and quantity (wherever applicable) of goods or services utilized in the execution of works contract;

(d)          The details of payment received in respect of each works contract; and

(e)          The names and addresses of suppliers from whom he received goods or services.

(M)      Option to Maintain Records in Electronic Form [Rule 56(15)] 

The records under the provisions of this chapter may be maintained in electronic form and the record so maintained shall be authenticated by means of a digital signature.

(N)       Period of Preservation of Accounts [Rule 56(16)] 

Accounts maintained by the registered person together with all the invoices, bills of supply, credit and debit notes, and delivery challans relating to stocks, deliveries, inward supply and outward supply shall be preserved for a period of 72 months from the due date of furnishing of Annual Return for the year pertaining to such accounts and records. Further, where such accounts and documents are maintained manually, the said accounts and documents shall be kept at every related place of business mentioned in the certificate of registration and shall be accessible at every related place of business where such accounts and documents are maintained digitally.

See also  Advance Payment of Tax [Section 207-211, 218, & 219]

(O)       Maintenance of Records of Goods Handled by a Carrier or a C&F 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 and shall produce the details thereof as and when required by the proper officer.

(P)        Production of the Books of Accounts by Every Registered Person [Rule 56(18)] 

Every registered person shall, on demand, produce the books of accounts which he is required to maintain under any law in force.

(2) Keeping of Accounts and Other Records in case of Multiple Places of Business [First Proviso to Section 35(1)]

Where a registered person is having more than one place of business specified in the certificate of registration, then accounts and other records relating to each place of business shall be kept at such places of business. A supplier may be having centralised accounting, even in such cases in addition to centralised records he has to maintain records for each place of business which may be a duplication of maintenance of records for such supplier.

(3) Option to Maintain Accounts and Other Particulars in the Electronic Form [Second Proviso to Section 35(1)]

The registered person shall have the option of maintaining accounts and other particulars in the electronic form in the prescribed manner.

As per Rule 56(15), the records under the provisions of this chapter may be maintained in electronic form and the record so maintained shall be authenticated by means of a digital signature.

Further, Rule 57 of the CGST Rules, 2017 provides as under regarding generation and maintenance of electronic records: —

(a) Maintenance and Preservation of Proper Electronic Back-up of Records [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 reasonable period of time.

(b) Production of Electronic Records on Demand [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.

(c) Production of Details of Files Maintained Electronically Along with Their Passwords [Rule 57(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 explanation for codes used, where necessary for access and any other information which is required for such access along with sample copy in print form of the information stored in such files.

(4) Records to be maintained by Owner or Operator of Godown or Warehouse and Transporters [Section 35(2)]

Every owner or operator of warehouse or godown or any other place used for storage of goods

and

every transporter,

irrespective of whether he is a registered person or not, shall maintain records of the consigner, consignee and other relevant details of the goods in such manner as may be prescribed (see below).

Rule prescribed [Rule 58]

(A) Communication of a Unique Enrolment Number upon Validation of the Details Furnished [Rule 58(1)]

Every person required to maintain records and accounts in accordance with the provisions of section 35(2), if not already registered under the Act, shall submit the details regarding his business electronically on the Common Portal in FORM GST ENR-01, either directly or through a Facilitation Centre notified by the Commissioner and, upon validation of the details furnished, a unique enrolment number shall be generated and communicated to the said person.

(B) Deemed Enrolment [Rule 58(2)]

The person enrolled under rule 58(1) as aforesaid in any other State or Union territory shall be deemed to be enrolled in the State or Union territory.

(C) Amendment in the Details Furnished [Rule 58(3)]

Every person who is enrolled under sub-rule (1) shall, where required, amend the details furnished in FORM GST ENR-01 electronically on the Common Portal either directly or through a Facilitation Centre notified by the Commissioner.

(D) Maintenance of Records by Person engaged in the Business of Transporting Goods [Rule 58(4)(a)]

Subject to the provision of rule 56, any person engaged in the business of transporting goods shall maintain records of goods transported, delivered and goods stored in transit by him along with GSTIN of the registered consignor and consignee for each of his branches.

(E) Maintenance of Records by Every Owner or Operator of a Warehouse or Godown [Rule 58(4)(b)]

Subject to the provision of rule 56, every owner or operator of a warehouse or Godown shall maintain books of accounts, 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.

(F) Manner of Storing the Goods by the Owner or the Operator of the Godown [Rule 58(5)]

The owner or the operator of the Godown shall store the goods in such 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.

(5) Additional Accounts or Documents to be Maintained [Section 35(3)]

The Commissioner may notify a class of taxable persons to maintain additional accounts or documents for any specified purpose. This power has been conferred on the commissioner to meet out the challenge which may arise in the implementation of GST. He can notify any class of taxable person to maintain such additional records which he considered necessary to meet out the objective of Act. It is to be carefully noted that the term used is taxable person and not registered person.

See also  GST Liability on Composite and Mixed Supplies of Goods or Services [Section 8 of CGST Act, 2017]

(6) Relaxation for a Specified Class of Taxable Traders [Section 35(4)]

Where in the opinion of the Commissioner it is not feasible for any class of taxable persons to keep and maintain accounts in accordance with the provisions of this section, he may permit such class of taxable persons to keep and maintain accounts in the prescribed manner. However, the Commissioner shall have to record the reasons in writing for aforesaid permission given by him.

(7) Obligation to get his Accounts Audited [Section 35(5)]

It shall be obligatory on the part of every registered person whose turnover during a financial year exceeds the prescribed limit to get his accounts audited by a Chartered Accountant or a Cost Accountant.

As per Rule 80(3) of the CGST Rules, 2017, every registered person whose aggregate turnover during a financial year exceeds two crore rupees shall get his accounts audited.

Further, it shall also be necessary for aforesaid person to submit to the proper officer the following Statements and Documents:

(a)          A copy of the Audited Annual Accounts;

(b)     A Reconciliation Statement under section 44(2) i.e., a statement reconciling the value of supplies declared in the Return furnished for the financial year with the audited Annual Financial Statement;

(c)           Other prescribed documents in the prescribed form and prescribed manner.

(8) Determination of Tax Payable on Goods or Services or both Not Accounted For [Section 35(6)]

Where the registered person fails to account for the goods or services or both in accordance with provisions of Section 35(1), 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.

(9) Period of Retention of Accounts [Section 36 of the CGST Act]

Books of account or other records shall be retained by every registered person for a period of 72 months from the due date of furnishing of Annual Return for the year pertaining to such accounts and records.

Period of Preservation of Accounts [Rule 56(16)]

Accounts maintained by the registered person together with all the invoices, bills of supply, credit and debit notes, and delivery challans relating to stocks, deliveries, inward supply and outward supply shall be preserved for a period of 72 months from the due date of furnishing of Annual Return for the year pertaining to such accounts and records. Further, where such accounts and documents are maintained manually, the said accounts and documents shall be kept at every related place of business mentioned in the certificate of registration and shall be accessible at every related place of business where such accounts and documents are maintained digitally.

Period of Retention in Case Books of Account Etc. Pertain To an Appeal or Revision or Any Other Proceeding before Any Appellate Authority [Proviso to Section 36]

If a registered person is party to an appeal or revision or any other proceedings before any Appellate Authority or Revisional Authority or Appellate Tribunal or Court or is under investigation for an offence or penalty under Chapter XIX of the CGST/SGST Act, then it shall be obligatory on its part to retain the books of account and other records pertaining to subject matter of such appeal or revision or proceeding or investigation for later of the following two periods:

(a)     Period of one year after final disposal of such appeal or revision or proceedings or investigation; or

(b)     Period of 72 months from the due date of filing of Annual Return for the year pertaining to such accounts and records.

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