A GST notice alleging failure to maintain records invokes Section 36 of the CGST Act, which requires every registered person to keep and maintain books of account and other records at the principal place of business, and Section 145, which governs the admissibility of microfilms, facsimile copies and computer printouts as evidence. The penalty exposure runs from ₹10,000 to the tax evaded, whichever is higher, where the failure is treated as a record-keeping contravention under Section 122.
The Retention Period
Section 36 requires records to be retained for 72 months from the due date of the annual return for the relevant year. The retention period is not optional, and a taxpayer who deletes electronic records before the period expires cannot later rely on Section 145 to prove its case. The records should include the books of account, the invoices, the returns, the credit and debit notes, the e-way bills, the payment records and the supporting documents.
The Section 145 Admissibility Framework
Section 145 makes microfilms, facsimile copies and computer printouts admissible as documents and as evidence in GST proceedings, subject to prescribed conditions. The section is a facilitation provision, not a substitute for the underlying records. A taxpayer who produces a computer printout without the source data or without the prescribed authentication may find the printout excluded.
The Patanjali Ayurved case illustrates the limits: a show-cause notice that relied on third-party data such as RTO records without the certificate required under Section 145 was held to be based on inadmissible evidence. The taxpayer can use Section 145 to challenge the department’s reliance on uncertified third-party data, while ensuring that its own records are admissible.
The Penalty Exposure
A failure to maintain records can attract a penalty of ₹10,000 or the tax evaded, whichever is higher. Where the failure is part of an effort to suppress turnover or claim ineligible credit, the penalty can be higher. The taxpayer should distinguish a genuine record-keeping lapse—a misplaced invoice, a software migration issue—from an intentional suppression, because the penalty and the prosecution exposure differ.
The Records Production Notice
Where the officer issues a notice or summons for records, the taxpayer should produce the records in an organised set, with an index and a covering letter. The production should be complete but should not include documents that are protected by legal privilege. The taxpayer should retain a copy of everything produced.
What the Taxpayer Should Control
The records outcome depends on three variables: whether the records are retained for the full 72-month period; whether the records produced are admissible under Section 145; and whether the failure is characterised as a lapse rather than suppression. The taxpayer that controls these variables avoids the higher penalty and preserves the evidentiary basis for its returns.
Call to Action: We advise taxpayers on records-production notices, Section 145 admissibility and penalty defence. For a records-review engagement, contact office@anujdesaiassociates.com, Ph No. 9619456656, Website https://anujdesaiassociates.com, LinkedIn linkedin.com/in/ca-anuj-desai-122547230.