Maintaining proper books of account and records is a fundamental obligation for every registered person under GST. Section 35 of the CGST Act and Rule 56 of the CGST Rules prescribe the records to be maintained and the retention period. Failure to comply attracts penalty under Section 122(1)(xvi) of the CGST Act.
This article explains the record-keeping requirements and the penalty consequences.
Record-Keeping Requirements Under Section 35
Every registered person is required to maintain:
- True and correct account of production or manufacture of goods.
- True and correct account of inward and outward supply of goods or services.
- True and correct account of stock of goods.
- Account of input tax credit availed.
- Account of output tax payable and paid.
- Any other particulars as may be prescribed.
Retention Period
Under Section 36, records must be retained for 72 months (six years) from the due date of filing the annual return for the year to which the records pertain. The Allahabad High Court has held that the penalty for non-maintenance of accounts is ₹10,000.
Penalty Under Section 122(1)(xvi)
Section 122(1)(xvi) provides that a taxable person who fails to keep, maintain, or retain books of account and other documents in accordance with the Act shall be liable to pay a penalty of ₹10,000 or an amount equivalent to the tax evaded, whichever is higher.
Consequences of Non-Maintenance
- Penalty: ₹10,000 or tax evaded, whichever is higher.
- Audit objections: The department can raise audit objections and demand tax.
- Burden of proof: In the absence of records, the burden shifts to the taxpayer to prove compliance.
- Prosecution: In serious cases, prosecution can follow for falsification of records.
Practical Compliance Steps
- Maintain records in electronic or physical form as required.
- Retain records for 72 months from the annual return due date.
- Ensure that records are complete and reconciled with GST returns.
- Keep records of all invoices, e-way bills, transport documents, and payment records.
- Train staff on record-keeping requirements.
Conclusion
Record-keeping is a critical compliance obligation. Failure to maintain proper books can result in penalties, audit objections, and adverse inferences. Businesses must implement robust record-keeping systems.
At Anuj Desai & Associates, we provide expert advisory services on GST record-keeping and audit preparation. Our team can help you implement compliant record-keeping systems.
For a confidential consultation, contact us at office@anujdesaiassociates.com or call 9619456656. Visit our website at https://anujdesaiassociates.com or connect with our founder on LinkedIn at linkedin.com/in/ca-anuj-desai-122547230.