Accounts To Be Maintained Under Goods and Services Tax Law

Introduction

Maintaining accurate and comprehensive accounts and records is a fundamental obligation for every business registered under the Goods and Services Tax (GST) law in India. These records are not just crucial for ensuring compliance with the GST regulations but also play a vital role in availing input tax credit, filing accurate returns, and facilitating audits by tax authorities. Proper record-keeping helps businesses track their financial transactions, understand their tax liabilities, and avoid potential penalties.

General Requirements for Maintaining Accounts and Records

The GST law lays down certain general principles regarding the maintenance of accounts and records:

• Manner of Maintenance: Registered persons can maintain their accounts and records either in electronic form or in physical form. With the increasing push towards digitalization, electronic maintenance is becoming more prevalent and is often recommended for ease of access and storage.
• Language of Records: All accounts and records must be maintained in the English or Hindi language, or in the language prevalent in the State where the principal place of business is located.
• Period of Retention of Records: Every registered person is required to keep and maintain the prescribed books of account and other records for a period of 72 months (six years) from the due date of filing of the annual return for the year pertaining to those records.
• Accessibility of Records: The accounts and records maintained should be easily accessible at the principal place of business or at the additional places of business mentioned in the registration certificate. If records are maintained electronically, they should be accessible through the computer systems installed at these locations.

Specific Accounts and Records to Be Maintained

The GST rules specify the particular accounts and records that every registered person must maintain. These include:

• Records of Inward and Outward Supplies: This is a fundamental requirement and includes detailed records of all goods and services received (inward supplies) and supplied (outward supplies). These records should contain:
  • Description of goods or services.
  • Quantity.
  • Value.
  • Taxable value.
  • Amount of tax (CGST, SGST/UTGST, IGST, Cess).
  • Details of the supplier and recipient (name, address, GSTIN).
  • Invoice numbers and dates.
• Stock Records: Businesses dealing with goods must maintain detailed records of the stock of goods held by them. This includes:
  • Opening balance.
  • Receipts.
  • Issues.
  • Closing balance of goods.
  • Details of goods held by them or on their behalf in any other place of business.
• Records of Input Tax Credit Availed: Registered persons must maintain records showing:
  • The amount of ITC availed.
  • Details of the invoices on which ITC was claimed.
  • The conditions under which ITC was availed.
  • Details of any ITC reversed.
• Records of Output Tax Payable and Paid: These records should clearly show:
  • Tax liability determined.
  • Tax collected.
  • Tax paid (along with challan details).
• Tax Invoices, Credit Notes, Debit Notes, and Delivery Challans: Copies of all tax invoices issued, as well as any credit notes, debit notes, and delivery challans, must be preserved. These documents are essential for return filing and ITC claims.
• Records of Advances Received and Paid: Maintain records of advance payments received for goods or services, including dates, amounts, and GST paid. Also, maintain records of advances paid to suppliers.
• Account of Goods Sent for Job Work: Businesses that send goods for job work must maintain detailed records of the goods sent, the name and address of the job worker, and the date of sending.
• Account of Goods Received from Job Work: Similarly, maintain records of goods received back from the job worker, including quantity and description.
• Records of Waste and Scrap: If your business generates any waste or scrap, maintain records of its generation, disposal, and any proceeds from its sale.
• Details of Payment Made to Suppliers: It is important to maintain records of payments made to your suppliers, especially for claiming ITC, as there are provisions linking ITC to the payment status of the supplier’s invoices.

Additional Records for Specific Types of Businesses

• Composition Scheme Dealers: While their record-keeping is generally simpler, they still need to maintain records of stock, purchases, and sales.
• E-commerce Operators: They are required to maintain records of all supplies made through their platform, including details of the suppliers and the amount collected from the recipients.
• Input Service Distributors (ISD): They need to maintain records of the input tax credit received and distributed to their units.

Consequences of Not Maintaining Proper Accounts and Records

• Difficulty in Claiming Input Tax Credit: Without proper records, you may not be able to substantiate your ITC claims, leading to potential disallowance.
• Penalties: Tax authorities can impose penalties for non-compliance with the record-keeping requirements.
• Complications During Audits and Assessments: If your records are not in order, it can lead to difficulties and adverse findings during GST audits and assessments.
• Potential Legal Action: In cases of significant non-compliance, legal action may be initiated by the tax authorities.

Tips for Effective Record Keeping

• Choose a System: Decide whether you will maintain records manually or electronically. For most businesses, using accounting software is highly recommended.
• Be Consistent: Follow a consistent and organized approach to recording all transactions.
• Maintain Supporting Documents: Ensure you have all the necessary supporting documents (invoices, bills, receipts, etc.) readily available and linked to your records.
• Regularly Update Records: Update your accounts and records regularly to ensure accuracy and currency.
• Train Your Staff: Ensure that employees involved in record-keeping are properly trained on GST requirements.
• Backup Electronic Records: If you maintain records electronically, have a robust backup system in place to prevent data loss.
• Seek Professional Advice: Consult with a qualified tax professional if you are unsure about any aspect of GST record-keeping.

Conclusion

Maintaining proper accounts and records is not just a legal obligation under the GST law; it is also a cornerstone of sound business management. By adhering to the prescribed guidelines and adopting best practices for record-keeping, businesses can ensure compliance, optimize their input tax credit claims, and navigate the GST regime effectively. Remember to stay informed about any updates or changes in the rules related to the maintenance of accounts and records to avoid any potential issues.