What records must be maintained under GST?

Goods and Services Tax (GST) is a tax reform that will eliminate India's major indirect taxes – Excise, Service Tax, and VAT. However, record-keeping and reporting requirements under GST contain elements from each of these, and they are far from simple.

Section 35 of the GST Act explains the record-keeping requirements. In addition, in April 2017  the central government released draft rules for GST accounts and records (draft record rules), which lists additional GST accounting and record-keeping requirements.

Every registered person

Section 35

Each registered person is required maintain a true and correct account of the following:

  • Production or manufacture of goods
  • Inward and outward supply of goods or services, or both
  • Stock of goods
  • Input tax credit availed
  • Output tax payable and paid
  • Any other particulars deemed necessary

The above records must be maintained at each place of business registered under GST.

Draft record rules

In additions to the above, every registered person must maintain the following:

  • A separate account of advances received and paid, along with any adjustments
  • A true and correct account of:
    • Goods or services imported or exported
    • Supplies attracting payment of tax on reverse charge

Other points:

Every registered person must also maintain relevant documents including invoices, bills of supply, delivery challans, credit notes, debit notes, receipt vouchers, payment vouchers, refund vouchers, and electronic way (e-way) bills. Additionally, there must be separate records for each activity (i.e., manufacturing, trading, and the provision of services). Records must be in serially-numbered account books and include the following information:

  • Names and complete addresses of suppliers
  • Names and complete addresses of customers
  • Address of all premises where the goods are stored, including goods stored during transit, and descriptions of the stock stored

Registered person other than person falling u/s 10 (composition levy)

Furthermore, all the registered people other than those falling under composition levy scheme must maintain accounts of stock for each commodity received and supplied, along with the following information:

  • Opening balance
  • Receipt
  • Supply
  • Goods lost, stolen, destroyed, written off, or disposed of by way of gift or free samples
  • Balance of stock including raw materials, finished goods, scrap, and waste

These registered persons must also maintain an account containing the following details:

  • Tax payable
  • Tax collected and paid
  • Input tax and input tax credit claimed
  • Register of tax invoice, credit note, debit note, and delivery challan issued or received during any tax period

Godown and warehouse owner/operators, and transporters

There are different requirements for warehouse owner/operators and transporters. Whether registered or not, they must maintain records as prescribed under draft GST rules:

  • Every unregistered must submit business details electronically in Form GST ENR-01
  • Every transporter must maintain separate records for all branches of goods transported, delivered, and stored in transit:
  • Every warehouse and godown owner/operator must maintain books of accounts for each period that goods remain in the warehouse, including details relating to dispatch, movement, receipt, and disposal of such goods
  • The owner/operator must store the goods so that they can be identified by item and by owner, and facilitate (on demand) any authorized physical verification or inspection

Agent u/s 2(5)

Draft record rules require Agents (brokers, commission agents, del credere agents, auctioneer etc.) referred to in section 2(5) to maintain the following:

  • Authorization from each principal to separately receive or supply goods or services on their behalf
  • A description of goods or services received on behalf of every principal, including value and quantity (wherever applicable)
  • A description of goods or services supplied on behalf of every principal, including value and quantity (wherever applicable)
  • Details of accounts furnished to every principal
  • Tax paid on the supply of goods or services performed on behalf of every principal

Registered manufacturer of goods

As per the draft record rules, every manufacturer must maintain:

  • Monthly production accounts showing the quantitative details of raw materials or services used in the manufacture
  • Quantitative details of the goods manufactured, including any waste and by-products

Registered service provider

The draft record rules require every service provider to maintain the following:

  • Accounts showing the quantitative details of goods used in the provision of each service
  • Details of input services utilized and the services supplied

Registered works contractor

Under the draft record rules, registered works contractors are required to maintain separate accounts for each contract, showing:

  • The names and addresses of the persons on whose behalf the contract is executed
  • A description, value, and quantity of goods or services received for the execution of the work
  • A description, value, and quantity of goods or services utilized in the execution of each work contract
  • A description of the payment received for each contract
  • The names and addresses of suppliers of goods or services received

Persons whose turnover exceeds Rs. 1 crore in a financial year

In addition to the above requirements, any person whose turnover exceeds Rs. 1 crore in a financial year is required to:

  • Have accounts audited by a chartered accountant or a cost accountant
  • Submit a copy of the audited annual accounts and the reconciliation statement u/s 44(2) (Form GSTR-9B)and file annual return (Form GSTR-9)

Electronic record-keeping requirements

  • Electronic records must be authenticated by means of a digital signature
  • Electronic records must be backed-up

In addition, taxpayers must be able to produce — on demand — an account of the audit trail and inter-linkages, including the source document (paper or electronic), financial accounts, record layout, data dictionary, an explanation for codes used, and the total number of records in each field along with sample copies of documents.

As shown above, the GST regime has extensive accounting and record-keeping requirements. Although some of the more cumbersome manufacturing excise tax record-keeping requirements are eliminated under GST, they’re replaced by similarly stringent requirements. The onus is therefore on professionals and accountants to keep informed and in compliance with the new GST law, rules, and regulations.

The stakes are high. With the government intending to make the GST compliance rating of each taxable person public, non-compliance would have an adverse effect on the entire business.

This whitepaper is authored by CA Ami Dhabalia.

Avalara is an experienced application service provider (ASP) partnering with licensed GST Suvidha Providers (GSPs). To understand how Avalara TrustFile GST can help you with GST compliance, contact us through http://avalara.com/in/products/gst-returns-filing.