Accounts and Other Records – Section 35 of GST

The GST regime mandates strict compliance with record-keeping to ensure transparency and accountability. Section 35 of the CGST Act, 2017, specifies the requirements for maintaining accounts and other records by registered persons. This provision plays a crucial role in streamlining tax administration and preventing tax evasion.

Obligation to Maintain True and Correct Accounts

Every registered person under GST must maintain accurate and updated records at their principal place of business, as mentioned in their certificate of registration. The records should include:

• Production or manufacture of goods

• Inward and outward supply of goods or services or both

• Stock of goods

• Input tax credit (ITC) availed

• Output tax payable and paid

• Other prescribed details

If a registered person has multiple places of business, records related to each location must be maintained at the respective business premises.

Electronic Maintenance of Accounts

A registered person is allowed to maintain accounts and records in electronic form, provided they adhere to the prescribed manner. This provision enhances efficiency and facilitates easy access and retrieval of records during audits and assessments.

Record Maintenance by Warehouse Operators and Transporters

Owners or operators of warehouses, godowns, or any storage facilities, as well as transporters, must maintain records of consignors, consignees, and other relevant details of goods stored or transported. This requirement applies irrespective of whether the warehouse owner or transporter is registered under GST.

Additional Record-Keeping Requirements

The Commissioner has the authority to notify specific classes of taxable persons who must maintain additional records or documents as deemed necessary. This measure ensures better compliance and monitoring of businesses that engage in complex transactions.

Relaxation for Certain Taxable Persons

In cases where maintaining records as per Section 35 is impractical, the Commissioner may permit a specific class of taxable persons to maintain accounts in a prescribed alternative manner. Such permissions are granted based on documented reasons recorded in writing.

Consequences of Non-Maintenance of Records

Failure to maintain proper records as required under Section 35 can lead to serious consequences. If a registered person does not account for goods or services in accordance with the law, the tax officer has the authority to determine the tax liability on such unaccounted goods or services. The provisions of Section 73, Section 74, or Section 74A will apply for the determination and recovery of tax.

Amendments to Section 35

Finance Act, 2021 Amendment

The Finance Act, 2021, removed the requirement for mandatory GST audits by a Chartered Accountant (CA) or Cost Accountant. Previously, businesses exceeding a prescribed turnover limit were required to get their accounts audited and submit a reconciliation statement under Section 44(2). However, this provision was omitted w.e.f. 1st August 2021 via Notification No. 29/2021-C.T.

Finance Act, 2024 Amendment

The Finance Act (No. 2), 2024, introduced changes to Section 35, incorporating additional references to Section 74A of the CGST Act in determining tax liability for unaccounted goods or services.

Importance of Compliance with Section 35

Maintaining proper records under GST is critical for businesses due to the following reasons:

• Avoiding Penalties: Non-compliance can lead to penalties and tax liabilities under Section 73 or 74 of the CGST Act.

• Ease of Tax Filings: Well-maintained records facilitate smooth tax return filings and audits.

• Claiming Input Tax Credit (ITC): Proper documentation ensures the seamless claim of ITC, reducing the overall tax burden.

• Audit Readiness: In case of departmental audits, having accurate records minimizes disputes and compliance risks.

Conclusion

Section 35 of the CGST Act emphasizes the importance of maintaining true and correct accounts for all registered persons. It ensures tax transparency and facilitates compliance, thereby reducing the risk of tax evasion. Businesses must adhere to these record-keeping requirements to avoid legal complications and ensure seamless GST compliance.