Period of Retention of Accounts – Section 36 of GST

Maintaining proper books of accounts and records is a critical compliance requirement under the GST regime. Section 36 of the CGST Act, 2017, specifies the period for which these records must be retained. Understanding this provision is crucial for registered taxpayers to ensure compliance and avoid penalties in case of audits or legal proceedings.

What Does Section 36 of the CGST Act State?

Section 36 mandates that every registered person required to maintain books of account and other records under Section 35(1) must retain them for a minimum period of 72 months (6 years) from the due date of furnishing the annual return for the relevant financial year.

Key Provisions of Section 36

1. General Retention Period:

   • Books of accounts and other records must be retained for six years (72 months) from the due date of filing the annual return (GSTR-9) for the relevant financial year.

   • Since the due date for filing GSTR-9 is usually 31st December of the following financial year, the retention period effectively extends beyond seven years from the end of the financial year.

2. Extended Retention in Case of Litigation or Investigation:

   • If a registered person is involved in an appeal, revision, or any other legal proceedings before an appellate authority, revisional authority, tribunal, or court, they must retain the records until:

     • One year after the final disposal of such proceedings, or

     • The expiry of the 72-month retention period, whichever is later.

   • The same extended retention applies if the registered person is under investigation for an offence under Chapter XIX of the CGST Act.

Importance of Retaining GST Records

1. Compliance with GST Law: Failure to retain books for the prescribed period may lead to non-compliance, resulting in penalties or legal consequences.

2. Ease of Audit and Investigation: GST authorities may conduct audits or investigations, and proper record retention ensures smooth verification and avoids disputes.

3. Defending Legal Proceedings: In case of litigation, having well-maintained records helps in defending cases effectively.

4. Financial and Business Analysis: Businesses can use past records for financial planning, audits, and decision-making.

What Records Should Be Retained?

Under Section 35(1) of the CGST Act, the following books and records must be maintained:

• Invoices, bills of supply, and delivery challans

• Purchase registers and sales records

• Stock registers

• Input tax credit (ITC) records

• Tax payment records, ledgers, and returns

• E-way bills and transport documents

• Any other document required under GST laws

Penalty for Non-Retention of Records

If a taxpayer fails to maintain the required records for the prescribed period, GST authorities may:

• Determine the tax liability based on best judgment assessment (Section 73 or 74 of the CGST Act).

• Impose penalties as per the provisions of the law.

Conclusion

Section 36 of the CGST Act sets a mandatory six-year retention period for books of accounts and records, which may be extended in case of litigation or investigation. Compliance with this requirement ensures smooth GST audits, legal proceedings, and overall business transparency. Taxpayers must implement proper record-keeping strategies to avoid penalties and maintain seamless tax administration.

Frequently Asked Questions (FAQs)

1. What is the retention period for GST records under Section 36 of the CGST Act?

The records must be retained for 72 months (6 years) from the due date of furnishing the annual return (GSTR-9) for the relevant financial year.

2. Is the retention period extended if a case is pending in court?

Yes, if a registered person is involved in an appeal, revision, or investigation, the records must be retained until one year after the final disposal of such proceedings or the 72-month period, whichever is later.

3. What happens if I fail to retain GST records for the prescribed period?

Failure to maintain records may lead to best judgment assessment by tax authorities and imposition of penalties.

4. What types of records must be retained under GST?

Taxpayers must retain invoices, sales and purchase records, stock registers, ITC records, ledgers, tax payment records, and e-way bills, among others.

By ensuring compliance with Section 36 of the CGST Act, businesses can safeguard themselves from legal complications and tax disputes. Stay updated and maintain proper GST records for hassle-free compliance!