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Maintenance of Accounts and Records under GST

All accounts and records should be compulsorily and accurately maintained by every taxpayer registered under the Goods and Services Tax (GST) Law. These records should be maintained by the taxpayers at their principal place of business. Therefore, it is binding to know the details related to the maintenance of records and accounts under GST.

The following topics have been covered in this article:

1. About Accounts and Records

Accounts and records under the Goods and Services Tax (GST) regime are compulsory to be maintained by every registered taxpayer at their principal place of business. Every registered taxpayer with an annual turnover of more than Rs. 2 crores will have to get their accounts audited regularly (monthly, quarterly, or annually). This audit is to be conducted by a Chartered Accountant or a Cost Accountant.

The following individuals are responsible for maintaining these records:

  • Business owner
  • Warehouse/godown/storage place operator
  • Every transporter

The records to be maintained by every registered person are of:

  • Produced and manufactured goods
  • Inward supplies and outward supplies of goods and/or services
  • Goods stock
  • Availed Input Tax Credit (ITC)
  • Payable and paid output tax
  • Other prescribed particulars

There are various accounts to be maintained by a registered taxpayer under GST, such as:

  • Sales Account
  • Purchase Account
  • Stock Account
  • Electronic Cash Ledger
  • Electronic Credit Ledger
  • Input CGST (Central GST) Account
  • Output CGST Account
  • Input SGST (State GST) Account
  • Output SGST Account
  • Input IGST (Integrated GST) Account
  • Output IGST Account

2. Accounting Entries under GST

The GST provisions have made accounting a lot more simple and apparent. Various clarifications have been brought in areas of accounting and bookkeeping under GST. One of the biggest advantages of accounting entries under GST is that traders can now set-off their Input Tax Credit (ITC) on services with their output tax on sale.

3. Electronic Ledgers

Under the Goods and Services Tax (GST) law, registered taxpayers are required to have three ledgers. These ledgers will be generated automatically during registration. Their maintenance will also be done electronically. The three electronic ledgers are:

  • Electronic Cash Ledger: It serves as an e-wallet to the taxpayer. Cash will have to be deposited to the taxpayer’s electronic cash ledger as adding money to a wallet. The added cash balance will be utilized for making other payments.
  • Electronic Credit Ledger: It will reflect the input tax credit of the taxpayer on purchases. This will be reflected in three categories – CGST (Central GST), SGST (State GST), and IGST (Integrated GST). The input tax credit balance in this electronic credit ledger account can then be utilized by the taxpayer for paying tax only. Other tax related payments such as interest, penalty fees, etc. cannot be made through this account.
  • E-Liability Ledger: It will show the taxpayer’s total tax liability for a particular month after netting-off. The e-liability ledger will be auto-populated with the tax liabilities of the taxpayer.

4. Accounts Retention Period under GST

The Goods and Services Tax (GST) Act requires every registered taxpayer to maintain their records and books of accounts for a minimum period of 72 months, which translates to 6 years. This period is counted from the date when annual returns were last filed by the taxpayer for that particular financial year. The last date for filing annual returns of a particular financial year is the 31st December of its succeeding year.

In case, the taxpayer is under investigation or is involved in any proceedings before an authority (First Appellate), then s/he should maintain the books of account for one year after the passing of the said proceeding’s order.

5. Consequences of Not Maintaining Records Properly

In case, the taxpayer does not maintain accurate and proper records related to goods and/or services, then s/he will have to face its consequences. The proper officer will treat the unaccounted goods and services as if they were supplied by the taxpayer. The tax liability will then be applied and determined by the officer on such unaccounted goods and services. This tax liability will have to be paid by the taxpayer along with its penalty fee.

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