In the modern business environment, maintaining accurate and up-to-date accounts and records is essential for every organization, especially under the Goods and Services Tax (GST) regime. The GST law outlines specific guidelines for the preparation and preservation of accounts, ensuring transparency and smooth business operations.
1. Importance of Maintaining Accounts & Records under GST
The maintenance of accounts and records is vital not just for financial reporting, but also for audits, assessments, and legal compliance. In the context of GST, these records help in ensuring that businesses can efficiently manage their tax liabilities and avail of the necessary input tax credits (ITC).
Under the GST framework, many indirect taxes have been subsumed, offering businesses an opportunity to offset their input tax on services against output taxes on goods sold. The reduction in the number of accounts to be maintained is one of the significant benefits of the GST regime.
2. Mandatory Accounts & Records under GST
Every registered taxable person is required to maintain specific accounts and records at their Principal Place of Business. These records should be true and accurate, and include the following:
a. Stock Register
- Includes all details related to goods such as goods lost, stolen, destroyed, or given as free samples.
b. Register of Goods Produced or Manufactured
- Documents all the goods produced or manufactured by the business.
c. Input Tax Credit (ITC) Availed
- Record of all input taxes availed for the purpose of GST.
d. Output Tax Payable & Paid
- Details of output taxes on the goods and services sold, and the taxes paid.
e. Supplies Attracting Reverse Charge Mechanism (RCM)
- Record of goods and services where the reverse charge mechanism applies.
f. Inward and Outward Supply of Goods/Services
- Records all supplies of goods and services, both incoming and outgoing.
g. Imports and Exports of Goods/Services
- Detailed documentation on the import and export of goods and services.
h. Relevant Documents
- Includes invoices, bills of supply, credit and debit notes, receipts and payments vouchers, refund vouchers, delivery challans, and e-way bills.
i. Advances Received, Paid & Adjustments
- Detailed records of all advances received and paid, and the adjustments made against them.
j. Details of Vendors and Customers
- A list of vendors and customers, including their full names and addresses.
3. Specific Conditions for Multiple Places of Business
If a business operates from more than one location, accounts for each specific place of business must be maintained separately. The GST registration certificate will specify the places of business where the records should be kept.
4. Electronic Records & Digital Signature
Accounts and records can be stored electronically, and they must be authenticated using a Digital Signature Certificate (DSC). This method is widely adopted as it ensures the security and integrity of business data.
5. Separate Accounts for Different Activities
Under the GST law, businesses are required to maintain separate accounts for each type of activity they undertake, such as manufacturing, trading, or providing services. This ensures clarity and simplifies the process of filing returns.
6. Stock Accounts Under GST
For businesses other than those under the Composition Scheme (Section 10 of the GST Act), it is mandatory to maintain a detailed account of stock. This includes:
- Opening stock
- Receipts and supplies
- Goods lost, stolen, or destroyed
- Adjustments due to wastage or scrapping
- Final closing stock
This stock account must be updated for each commodity received and supplied by the business.
7. Important Documents to Be Issued under GST
Registered dealers are required to issue certain documents to maintain compliance under GST. These include:
- Tax invoices
- Bills of supply
- Credit notes and debit notes
- Delivery challans
- E-way bills
- Payment receipts and refund vouchers
The formats and details of each of these documents will be covered in detail in a future blog post.
8. Retention Period for Records
Under GST, every registered taxpayer is required to retain accounts and records for a period of 60 months (5 years) from the last date of filing the Annual Return for the respective financial year. This ensures that businesses have sufficient records available in case of audits or legal inspections.