GST Basics #16: Sections 35 and 36 — The Books You Must Keep

Sections 35 and 36 of the CGST Act decide what books you keep, where they must be kept and for how long. A plain-language walk through the stock account, the extra duties on agents, works contractors and transporters, and the traps.

Every registered person has to keep books. Sections 35 and 36 of the CGST Act say what those books must contain, where they must sit, and how long you must keep them. This is the part of the law that decides whether an assessment goes smoothly or turns into a reconstruction exercise three years later.

Section 35 starts with place. Your accounts must be kept at the principal place of business shown on your registration certificate, and records relating to any additional place of business must be kept at that place. Electronic form is allowed. If more than one premises is on your certificate, you cannot keep everything in one office and hope.

What must be recorded is a longer list than most small businesses realise. A true and correct account of goods produced or manufactured; of inward and outward supplies; of stock, showing opening balance, receipts, supplies, goods lost, stolen, destroyed, written off, gifted or given as free samples, and the closing balance; of advances received, paid and adjusted; of tax payable, collected and paid, and of input tax credit availed. You must also keep a register of tax invoices, credit notes, debit notes and delivery challans, the names and addresses of your suppliers and customers, and the address of every premises where goods are stored, including goods in transit. A composition dealer under Section 10 is spared the stock account.

Some categories carry extra duties. An agent must show the authorisation from each principal and the goods received and supplied on his account. A works contractor must keep a separate account for each contract, naming the person for whom it is executed and recording what was received, what was used and what was paid. A manufacturer keeps monthly production accounts including waste and by-products. Owners of warehouses and godowns and transporters must keep records even if they are not registered, after enrolling on the portal in FORM GST ENR-01, and must store goods so that each item and each owner can be identified.

Two practical rules are easy to trip over. Entries cannot be erased or overwritten; an incorrect entry is struck through and attested, and where records are electronic every deleted or edited entry must show in a log. And if taxable goods are found at a place you never declared, the officer may charge tax on them as though they had been supplied. That is the whole penalty for sloppy premises records.

Section 36 fixes the retention period. It is long, and it runs longer where an appeal, revision or investigation is pending, so read the current text of Section 36 before you destroy any GST record.

CBIC's own flyer on accounts and records sets these requirements out in full: https://www.gstcouncil.gov.in/sites/default/files/e-version-gst-flyers/accounts-and-records-rules.pdf

Read this instalment with #15 on the tax invoice, #11 on input tax credit and #14 on job work delivery challans.

Topics:accounts and recordsSection 35Section 36GST booksstock accountworks contractENR-01retention periodbookkeepingGST basicsChennaiTamil Nadu

Back to all GST updates