Preparing for GST Audit – Books to be maintained – A Practical Approach

Preparing for GST Audit – Books to be maintained – A Practical Approach

Most of the taxpayers by now have started feeling that GST has eased down and things will settle soon. But as soon as the assessments and audit will start, it will open up another pindora box of difficulties for most of the taxpayers. Taxpayers having aggregate turnover exceeding Rs. 2 crores shall be required to get their accounts audited separately under GST. As per section 44 read with section 35(5), a taxpayer is required to submit audited financial statements as well as a reconciliation statement between monthly returns and the audited financial statements of the previous financial year. Such statements need to be endorsed by a Chartered Accountant or a Cost Accountant.

But before we even start discussing audit, we need to first prepare for it. Preparation starts with maintaining of proper books of accounts, records, registers etc. It must be noted that a GSTIN shall be treated as a separate taxpayer for the purposes of the Act (Section 25). A company having three GSTIN in different states shall be treated as three different taxpayers for the purposes of this Act.

As per Rule 56 of CGST Rules 2017, a taxpayer is required to maintain following records:

1.        Account of Production and Manufacture of Goods 2.        Account of Inward and Outward Supply of Goods or Services or both including the supplies made without consideration covered under Schedule 1 of CGST Act 2017. 3.   Account of Stock of Goods including the opening balance, receipt, supply, goods lost/stolen, goods destroyed, disposed off, written off by way of gift or samples for all raw materials, finished goods, scrap and wastage thereof 4.  Details of Input Tax Credit availed including the details of ITC reversed as per section 17(5) and Rule 42/43 of CGST Rules 2017. A reconciliation between GSTR 2A and the claim of Input Tax Credit shall be made and kept on records by the taxpayer. 5.        Details of Tax liability and payment of tax 6.        Details of Goods or services imported or exported 7.        Details of Inward Supplies attracting reverse charge 8.    Separate Account of Advances received, paid and adjustment made thereof 9.       Particulars along with names and complete address of suppliers from   whom he has received the goods or services chargeable to tax 10.  Particulars along with names and complete address of persons to   whom he has supplied the goods or services 11.   The complete address of the premises where goods are stored by him,  including goods stored during transit along with particulars of stock stored therein. If such place of storage is not declared as additional place of business in GST registration, the officer shall determine the amount of tax payable on such stored goods as if such goods have been supplied by the registered person. In most of the cases the taxpayers are found to store their goods pertaining to different business at one premises and the same is declared in one of the GSTIN only. In such a scenario if the stock related to other GSTIN is found in the said premises, the proper officer shall deem it to be supplied and calculate tax liability on such stock. 12. Details of E-way Bills generated and received and the taxes paid thereon. 13. Records of all Tax Invoices, Bill of Supply, Debit/Credit Notes, Receipt Voucher and Refund vouchers shall be maintained.

  

Where to keep all the records?

The taxpayer shall keep all the records at its principal place of business along with the records pertaining to additional place of business at such places. Such records shall be maintained for a period of 72 months i.e. for 6 years from the due date of furnishing of annual return of financial year. Or in simple terms, 81 months from the end of the financial year.  

Manner of Maintaining Records?

The taxpayer can maintain the records in electronic as well as manually. But simultaneously if taxpayer is maintaining records manually, he shall also make arrangements for electronic backup for a reasonable period of time.  

Back-up of the data?

It is the responsibility of the taxpayer to maintain the electronic backup of the records and accounts. It is the responsibility of the taxpayer that even in case of destruction of records due to accident or even due to natural causes be retrieved and data be presented to the department.

Accounts to be maintained by Transporters:

Although transporters are exempted from registration (covered under Reverse Charge Mechanism), they are required to maintain proper records to consigner and consignees (along with their GSTIN) with respect to material transported by them. These details are required to be submitted online at the portal. For this purposes all the transporters shall be required to enrol themselves by filing Form GST ENR-01 online at the portal. Based upon the application they shall be issued enrolment number.  

Penalty for Non-maintenance of Records

S. No.	Nature of Default	Penalty
1.	Non declaration of place of storage	The tax payable on the goods stored at such place of storage
2.	Non-Maintenance of accounts and records	Rs. 10,000 or an amount equivalent to the amount of tax sought to be evaded whichever is higher

Even before the audit is conducted, it should be ensured that above records are maintained by the taxpayer. This will enable the auditor to give his fair opinion on the compliance of Goods and Services Tax Act.

Thanks and Regards

Keshav R Garg

(B.Com, FCA, CS, ISA(ICAI))

Author: Bharat's GST Ready Reckoner

            A Handbook on GST

Member: Indirect Tax Committee of CII, 

Founder: MyGst.MyTax Foundation

Adviser: Industries Association of Chandigarh

Adviser: Chambers of Chandigarh Industries

Address: 3328, First Floor, Sector 27 D, Chandigarh, India - 160 019

Phones: +91-172-461-3328, +91-98880-90008

Mail: keshavgarg@kdai.in