Consequence of Non-Maintenance of Books of Accounts under GST

The Goods and Services Tax (GST) Law mandates every registered person to maintain accurate books of accounts and records. Failing to do so can result in penalties and the confiscation of goods. This article explains the provisions related to the maintenance of books of accounts and highlights the potential consequences of non-compliance.

Provisions Governing the Maintenance of Books of Accounts under GST

A combined reading of both Section 35 of the Central Goods and Services Tax Act, 2017, and Rule 56 of the Central Goods and Services Tax Rules, 2017, mandates the registered person to maintain true and correct accounts of the following:

A Provision Which Mandates Maintaining of Accounts	List of Accounts to Be Maintained
Section 35(1)	Production/ manufacture of goods (i.e., Production Register)
Inward and outward supply of goods or services or both (i.e., Sale/Supply Register)
Stock of goods (i.e., Stock Register)
Input Tax Credit availed (i.e., ITC Register)
Output tax payable and paid
Any other prescribed particulars
Rule 56	Goods or services imported/exported
Supplies attracting tax on a reverse charge basis along with relevant documents
Invoices (tax invoice as well as revised tax invoices)
Bill of supply
Delivery challan
Credit notes
Debit notes
Receipt voucher, payment voucher, and refund voucher
Complete details of raw material, finished goods, scrap, wastage, etc.
Advances received, paid, and their adjustments
Details of tax payable, collected, and paid
Name and complete address of the supplier and customer
Address of premises used for storing goods

According to Section 36, registered individuals must retain books of accounts for the following periods:

Particulars	Retention Period
In case of appeal, revision, proceedings, or investigation	Till one year after final disposal of the appeal, revision, proceedings or investigation.
In other cases	Till 72 months from the due date of filing the annual return.

Moreover, a registered person with multiple business locations must keep accounts for each at their respective locations. The accounts can be maintained electronically or manually.

Consequences of Non-Maintenance of Books of Accounts

Failure to maintain books of accounts as per Section 35(1) allows the proper officer to determine the tax payable on unaccounted goods/services under Section 73 or Section 74. Penalties under Section 122(1)(xvi) may include a fine of INR 10,000 or the amount equal to the tax involved, whichever is higher. To avoid such penalties, consider opting for CA Assisted GST Return Filing.

Non-Maintenance of Books of Accounts vis-à-vis Confiscation Provisions

Section 130 of the Central Goods and Services Tax Act, 2017, empowers the confiscation of goods and the levy of penalties. Per Section 130(1)(ii), a defaulter may face confiscation of goods and penalties under Section 122 for failing to account for any taxable goods. Reference can be made to cases such as GSTR-9 Annual Filing for further insight into compliance requirements.

For efficient handling of GST obligations and to prevent non-compliance issues, businesses might benefit from understanding ITC Reconciliation and the processes involved in Online GST Filing. Pay attention to GST Return Due Dates to ensure timely submissions and avoid penalties.

For more comprehensive insights, businesses interested in maintaining compliance can explore resources like GSTR-1 Filing and handling Nil Returns. Understanding these details can significantly benefit the smooth operation and compliance standing of a business.

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