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GST accounting: Best Practices to Maintain Accounts & Records

CA Hema Pandey

Updated on February 2nd, 2024

GST Accounting is the backbone of every organisation and accounting starts with book keeping.

Organisations spend huge money on accounting department and hire efficient personnel, so that accurate books can be maintained.

Maintenance of books is prominent as it shows clear picture of every aspect of business. May it be profit, loss, revenue, expenditure, own fund, owed fund or anything.

One of the most important area out of these is taxation. And GST return filing is a very crucial aspect under taxation.

Why??

Because GST is entangled with all the transactions taking place in business.

Therefore, person appointed at various levels like preparing invoices, passing journal entries, finalising accounts, paying tax, auditing, etc. must have appropriate knowledge of GST accounting.

We know that GST accounting is a wider concept and required detailed knowledge.

In this article, I am going to cover compliances and best practices to maintain accounts and records under GST accounting.

GST accouting & Compliances

A taxpayer is required to self-assess its GST and pay the tax to GST Department

GST department on the basis of such returns, does scrutiny on verify the tax paid by the taxpayer.

For this, a taxpayer is required to file accurate return and pay appropriate tax as department will verify based on documents and not physical controls.

Chapter VIII- Accounts and Records (Section 35 and 36) of CGST Act specifies accounts and records required to be maintained by the taxpayer.

GST Return Filing

How to manage GST accouiting?

Section-35 (1)

Section-35 (1): Maintenance of Books of Account

As per this section, every registered person, at its principal place of business as mentioned in its GST registration certificate, is required to maintain true and correct account of:

  • Production or Manufacture of goods
  • Inward / Outward Supply of goods or services or both.
  • Stock details of goods
  • Input tax credit availed
  • Output tax paid or payable
  • Such other particulars as may be prescribed.

In case there are multiple places of business is mentioned in GST registration certificate, books relating to each place shall be maintained at such place.

For example

  • X Ltd has 3 Place of business
  • “P” Principal Place of business
  • “Q” Additional Place of Business
  • “R” Additional Place of business

In this situation X ltd has to maintain details of P at P, Q at Q and R at R.

Registered person may maintain data in electronic form as per his discretion. However, data maintenance in electronic form is not mandatory.

Rule 56(1), (3), (5) and (6)

Additional Accounts, if applicable

  • Imported/Exported Goods or Services or both.
  • Supplies under reverse charge mechanism.
  • Advances received/paid.
  • Detailed particulars of suppliers and recipients of goods or services.

Rule 56(2) and (4)

Details to be maintained by suppliers (other than composition supplier)

  • Details of stock
  • Details of tax

    • Rule 56(11)

    Details to be maintained by agents

    • Record of authorization provided by every principal to him to receive or supply goods or services.
    • Description, quantity and value of goods or services received
    • Description, quantity and value of goods or services supplied.
    • Details of accounts furnished to every principal.
    • Taxes paid on behalf of its principal.

    Rule 56(12)

    Details to be maintained by manufacturer

    • Quantitative details of Raw material or services used for manufacture.
    • Quantitative details of goods manufactured
    • Waste and By-products.

    Rule 56(13)

    Details to be maintained by Service Providers:

  • Details of goods utilised in provision of service.
  • Details of input services.

    • Rule 56(14)

    Work Contractor:

  • Name and address of person who has assigned work contract.
  • Value, Description and quantity of goods or services received.
  • Value, Description and quantity of goods or services utilised.
  • Details of payment received
    • Invoice-Furnishing-Facility

    GST accounting: Section 35(2) read with rule 58

    Owner/ Operator of Godown or warehouse and Transporters

    Every owner/ operator of godown or warehouse, and Every transporter

    Whether registered under GST or not, shall maintain detailed records of consigner, consignee and other relevant details of goods.

    If any of the party mentioned above is not registered, then should electronically apply for a UNIQUE REGISTRATION NUMBER on GST portal.

    Details to be maintained by TRANSPORTER:

    A transporter has to maintain details of goods transported, delivered and stored to consigner and from consignee

    Owner/ Operator of Warehouse/ Godown

  • Period for which goods remain in warehouse
  • Dispatch, receipt, movement and disposal of goods.
  • Owner or operator shall maintain goods in warehouse in such a way that the proper officer can easily identify and verify each item.

    • Rule 56(17)

    Custodian/ Clearing and forwarding agent Shall maintain detail of goods in custody and shall produce such details as and when required to the proper officer.

    Section 35 (3)

    Commissioner may notify a class of taxable persons to maintain any additional account or document as may be required.

    Section 35 (4)

    When commissioner is of the opinion that any class of person is not in the position to maintain books as per provision of this section, he may record reason in writing, permit to maintain such accounts as may be prescribed.

    gst accouting

    GST accouting: How to maintain accounts and records?

    Section 35(1) read with Rule 56 (7) , (8), (9), (15), (16), (18) and (57)

    In electronic form

    1. Document stored electronically must be authenticated by digital signature.
    2. Proper back up shall be maintained.
    3. When asked to produce by proper officer, the registered person shall produce the data in hard copy or electronically readable format.
    4. When demanded, a registered person shall provide information, files, password to the proper officer.

    Manipulation of entries

    1. No Entries shall be erased or deleted.
    2. Any incorrect entry shall be scored out under attestation and then correct entry is to be recorded.
    3. Log of every edited or deleted entry shall be maintained.

    GST accounting: Audit of accounts

    Section 35 (5) read with Section 44(2) and Rule 80

    Every registered person shall get his accounts audited by a Chartered Accountant or Cost Accountant if his aggregate turnover during the Financial Year exceeds Rs. 2 crores.

    (In case of Central Government, State Government, Local Authority shall get their accounts audited from Comptroller and auditor general of India)

    A registered person shall submit annual return along with:

    • Audited Accounts
    • Reconciliation statement
    • Reconciliation statement will reconcile the value of supplies declared in returns with audited Financial statements.

    Section 35 (6)

    Failure to maintain Books of Accounts

    • If Books of accounts are not properly maintained, the proper officer shall determine amount of tax payable on goods or services not accounted for, as if such goods or services are supplied.
    • For this, section 73 and 74 shall be mutatis mutandis apply.

    Section-36

    Period to maintain Books

    • Books shall be maintained for until expiry of 72 months from due date of furnishing annual return
    • However, any party to an appeal, Revision, Investigation shall maintain books up to at least One year from disposal of such appeal, revision or investigation.

    Best Practices to Maintain Accounts and Records for GST accouting

    1

    Follow Standards and Schedules

  • There are various standards prescribed to maintain books of accounts such as Accounting standard, Ind AS, Standards of Auditing which are applicable to every businessman depending upon their eligibility.
  • Other than this some schedules are also mentioned under companies Act for maintenance of account. So, the accountant shall keep them in mind while maintaining books.

    • 2

    Update Regularly

    Accounting is not a temporary job. It is a routine for business. An entrepreneur has to ensure that his transactions are properly getting recorded as and when they take place.


    Moreover, GST is inclusive in almost every transaction and the taxpayer has to file return and pay tax monthly or quarterly, as the case may be.

    3

    Self-Assessment and Audit:

    GST requires self-assessment of accounts and tax. Taxpayer has to self-assess his tax and find out his tax liability to government. So, he should to do it regularly so that no error takes place.

    Hope this article was helpful to you for better understanding of Accounting and Book keeping under GST.

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    CA Hema Pandey

    About the author

    Hema is a Chartered Accountant who is having about Eight years of experience in taxation and accounting. She is in practicing as a Chartered Accountant since 2020. She is a writer by passion and thus shares her experience and knowledge through her articles at various platform.

    Predominantly her area of interest is GST. Since GST is a very new concept for India, every practitioner is looking for clarity in this area. She likes to share her experience with everyone and therefore tries to put them in form of articles.
    Apart from this, she is also well-worsed in Financial market.

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