Every business registered under GST carries one fundamental responsibility that goes beyond just filing returns — maintaining accurate books of accounts and records. Under the Goods and Services Tax (GST) framework in India, assessment is primarily self-driven. This means that the taxpayer themselves calculates the tax liability and files the return. But how does the government verify whether this has been done correctly?
The answer lies in documentary compliance — and that is exactly what Section 35 of the CGST Act, 2017 addresses. This section, read alongside Chapter VII (Rules 56 to 58) of the CGST Rules, 2017, lays down a comprehensive framework for record-keeping obligations that every registered person must follow.
Whether you are a small business owner, a student preparing for exams, or a tax professional advising clients, understanding the GST accounts and records requirements is absolutely essential. Let's break it all down.
Why Does GST Require Businesses to Maintain Records?
India's GST system is built on self-assessment. Every registered taxpayer is expected to:
- Calculate their own tax liability
- File returns for each tax period
- Pay the applicable taxes
The government's compliance verification happens through scrutiny of returns and investigations — not physical inspections of every business. This documentary-centric approach means the burden falls on the taxpayer to maintain clean, accurate, and accessible records that can be verified at any point in time.
Without proper records, a business cannot substantiate its claimed input tax credits (ITC), prove the value of supplies made, or demonstrate tax paid. Poor record-keeping is therefore not just a procedural lapse — it can lead to tax demands, penalties, and legal proceedings.
Who Is Required to Maintain GST Accounts and Records?
Under Section 35(1) of the CGST Act, every registered person is required to maintain books of accounts. This includes businesses registered under:
- Regular taxable registration
- Voluntary registration
- Registration under special categories
The obligation extends beyond just active taxpayers. Every owner or operator of a warehouse, godown, or any storage facility, as well as every transporter, must maintain specified records — regardless of whether they are registered under GST or not. They are not required to obtain a GSTIN for this purpose, but they may need to obtain a unique enrollment number from the GST Common Portal.
Where Must GST Records Be Maintained?
Location matters as much as content when it comes to GST records. The law is clear on this:
- Every registered person must keep and maintain books of accounts at their Principal Place of Business (PPoB) — i.e., the address mentioned as the principal place in the GST registration certificate.
- If the registered person has Additional Places of Business (APoB), the accounts relating to each such place must be kept at those respective locations.
An important legal presumption also applies here: if any documents, registers, or books of account belonging to a registered person are found at any premises NOT mentioned in the registration certificate, they shall be presumed to have been maintained by that registered person — unless proven otherwise. This is a significant provision that businesses with multiple locations must keep in mind.
What Accounts and Records Must Be Maintained?
Section 35(1) requires every registered person to maintain a true and correct account of the following:
1. Production or Manufacture of Goods
All records relating to the manufacture of goods must be maintained. This includes raw materials consumed, goods produced, and by-products or waste generated.
2. Inward and Outward Supply of Goods or Services
Complete details of all purchases (inward supply) and sales (outward supply) — whether of goods or services or both — must be recorded. This forms the backbone of ITC claims and output tax calculations.
3. Stock of Goods
A running account of inventory must be maintained. This includes the opening balance, goods received, goods supplied, and goods lost, stolen, destroyed, written off, or disposed of as gifts or free samples, as well as the closing balance of stock — covering raw materials, finished goods, scrap, and wastage.
4. Input Tax Credit (ITC) Availed
A clear account of all ITC claimed must be maintained, along with supporting documents like tax invoices and debit notes from suppliers.
5. Output Tax Payable and Paid
Details of the tax liability — both payable and actually paid — must be recorded for each tax period.
6. Other Prescribed Particulars
The CGST Rules provide additional requirements beyond those listed in the Act. These include:
- Goods/services imported or exported
- Reverse charge supplies along with all relevant documents (invoices, bills of supply, delivery challans, credit notes, debit notes, receipt vouchers, payment vouchers, refund vouchers)
- Separate account of advances received, paid, and adjusted
- Names and complete addresses of suppliers from whom taxable goods or services were received
- Names and complete addresses of recipients to whom goods or services were supplied (where required under the Chapter)
- Complete address of all premises where goods are stored, including goods in transit
“Important: If taxable goods are found stored at any location not declared in the records, without valid documents, the proper officer has the authority to treat such goods as having been supplied by the registered person and levy tax accordingly.”
Special Records for Suppliers (Not Applicable to Composition Dealers)
Suppliers who are not under the composition scheme are required to maintain two additional sets of records:
(a) Stock Register
This account must capture:
- Opening balance
- Goods received and supplied
- Goods lost, stolen, destroyed, written off
- Goods disposed of by way of gift or free samples
- Closing balance — covering raw materials, finished goods, scrap, and wastage
(b) Tax Account Register
This must include:
- Details of tax payable (including reverse charge tax)
- Tax collected and paid
- Input tax and ITC claimed
- A register of tax invoices, credit notes, debit notes, and delivery challans issued or received during each tax period
Businesses that have opted for the composition levy scheme are exempted from maintaining these two specific records, given the simplified nature of their compliance obligations.
Can GST Records Be Maintained Electronically?
Yes — and this is a significant feature of the GST framework. It is not mandatory to maintain records in physical/manual form. Businesses have the flexibility to maintain records:
- Manually — in which case each volume of account books must be serially numbered
- Electronically — stored on any electronic device, including computers, accounting software, or cloud systems
However, electronic records come with specific obligations:
- They must be authenticated using a digital signature
- A proper electronic backup must be maintained so that records can be restored in the event of accidental loss or destruction
- On demand, the registered person must produce records in hard copy or electronically readable format
- If the department demands access, the taxpayer must provide file details, passwords, codes, and any other information required for access, along with a sample printout
The No-Erasure Rule
One of the most important procedural requirements under GST record-keeping is the prohibition on erasing or overwriting entries. Specifically:
- No entry in registers, accounts, or documents shall be erased, effaced, or overwritten
- Incorrect entries (other than clerical mistakes) must be scored out under attestation, with the correct entry recorded thereafter
- For electronically maintained records, a log of every entry that is edited or deleted must be maintained
This rule ensures the integrity and auditability of all GST records.
Commissioner's Powers: Additional Obligations and Relaxations
The law grants the Commissioner two important powers regarding record-keeping:
- To impose additional obligations: The Commissioner can notify a specific class of taxable persons to maintain additional accounts or documents for a specified purpose.
- To grant relaxations: If a class of taxable persons is genuinely not in a position to maintain accounts as prescribed, the Commissioner can — for reasons recorded in writing — permit them to maintain accounts in an alternate prescribed manner.
These powers ensure that the framework remains both rigorous and practical across different types of businesses.
What Happens If You Fail to Maintain Accounts?
Non-compliance with the record-keeping obligations under Section 35(1) has direct tax consequences. Under Section 35(6), if a registered person fails to account for goods or services as required:
- The Proper Officer will determine the tax payable on the unaccounted goods or services
- The goods or services will be treated as if they had been supplied by the registered person
- The determination will be made in accordance with the provisions of Section 73, Section 74, or Section 74A of the CGST Act, as applicable to the relevant financial year
This is a serious consequence — it means the tax department can raise a demand based on assumed supply even if no actual supply took place, simply because the records were not maintained.
Key Takeaways
| Aspect | Requirement |
| Who must maintain | Every registered person |
| Where to maintain | Principal Place of Business + Additional Places |
| Core records | Production, supply, stock, ITC, output tax |
| Format | Manual or electronic (both allowed) |
| Erasure | Prohibited; corrections under attestation only |
| Failure consequence | Tax demand as if goods/services were supplied |
| Applicable law | Section 35, CGST Act + Rules 56–58, CGST Rules |
Conclusion
GST accounts and records maintenance is not merely a compliance checkbox — it is the foundation of your entire GST standing. Proper records protect you during audits, support your ITC claims, and demonstrate your good faith compliance to the authorities.
Whether you're a trader, a manufacturer, or a service provider, understanding Section 35 and the associated rules is non-negotiable. Make sure your accounting systems — whether manual ledgers or software — are set up to capture every element required under the law.
If you're unsure whether your current record-keeping practices meet GST standards, consult a qualified Chartered Accountant or tax professional. Getting this right from day one is far less expensive than dealing with a tax demand later.
This article is based on the provisions of the CGST Act, 2017 and CGST Rules, 2017 as applicable up to 30th April 2025. Readers are advised to verify the latest amendments before taking any compliance decisions.
Tags: GST accounts and records, Section 35 CGST Act, GST record keeping, CGST Rules 56 to 58, GST compliance India, GST books of accounts, registered person GST obligations, input tax credit records, GST documentary compliance
FAQ
FAQ 1: Who is required to maintain accounts and records under GST?
A: Every registered person under GST is required to maintain books of accounts under Section 35(1) of the CGST Act, 2017. This includes businesses with regular registration, voluntary registration, and special category registration. Additionally, owners and operators of warehouses, godowns, and storage facilities, as well as transporters, are also required to maintain specified records — even if they are not registered under GST.
FAQ 2: Where should GST books of accounts be maintained?
A: GST books of accounts must be maintained at the Principal Place of Business (PPoB) as mentioned in the GST registration certificate. If the registered person has one or more Additional Places of Business (APoB), accounts relating to each such place must be kept at those respective locations. If records are found at any premises not mentioned in the certificate of registration, they are presumed to belong to the registered person unless proven otherwise.
FAQ 3: What are the records required to be maintained under Section 35 of the CGST Act?
A: Under Section 35(1) of the CGST Act, every registered person must maintain a true and correct account of: (a) production or manufacture of goods, (b) inward and outward supply of goods or services, (c) stock of goods, (d) input tax credit availed, (e) output tax payable and paid, and (f) other particulars prescribed by the CGST Rules — such as imported/exported goods, reverse charge supplies, advance accounts, supplier/recipient details, and storage premises addresses.
FAQ 4: Can GST records be maintained electronically?
A: Yes. Under GST law, it is not mandatory to maintain records manually. Records can be maintained either manually or electronically on any electronic device. However, electronically maintained records must be authenticated using a digital signature, proper electronic backups must be maintained, and the taxpayer must be able to produce records in hard copy or electronically readable format on demand. Additionally, file details, passwords, and access codes must be provided to the tax department if requested.
FAQ 5: What happens if a registered person fails to maintain GST accounts?
A: Under Section 35(6) of the CGST Act, if a registered person fails to account for goods or services as required, the Proper Officer will determine the tax payable on the unaccounted goods or services — treating them as if they had been supplied by that person. Tax demand proceedings are then initiated under Section 73, Section 74, or Section 74A of the CGST Act, depending on the relevant financial year. This can result in significant tax liability even where no actual supply took place.
FAQ 6: Are composition dealers required to maintain GST accounts?
A: Composition dealers are required to maintain the basic records under Section 35(1) such as inward/outward supply details, stock of goods, ITC, and output tax. However, they are specifically exempted from maintaining two records: (a) the detailed stock register showing opening balance, supply, goods lost/gifted/destroyed, and closing balance, and (b) the detailed tax account register containing ITC claimed, tax collected/paid, and a register of invoices, credit/debit notes, and delivery challans.
FAQ 7: Can entries in GST books of accounts be erased or overwritten?
A: No. Under GST rules, no entry in registers, accounts, or documents can be erased, effaced, or overwritten. If an incorrect entry is made (other than a clerical error), it must be scored out under attestation and the correct entry must be recorded thereafter. For electronically maintained records, a log of every entry that is edited or deleted must be maintained to preserve an audit trail.
FAQ 8: For how long must GST records be retained?
A: Under Section 36 of the CGST Act, every registered person must retain books of accounts and records for 72 months (6 years) from the due date of furnishing the annual return for the year to which the records pertain. However, if the registered person is a party to any appeal, revision, or legal proceedings, or is under investigation, records related to the subject matter must be retained for 1 year after the final disposal of such proceedings, or for 72 months — whichever is later.
FAQ 9: What is the difference between the Principal Place of Business and Additional Place of Business under GST?
A: The Principal Place of Business (PPoB) is the primary address of the taxpayer as specified in the GST registration certificate — this is where the main books of accounts must be maintained. An Additional Place of Business (APoB) is any other location from which the registered person also conducts business, stores goods, or maintains accounts, and is declared separately in the registration certificate. Accounts relating to each APoB must be kept at that respective location.
FAQ 10: Does a transporter need to register under GST to maintain records?
A: No. A transporter is not required to obtain GST registration solely for the purpose of maintaining records. However, if the transporter is not already registered under GST, they must obtain a unique enrollment number by applying electronically at the GST Common Portal in Form GST ENR-01. Once enrolled in any State or Union Territory, they are deemed to be enrolled across all States and Union Territories. After obtaining this enrollment number, they cannot use any GSTIN.
