CA Intermediate · Taxation

Accounts and Records: formula sheet

Full chapter guide

Key formulas

Stock account (all registered persons except composition): Closing stock = Opening balance + Receipts − Supplies − Goods used in production or issued − Goods lost, stolen, destroyed, written off, gifted or given as free samples; Covers raw materials, finished goods, scrap and wastage. Goods consumed in manufacture are not a supply, but they reduce the raw material stock and must be shown separately in that account. A person paying tax under Section 10 (composition) is not required to maintain it.
Manufacturer: Monthly production account: raw materials used (quantity) + goods manufactured (quantity) + waste and by-products; The account is monthly and quantitative. Value is not the main requirement.
Service provider: Quantitative details of goods used in services + input services utilised + services supplied; Applies to a registered person supplying services.
Works contractor: Separate account per works contract: (a) names and addresses of persons for whom executed; (b) goods or services received; (c) goods or services used; (d) payments received; (e) names and addresses of suppliers; Description, value and quantity (where applicable) are needed for goods and services received and used.
Agent: Per principal: authorisation received; goods or services received on behalf; goods or services supplied on behalf; accounts furnished to the principal; tax paid on them; Each principal's records must be kept separately.
Godown owner, warehouse operator, transporter: Records of consigner, consignee and other relevant details of goods handled, irrespective of registration; The basis is Section 35 of the CGST Act, with details in Rule 56.
Common records for every registered person: Advances account + import, export and reverse charge records + supplier particulars + addresses of storage premises; Only the stock account is excused for a person paying tax under Section 10. The other common records still apply to a composition dealer.
General retention period (Section 36): Retention ends = due date of annual return for the year + 72 months; Counted from the due date, not the actual filing date. Applies to every registered person required to keep records under Section 35(1).
Retention during litigation or investigation: Retain until the LATER of: (final disposal + 1 year) or (due date of annual return + 72 months); Applies to a registered person who is a party to an appeal, revision or other proceedings before the Appellate Authority, Revisional Authority, Appellate Tribunal or court (filed by him or by the Commissioner), or is under investigation for an offence under Chapter XIX. Covers only records pertaining to the subject matter of that matter.
Electronic records (Section 35(1) read with Rule 56): Electronic form permitted (Section 35(1)) + Rule 56: no erasing, effacing or overwriting of entries + electronic books: log of every entry edited or deleted; Manual books are different: an incorrect entry (other than a clerical one) is scored out under attestation and the correct entry recorded, and all pages must be serially numbered.
Penalty for failing to keep, maintain or retain records: Section 122(1)(xvi): penalty of ₹10,000 for the books default. The 'higher of' limb (tax evaded, ITC wrongly availed or passed on, refund wrongly taken) applies only where such an amount arises in connection with the default.; Section 122(1) lists specific offences, and clause (xvi) covers failure to keep, maintain or retain books and documents. Section 125 general penalty (up to ₹25,000) applies where no specific penalty is provided.
Old section 35(5) audit (omitted): Turnover > ₹2 crore → accounts audited by CA/CMA (omitted; applies from FY 2020-21 onwards); Know it for history and for questions that ask what has changed. Do not apply it to current-law problems.
GSTR-9C threshold: Aggregate turnover > ₹5 crore in the financial year → self-certified reconciliation statement in GSTR-9C; Filed along with GSTR-9. Certified by the taxpayer; no CA/CMA certificate is needed. Rule 80(3) of the CGST Rules, applicable from FY 2020-21 onwards.
Departmental audit (section 65): Notice in advance (15 working days) → audit by Commissioner's authorised officer → completion within 3 months of commencement, extendable by up to 3 months; Extension is by the Commissioner for sufficient cause. Findings are communicated, and demand proceedings may follow if tax is found unpaid.
Special audit (section 66): Officer ≥ Assistant Commissioner + prior permission of Commissioner → CA/CMA nominated by Commissioner → report within 90 days, extendable by 90 days; Applies when value is not correctly declared or credit is not within normal limits. Cost is borne by the department.
Record retention (section 36): Keep records for 72 months from the due date of the annual return for the year; Records stay relevant for any audit, so the retention period links this topic to section 35.

Quick revision

Section 35 applies to every registered person: keep a true and correct account.
Six heads: production or manufacture, inward and outward supplies, stock, ITC availed, output tax payable and paid, other prescribed particulars.
Keep accounts at the principal place of business shown in the registration certificate.
With more than one place of business, keep accounts for each place at that place.
Owners or operators of godowns or warehouses and transporters must keep records of goods handled, whether registered or not. This duty comes from the Act itself.
The Commissioner may notify other classes of persons who must keep records.
Agents, works contractors and manufacturers keep additional details as Rule 56 of the CGST Rules requires. This is separate from the godown and transporter duty.
Retention under Section 36: 72 months from the due date of the annual return for that year.
If appeal, revision or other proceedings are pending, keep records for one year after final disposal of the proceeding, or 72 months from the due date of the annual return, whichever is later.
Records may be kept manually or electronically. Electronic records should be secure and retrievable.
Departmental audit comes under Section 65 and special audit under Section 66.
Failure to keep records can lead to penalty and can weaken an ITC claim.

Common mistakes

Saying a transporter or godown owner needs to keep records only if registered. Fix: Remember that Section 35 requires these records irrespective of registration. Link 'godown, warehouse, transporter' with 'registered or not'.
Requiring a composition dealer to maintain the stock account. Fix: Note the carve-out for persons paying tax under Section 10 for the stock account. The advances account and supplier details still apply.
Counting 72 months from the end of the financial year. Fix: Always anchor to the due date of the annual return for that year. For a year ending 31 March, that is normally 31 December of the next calendar year.
Counting from the date the annual return was actually filed. Fix: The Act says due date of furnishing. Late or early filing does not change the retention date.
Saying a CA or CMA audit is compulsory above ₹2 crore turnover under section 35(5). Fix: Remember that section 35(5) was omitted, applying from FY 2020-21 onwards. Present law needs only a self-certified GSTR-9C above ₹5 crore.
Writing that GSTR-9C must be certified by a CA or CMA. Fix: Under current rules the statement is self-certified by the registered person. A professional may help, but certification is not required.

Exam tips

Questions are often fact-based: a person is described and you must list the records. Start by naming the person's category so the examiner can see the link.
For MCQs, the favourite traps are 'registration required for godown owner or transporter' and 'composition dealer must keep stock account'. Both are wrong.
Give each record its own bullet with its particulars. Do not write one long paragraph.
Cite Section 35 and Rule 56 together. Do not quote sub-rule numbers unless you are certain of them.
Practise one short stock account numerical. It is easy marks when asked.
Practise one date calculation per sitting. Examiners usually give a year, an annual return due date and sometimes a disposal date, and ask for the last date of retention.
Write the due date and the 72-month date as separate lines. Do not jump to the final answer.
In the litigation case, show both dates and state clearly that you are taking the later one.