CMA Final · Indirect Tax Laws and Practice

Accounts and Records: formula sheet

Full chapter guide

Key formulas

Particulars under Section 35(1): Production + Inward/outward supplies + Stock + ITC availed + Output tax payable and paid + Other prescribed particulars; Six heads in clauses (a) to (f). Accounts must be true and correct.
Place of keeping accounts: Principal place of business; each additional place of business keeps its own accounts; Per the first proviso to section 35(1), where the certificate of registration shows more than one place.
Electronic form: Accounts may be kept in electronic form in the prescribed manner; Second proviso to section 35(1).
Warehouse and transporter records: Section 35(2): records of consigner, consignee and other relevant details of goods; Applies whether or not registered. Rule 58 gives the procedure.
Failure to account: Tax on unaccounted goods or services is determined as if supplied by the person; Section 35(6). Proper officer applies section 73, 74 or 74A.
Rule 56(1): imports, exports, reverse charge: Keep true and correct account of goods or services imported or exported, and of supplies attracting reverse charge, with documents; Documents include invoices, bills of supply, delivery challans, credit and debit notes, receipt, payment and refund vouchers. Applies to every registered person.
Rule 56(2): stock account: Opening balance + receipts − supplies − goods lost, stolen, destroyed, written off, gifted or free samples = closing balance; Not required from a person paying tax under section 10. Must cover raw materials, finished goods, scrap and wastage.
Rule 56(3): advances: Separate account of advances received, paid and adjustments made; Applies to every registered person.
Rule 56(4): tax and ITC account: Tax payable (including section 9(3) and 9(4)), tax collected and paid, input tax, ITC claimed, plus register of invoices, credit notes, debit notes, delivery challans; Not required from a section 10 person.
Rule 56(5) and (6): particulars and unlisted storage: Names and addresses of suppliers; of customers where required; address of every storage premises; If taxable goods are found at an undeclared place without valid documents, the proper officer determines tax as if the registered person had supplied them.
Rule 56(12) to (14): business-specific accounts: Manufacturer: monthly production account. Service provider: goods used, input services used, services supplied. Works contractor: separate account per works contract; Production account shows quantities of raw materials, goods made, waste and by-products.
Rule 56(11): agent: Per principal: authorisation, goods or services received, supplied, accounts furnished, tax paid; Applies to an agent as defined in section 2(5).
Manner of keeping: No erasing or overwriting; incorrect non-clerical entries scored out under attestation; electronic log of edits; manual volumes serially numbered; Books are kept at the principal place of business and at additional places for those places. Records may be electronic, authenticated by digital signature.
Rule 57(1): Back-up: Proper electronic back-up must be maintained and preserved so that, if records are destroyed by accidents or natural causes, information can be restored within a reasonable period of time; The trigger is destruction by accidents or natural causes. No fixed time limit is stated.
Rule 57(2): Production on demand: Registered person produces, on demand, relevant records or documents, duly authenticated by him, in hard copy or in any electronically readable format; Authentication is by the registered person. The format can be hard copy or electronic.
Rule 57(3): Access details: On demand, provide details of files, passwords of files, explanation for codes used (where necessary), any other information needed for access, and a sample print copy of the stored information; Applies where accounts and records are stored electronically.
Related: Rule 56(15) and 56(8): Electronic records authenticated by digital signature; a log of every entry edited or deleted must be maintained; Supports Rule 57 and is often tested together with it.
Basic retention period (section 36): Retain until 72 months from the due date of the annual return for the year of the accounts; Counted from the due date, not the actual filing date.
Retention when proceedings are pending (proviso to section 36): Later of: (a) 1 year after final disposal of appeal, revision, proceedings or investigation; (b) the 72-month period; Applies only to records pertaining to the subject matter of the appeal, revision, proceedings or investigation.
Special audit trigger (section 66(1)): Officer not below Assistant Commissioner + prior approval of Commissioner + opinion that value is not correctly declared or credit availed is not within normal limits; Auditor is a chartered accountant or cost accountant nominated by the Commissioner.
Special audit report time (section 66(2)): Report within 90 days; extendable by a further 90 days; Extension by the Assistant Commissioner on application by the registered person or the auditor, or for material and sufficient reason.
Rule 102 forms: Direction in FORM GST ADT-03; findings communicated in FORM GST ADT-04; Rule 102 of the CGST Rules.
Preservation and place (Rule 56(16)): Preserve per section 36; manual records at every related place of business; digital records accessible at every related place of business; Applies to accounts with invoices, bills of supply, credit and debit notes and delivery challans.

Quick revision

Section 35(1): keep accounts at the principal place of business as shown in the registration certificate.
Where there are several places of business, accounts of each are kept at that place.
Section 35(1) heads: production or manufacture, inward and outward supplies, stock, ITC availed, output tax payable and paid, and other prescribed particulars.
Warehouse owners and transporters must keep consigner and consignee records whether registered or not.
Section 35(6): unaccounted goods or services are taxed as if supplied by the person, using section 73, 74 or 74A.
Rule 56(2) and (4) do not apply to a person paying tax under section 10.
Rule 56(8): no erasing or overwriting; incorrect entries other than clerical ones are scored out under attestation; electronic edits need a log.
Rule 57: keep electronic back-up, produce authenticated records on demand, and give access details and a printed sample.
Section 36: retain records for 72 months from the due date of the annual return for that year.
Appeal, revision, proceedings or investigation: keep the related records for one year after final disposal, or the normal period, whichever is later.
Section 66: officer not below Assistant Commissioner, prior approval of the Commissioner, audit by a chartered accountant or cost accountant nominated by the Commissioner.
Special audit report within 90 days, extendable by 90 days; Rule 102 uses FORM GST ADT-03 for direction and ADT-04 for findings.

Common mistakes

Saying all accounts of all places can be kept only at the head office. Fix: Add the first proviso: where more than one place is in the certificate, the accounts of each place are kept at that place.
Leaving out input tax credit availed or output tax payable and paid from the list. Fix: Learn the six heads (a) to (f) as a list. ITC availed and output tax payable and paid are separate heads.
Saying a composition taxpayer need not maintain any rule 56 accounts. Fix: Only sub-rules (2) and (4) exclude section 10 persons. Advances, imports and exports, supplier particulars and manner rules still apply.
Treating the stock account as needed only for finished goods. Fix: Sub-rule (2) covers raw materials, finished goods, scrap and wastage, and goods lost, stolen, destroyed, written off, gifted or given as free samples.
Stating a fixed number of days for restoring back-up data Fix: Write only "within a reasonable period of time", as the rule says.
Saying records can be produced only in hard copy Fix: Remember: hard copy or any electronically readable format.
Counting 72 months from the date the annual return was actually filed. Fix: Section 36 counts from the due date of furnishing the annual return. Late filing does not extend it.
Counting 72 months from the end of the financial year. Fix: Always start from the annual return due date for that year's accounts.

Exam tips

MCQs often test the six heads or the place rule. Memorise clauses (a) to (f) in order.
Remember the extra points: sub-section (2) applies to unregistered warehouse keepers and transporters, and sub-section (6) gives the tax consequence.
In case questions, state the place of keeping accounts using the certificate of registration, then conclude.
Pair this topic with Rule 56. Cite the Act for the duty and the Rule for the detailed registers, without mixing them.
Do not cite sub-section (5). It has been omitted.
Memorise the sub-rule numbers for manufacturer (12), services (13), works contract (14) and agent (11). MCQs test the match.
Always state whether section 10 persons are covered. Examiners like the exclusion of sub-rules (2) and (4).
In case questions, link rule 56 with section 143(2) on job work: the principal keeps the accounts.