Tax Laws and Practice · Procedural Compliance under GST

Accounts and Records under GST: Section 35, 36 and Audit

Updated 11 October 2026 · Fact-checked

Under Section 35, every registered person must keep a true and correct account of production, supplies, stock, input tax credit and tax payable and paid, at the principal place of business. Section 36 requires retention for 72 months from the due date of the annual return. Section 65 allows departmental audit.

Understand Accounts and Records under GST

GST is a self-assessment tax. You calculate and pay the tax yourself, so the department needs a way to check your figures later. That check depends on your books and records. Sections 35 and 36 say what you must keep and for how long.

Section 35 requires every registered person to keep a true and correct account of: production or manufacture of goods; inward and outward supply of goods or services or both; stock of goods; input tax credit availed; output tax payable and paid; and other particulars that may be prescribed. The accounts are kept at the principal place of business shown in the registration certificate. If the certificate shows more than one place of business, the accounts of each place are kept at that place. Accounts may be kept in electronic form in the prescribed manner.

Section 35 also covers others. Every owner or operator of a warehouse or godown, and every transporter, must keep records of the consigner, consignee and other relevant details of the goods. This applies whether or not they are registered. The Commissioner may notify a class of taxable persons to maintain additional accounts or documents. He may also, for reasons recorded in writing, permit a class of taxable persons who cannot keep accounts as required to maintain them in a prescribed manner. Government departments and local authorities whose books are audited by the CAG, or by an auditor appointed under law for local authorities, are outside the section's scope.

Section 36 sets the retention period. You keep the books until 72 months from the due date of furnishing the annual return for the year to which the records relate. If you are a party to an appeal, revision or other proceedings, or under investigation for an offence under Chapter XIX, you keep the records of that subject matter for one year after final disposal, or for the period above, whichever is later.

If you fail to account for goods or services, the proper officer determines the tax on them as if you had supplied them. He does this under Section 73, Section 74 or Section 74A, as the case may be. Section 65 lets the Commissioner or an authorised officer audit you. Related powers sit in Sections 71 (access to business premises) and 67 (inspection, search and seizure). Section 66 deals with special audit, which you should read alongside this topic.

Key rules to remember

Section 35(1): what to account for: Production/manufacture + inward and outward supplies + stock + ITC availed + output tax payable and paid + prescribed particulars; Accounts must be true and correct, kept at the principal place of business.
Multiple places of business: Accounts of each place of business kept at that place; Applies where the registration certificate specifies more than one place.
Section 35(2): warehouse and transporter records: Owner/operator of warehouse or godown and every transporter: records of consigner, consignee and other details of goods; Applies whether registered or not.
Section 36: retention period: 72 months from the due date of furnishing the annual return for the relevant year; Extended in case of appeal, revision, proceedings or Chapter XIX investigation: one year after final disposal, or the 72 months, whichever is later.
Section 65(3): audit notice: Notice not less than 15 working days before audit; Given in the prescribed manner.
Section 65(4): audit duration: 3 months from commencement; extendable by up to 6 months more by the Commissioner for reasons recorded in writing; Commencement is the later of the date records called for are made available and the actual institution of audit at the place of business.
Section 65(6): audit findings: Inform the registered person within 30 days of conclusion of audit; Findings, rights and obligations and reasons must be communicated.
Section 71(2): production of records: Within 15 working days of demand, or further period allowed; Records include trial balance, audited accounts, cost audit report and income-tax audit report where applicable.

How to solve Accounts and Records under GST questions

Use this method for any question on accounts, records or audit under GST.

1Identify the person: registered person, warehouse owner or operator, transporter, or a Government department or local authority.
2State the rule: Section 35 for what and where to keep, Section 36 for retention, Section 65 for audit, Section 71 for access.
3List the facts that matter: places of business, form of records (paper or electronic), year concerned, any appeal or investigation.
4Apply the numbers: for retention, find the due date of the annual return for that year and add 72 months. If proceedings are pending, compare with one year after final disposal and take the later date.
5For audit, check notice (15 working days), time limit (3 months plus up to 6 months), and findings (30 days).
6Add the consequence: tax on unaccounted goods or services under Section 73, 74 or 74A, or action under Section 65(7) if audit detects short payment.
7Write a clear conclusion that answers the exact question asked.

Quickest way: Number-first recall for Sections 35, 36 and 65

When to use it: Use when the question is short and tests a period, a place or a power.

Write the key figures first: 72 months, 15 working days, 3 months, 6 months, 30 days.
Match each figure to its section: 36, 65(3), 65(4), 65(4) proviso, 65(6).
For retention, write the end date: due date of annual return plus 72 months.
For place, write principal place of business, or each place if there are several.
Finish with the consequence of default in one line.

Common mistakes in Accounts and Records under GST

Counting the 72 months from the end of the financial year or the date of filing.
Students recall the period but not the starting point.
Fix: Start from the due date of furnishing the annual return for the year of the records, as Section 36 says.
Saying all accounts must be kept only at the principal place of business.
The main rule is remembered but the first proviso is missed.
Fix: Where the certificate specifies more than one place, accounts of each place are kept at that place.
Applying Section 35(2) only to registered persons.
Students assume GST duties apply only to registered persons.
Fix: Warehouse owners, operators and transporters must keep consigner and consignee records irrespective of registration.
Ignoring the longer retention rule when an appeal or investigation is pending.
Students stop at the basic 72 months.
Fix: Keep records of the subject matter until one year after final disposal, or the basic period, whichever is later.
Confusing the 3-month audit limit with the 15 working days notice, or forgetting the six-month extension.
Several time limits sit close together in Section 65.
Fix: Remember: notice 15 working days before, audit within 3 months, extension up to 6 months more with recorded reasons, findings within 30 days.
Treating audit under Section 65 as the same as special audit under Section 66.
Both are called audit and both appear in the same chapter.
Fix: Section 65 is by the Commissioner or an authorised officer. Section 66 is special audit by a nominated chartered accountant or cost accountant, read separately.

Worked examples

Example 1

Sharma Traders, Jaipur, has its principal place of business in Jaipur and an additional place of business in Kota, both shown in its registration certificate. The owner proposes to keep all accounts at Jaipur only. Advise him.

Show the solution

Provision: Section 35(1) requires a registered person to keep true and correct accounts at the principal place of business shown in the certificate.
The first proviso says that where more than one place of business is specified, the accounts relating to each place are kept at that place.
Facts: both Jaipur and Kota are specified in the certificate.
So Kota's accounts must be kept at Kota, and Jaipur's at Jaipur.
He may keep the accounts in electronic form in the prescribed manner under the second proviso.

Answer: He cannot keep all accounts only at Jaipur. The accounts relating to the Kota place of business must be kept at Kota, and those relating to Jaipur at Jaipur. Electronic form is permitted in the prescribed manner.

Example 2

Mehta Industries received a notice of audit under Section 65 on 1 July. Records were made available on 10 July, and the audit was actually instituted at its premises on 5 July. Within what period must the audit normally be completed, and can it be extended?

Show the solution

Provision: Section 65(4) requires audit to be completed within three months from the date of commencement of audit.
The Explanation says commencement is the date records called for are made available or the actual institution of audit at the place of business, whichever is later.
Facts: records were made available on 10 July and audit was instituted on 5 July. The later date is 10 July.
So the three months run from 10 July.
Extension: under the proviso, if the Commissioner is satisfied that audit cannot be completed in three months, he may, for reasons recorded in writing, extend by a further period not exceeding six months.
After the audit, the proper officer must inform the registered person of the findings, rights and obligations and reasons within thirty days of conclusion (Section 65(6)).

Answer: The audit must normally be completed within three months from 10 July. The Commissioner may extend it by up to six months more, for reasons recorded in writing. Findings must be communicated within thirty days of conclusion of audit.

Exam tips

Learn the figures with their sections: 72 months (Section 36), 15 working days (Section 65(3)), 3 months plus 6 months (Section 65(4)), 30 days (Section 65(6)).
In an answer, state the provision, apply it to the facts, then conclude. Cite the section number each time.
If a question mentions an appeal or investigation, always check the extended retention rule in the proviso to Section 36.
For differences between audit types, write a short comparison by who conducts it, how it is initiated and where it is dealt with. Keep Section 65 and Section 66 distinct.
Mention the consequence in your conclusion, such as determination of tax under Section 73, 74 or 74A, to show complete understanding.

Practice questions from Procedural Compliance under GST

Accounts and Records under GST in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Accounts and Records under GST: frequently asked questions

How long must I retain GST records?

You must retain them until 72 months from the due date of furnishing the annual return for the year of the records. If you are in an appeal, revision, other proceedings or a Chapter XIX investigation, keep the related records for one year after final disposal, or for the 72 months, whichever is later.

Where must GST accounts be kept?

At the principal place of business shown in the registration certificate. If the certificate specifies more than one place of business, the accounts of each place are kept at that place. Electronic form is allowed in the prescribed manner.

Can accounts be kept in electronic form?

Yes. The second proviso to Section 35(1) allows a registered person to keep accounts and other particulars in electronic form in the prescribed manner.

What is the difference between GST audit under Section 65 and special audit under Section 66?

Section 65 audit is undertaken by the Commissioner or an officer authorised by him, at the premises or in their office, after notice of at least fifteen working days. Section 66 provides for special audit by a chartered accountant or cost accountant nominated for the purpose. Study Section 66 separately for its conditions.

What happens if I fail to account for goods or services?

Under Section 35(6), the proper officer determines the tax on the unaccounted goods or services as if you had supplied them. He uses Section 73, Section 74 or Section 74A, as the case may be.