Goods and Services Tax (GST) and Corporate Tax Planning · Procedural Compliance under GST

Accounts, Records and Audit under GST

Updated 11 October 2026 · Fact-checked

Every registered person must keep true and correct accounts at the principal place of business (section 35) and retain them for 72 months from the due date of the annual return (section 36). The department can audit you (section 65) or order a special audit by a CA or cost accountant (section 66).

Understand Accounts, Records and Audit

GST works on self-assessment. You declare your own supplies, credit and tax. The law therefore needs a paper trail, so that an officer can check what you declared. Sections 35 and 36 create that trail. Sections 65, 66 and 71 give the department tools to test it.

Section 35(1) says every registered person must keep a true and correct account at the principal place of business shown in the registration certificate. The account covers production or manufacture of goods, inward and outward supplies of goods or services or both, stock of goods, input tax credit availed, output tax payable and paid, and other prescribed particulars. 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.

Some records are needed even from persons who are not registered. Owners or operators of warehouses or godowns and every transporter must keep records of the consigner, consignee and other relevant details of the goods, whether registered or not (section 35(2)). The Commissioner can notify a class of taxable persons to keep additional accounts (section 35(3)). He can also, for reasons recorded in writing, allow a class of persons to keep accounts in a prescribed manner if they cannot follow the normal rules (section 35(4)). If you fail to account for goods or services, the proper officer determines the tax on them as if you had supplied them, using section 73 or 74 or 74A, as applicable (section 35(6)).

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

Audit by the department is separate from scrutiny of returns. Section 65 is an audit of the registered person by the Commissioner or an authorised officer, with notice, at your premises or their office. Section 66 is a special audit by a chartered accountant or cost accountant, ordered where value or credit looks doubtful. Section 71 gives officers access to your premises and records to support audit, scrutiny, verification and checks. The Act text supplied here does not contain the separate provisions on scrutiny of returns, so do not attribute section 65 timelines to scrutiny.

Key rules to remember

Section 35(1) accounts: True and correct account at principal place of business of: production, inward and outward supplies, stock, ITC availed, output tax payable and paid, other prescribed particulars; If more than one place of business is shown in registration, accounts of each place are kept there. Electronic form is allowed in the prescribed manner.
Section 35(2) third-party records: Warehouse or godown owners, operators and transporters: records of consigner, consignee and other details of goods; Applies whether or not they are registered.
Section 36 retention: Retention period = until 72 months from due date of annual return for the relevant year; If in appeal, revision, other proceedings or offence investigation: one year after final disposal, or the 72-month period, whichever is later.
Section 65 audit timelines: Notice: not less than 15 working days before audit. Completion: within 3 months from commencement, extendable by up to 6 months. Findings: within 30 days of conclusion; Commencement is the later of the date records called for are made available or actual institution of audit at the place of business. Extension is by the Commissioner, for reasons recorded in writing.
Section 65(7) follow-up: Tax not paid, short paid, erroneously refunded, or ITC wrongly availed or utilised: action under section 73 or 74 or 74A; Section 66(6) has the same follow-up for special audit.
Section 66 special audit: Officer not below Assistant Commissioner + prior approval of Commissioner + written direction. Report within 90 days, extendable by 90 days; Triggers: value not correctly declared or credit availed not within normal limits. Auditor is a CA or cost accountant nominated by the Commissioner. Expenses are determined and paid by the Commissioner.
Section 71 production of records: Records to be made available within 15 working days of demand, or further period allowed; Authorisation is by an officer not below Joint Commissioner's authorisation level: the proper officer authorising must be not below the rank of Joint Commissioner.

How to solve Accounts, Records and Audit questions

Most questions give a short fact pattern and ask what the taxpayer must do or what the officer can do. Use the same sequence each time.

1Identify the provision: record-keeping (section 35), retention (section 36), departmental audit (section 65), special audit (section 66) or access to premises (section 71).
2State the rule in plain words, with the exact condition or time limit.
3Pick out the facts: who is the person, where are the records, which year, any pending appeal, who ordered the audit and with what approval.
4Apply the rule to each fact. Count days or months carefully from the correct starting point.
5Check for provisos: multiple places of business, electronic records, pending proceedings, extension powers.
6Conclude clearly, then add the consequence, such as action under section 73, 74 or 74A, or the right to be heard under section 66(4).
7Add a practical compliance point, such as keeping electronic backups or replying to the audit findings.

Quickest way: Provision and number check

When to use it: Use when you have little time and the question is a short fact-based one.

Write the section number next to the keyword: records 35, retention 36, audit 65, special audit 66, access 71.
Write the one number that matters: 72 months, 15 working days, 3 plus 6 months, 30 days, 90 plus 90 days.
Write who acts: Commissioner or authorised officer for section 65; officer not below Assistant Commissioner with Commissioner's prior approval for section 66.
Write the consequence in one line and finish.

Common mistakes in Accounts, Records and Audit

Treating section 65 audit as the taxpayer's own audit by a CA.
The word audit suggests a statutory audit by an auditor.
Fix: Under the supplied text, section 65 is an audit by tax authorities. Section 66 is the one that uses a CA or cost accountant, and only on the officer's direction.
Counting the 72-month retention from the end of the financial year.
Students link books to the accounting year.
Fix: Count from the due date of furnishing the annual return for that year. Then check the proviso for pending appeals or investigation.
Saying special audit needs only the officer's opinion.
The trigger of doubtful value or credit is remembered, but not the approval.
Fix: Write all conditions: officer not below Assistant Commissioner, prior approval of the Commissioner, written direction, and nomination of the CA or cost accountant by the Commissioner.
Mixing up the 3-month audit period and the 90-day special audit period.
Both are short periods and both can be extended.
Fix: Section 65: 3 months from commencement, extendable by up to 6 months by the Commissioner. Section 66: 90 days to report, extendable by a further 90 days by the Assistant Commissioner.
Saying only registered persons keep records.
Section 35(1) is learned and section 35(2) is ignored.
Fix: Warehouse keepers and transporters must keep consigner and consignee records even if unregistered.
Forgetting the taxpayer's rights.
Answers focus on the officer's powers.
Fix: Mention the 15 working days' notice, findings communicated within 30 days with reasons, and the opportunity of being heard under section 66(4).

Worked examples

Example 1

Meera Textiles Pvt Ltd, Surat, is registered with its principal place of business in Surat and an additional place of business in Jaipur. The annual return for FY 2025-26 is due on 31 December 2026. Advise on where accounts must be kept and until when they must be retained, assuming no proceedings are pending.

Show the solution

Rule: section 35(1) requires true and correct accounts at the principal place of business as in the registration certificate.
Proviso: where more than one place of business is specified in the certificate, accounts of each place are kept at that place. So Jaipur accounts are kept at Jaipur.
Electronic form is permitted in the prescribed manner.
Retention under section 36: until expiry of 72 months from the due date of the annual return for the year.
Due date is 31 December 2026. Adding 72 months (6 years) gives 31 December 2032.
No appeal or investigation is pending, so the proviso does not extend the period.

Answer: Surat accounts are kept at Surat and Jaipur accounts at Jaipur, if both are specified in the certificate. All must be retained until 31 December 2032.

Example 2

An Assistant Commissioner, during an inquiry into Kaveri Steels Ltd, believes the credit availed is not within normal limits. He directs Kaveri Steels in writing to get its books audited by a chartered accountant of his own choice. Is the direction valid? What happens after the report?

Show the solution

Provision: section 66 deals with special audit.
Officer: the Assistant Commissioner is not below that rank, so the rank condition is met. The ground, credit not within normal limits, is a valid trigger.
Approval: prior approval of the Commissioner is required. The facts do not show it.
Nomination: the CA or cost accountant must be nominated by the Commissioner, not chosen by the Assistant Commissioner.
So the direction is invalid as stated, unless the Commissioner's prior approval was obtained and the Commissioner nominated the auditor.
If validly made: the auditor reports within 90 days, extendable by 90 days. Kaveri must get an opportunity of being heard on any material from the special audit to be used against it. The Commissioner determines and pays the expenses.
If the report shows tax short paid or ITC wrongly availed, the proper officer may initiate action under section 73 or 74 or 74A.

Answer: The direction is not valid as described because the Commissioner's prior approval and nomination of the auditor are missing. If those are met, the special audit stands even if accounts are already audited under another law (section 66(3)), and tax demand action may follow.

Exam tips

Write section numbers and exact time limits. Examiners reward precision on 72 months, 15 working days, 3 plus 6 months, 90 plus 90 days.
Use the structure: provision, facts, analysis, conclusion. Keep each answer to the facts given.
In a compare question on audit and special audit, cover who orders it, approval, who audits, time limit, and follow-up.
Mention practical drafting points: electronic records, backups, reply to audit findings, requesting extension in writing.

Practice questions from Procedural Compliance under GST

Accounts, Records and Audit in other exams

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

Accounts, Records and Audit: frequently asked questions

Where must GST accounts be kept?

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

For how long must books of account be retained under GST?

Until 72 months from the due date of furnishing the annual return for the relevant year (section 36). If you are in an appeal, revision or other proceeding, or under investigation for an offence, keep the related records for one year after final disposal or the 72-month period, whichever is later.

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

Section 65 is an audit by the Commissioner or an authorised officer, with at least 15 working days' notice. Section 66 is an audit by a CA or cost accountant nominated by the Commissioner, ordered by an officer not below Assistant Commissioner with the Commissioner's prior approval, where value or credit looks doubtful.

How long does a section 65 audit take?

It must be completed within three months from commencement. The Commissioner may extend this by up to six months, for reasons recorded in writing. Within 30 days of conclusion, the officer informs you of the findings, your rights and obligations and the reasons.