With GST compliance becoming increasingly data-driven, maintaining accurate business records is no longer optional. Every GST-registered business is legally required to preserve detailed books of accounts that can be verified during assessments, audits, inspections, or investigations.
Under Section 35 CGST Act, 2017, businesses must maintain complete records of purchases, sales, stock, taxes, and Input Tax Credit (ITC). Rule 56 of the CGST Rules further prescribes the specific records and documents that taxpayers must keep.
Proper record-keeping not only ensures GST compliance but also helps businesses avoid notices, penalties, and ITC disputes. And for this Marg GST Billing Software helps end-to-end with India’s best billing and accounting software.
What is Section 35 of the CGST Act 2017?
Section 35 of the Central Goods and Services Tax (CGST) Act, 2017 lays down the legal requirements for maintaining books of accounts and other records by GST-registered persons. It ensures that tax authorities can verify transactions and determine the correct tax liability whenever required.
Every registered person must maintain true and correct records of;
- Production or manufacture of goods
- Inward supplies (purchases)
- Outward supplies (sales)
- Stock of goods
- Input Tax Credit (ITC) availed
- Output tax payable and tax paid
- Other prescribed records under GST Rules
Businesses with multiple registered locations must maintain separate records for each place of business. Electronic maintenance of records is also permitted, provided they comply with prescribed requirements.
Which businesses must maintain GST records?
Section 35 primarily applies to every GST-registered taxpayer. It also extends certain record-keeping responsibilities to other businesses including;
- Warehouse owners
- Godown operators
- Transporters
- Clearing and forwarding agents
- Businesses storing goods on behalf of registered persons
Even if these organisations are not registered under GST, they may still be required to maintain specified records relating to the movement and storage of goods.
What records must every business maintain under GST?
Apart from the books specified in Section 35, Rule 56 of the CGST Rules requires businesses to preserve several additional records. These additional records include;
- Purchase Register
- Sales Register
- Stock Register
- Input Tax Credit Register
- Output Tax Register
- Tax Invoice Register
- Credit Note Register
- Debit Note Register
- Delivery Challans
- E-Way Bills
- Bills of Supply
- Receipt Vouchers
- Payment Vouchers
- Refund Vouchers
- Reverse Charge transactions
- Import and Export documents
- Advances received and adjusted
- Supplier and customer details
- Goods stored at every warehouse or business location
The records must accurately reflect every GST transaction undertaken by the businesses. You should try the best billing software in India for advanced and accurate reports. Marg ERP offers 1000 plus financial reports, based on verified data.
Where should GST records be maintained?
The CGST Act 2017 specifies where businesses should keep their records. GST books of accounts should generally be maintained at;
- Principal address of business mentioned in GST registration
- Every additional place of business declared under GST
- Electronic systems or accounting software (We suggest Marg GST Billing Software)
- Cloud-based accounting solutions with proper backups
If records are maintained electronically, businesses should be able to produce them whenever demanded by GST authorities. Proper audit trails and backups should also be available.
How long should GST records be preserved?
GST records cannot be discarded immediately after filing returns. Under Section 36 of the CGST Act, businesses must preserve books of accounts and related records for 72 months (6 years) from the due date of filing the annual return for the relevant financial year.
If your business is involved in Appeals, Investigations, Revisions, and Litigation, the financial records must be retained for an extended period until the proceedings are finally concluded or for the prescribed period, whichever is later.
Can GST records be maintained electronically?
The CGST Act allows businesses to maintain electronic books of accounts. However, businesses should ensure;
- Proper electronic backups
- Secure storage
- Availability of audit trails
- Ability to generate readable reports
- Protection against accidental loss
Whenever GST officers request records, businesses must provide them in electronic or printed format. To keep your business audit-ready, you require a comprehensive billing software that manages GST, billing, inventory with integrations and auto-reconciliation.
Also, you must check cloud-backup, data security, whatsapp invoicing for faster and secure business transactions.
What happens if businesses fail to maintain proper GST records?
Improper financial record maintenance can create significant compliance risks. Improper record maintenance can create significant compliance risks and might attract penalties. If your books are incomplete or something missing;
- GST authorities may reject claimed Input Tax Credit.
- Unaccounted goods may be treated as taxable supplies.
- Additional tax demand may arise.
- Interest and penalties may be imposed.
- Businesses may receive notices under applicable GST provisions for tax determination.
Proper financial reports and documentation therefore becomes the strongest defence during GST scrutiny or departmental verification.
How can GST Billing Software help businesses maintain Section 35 Compliance?
Manual bookkeeping often results in missing entries, reconciliation issues, and delayed compliance. Modern billing software like Marg ERP simplifies financial record maintenance by;
- Automatically recording purchases and sales
- Maintaining digital stock registers
- Tracking Input Tax Credit
- Generating GST-compliant invoices
- Maintaining audit-ready reports
- Storing invoices and vouchers electronically
- Generating e-Way Bills and e-Invoices
- Creating secure backups
- Simplifying GST reconciliation
Automation reduces human errors while ensuring businesses remain prepared for audits and departmental inspections.
Conclusion
Section 35 of the CGST Act forms the backbone of GST compliance by requiring businesses to maintain complete and accurate financial records. Proper bookkeeping, timely documentation, and digital record management not only fulfil legal obligations but also help businesses avoid penalties, safeguard Input Tax Credit, and stay prepared for every GST assessment or audit.
FAQs on Section 35 of the CGST Act
What is Section 35 of the CGST Act?
Section 35 requires every GST-registered person to maintain prescribed books of accounts, stock records, purchase and sales records, tax details, and Input Tax Credit records.
Can GST records be maintained digitally?
Businesses can maintain electronic records, provided they preserve backups, audit trails, and produce records whenever requested by GST authorities.
How long should GST records be preserved?
Generally, GST records must be retained for 72 months (6 years) from the due date of filing the annual return. Longer retention may apply where litigation or investigations are pending.
Who must maintain GST books of accounts?
Every GST-registered taxpayer, along with certain warehouse operators, transporters, and godown owners, must maintain prescribed records under Section 35 and the CGST Rules.
What records are mandatory under GST?
Businesses should maintain records relating to purchases, sales, stock, Input Tax Credit, output tax, invoices, credit notes, debit notes, delivery challans, e-Way Bills, advances, reverse charge transactions, imports, exports, and supporting documents as prescribed under Rule 56.
