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How To Maintain Proper Books of Accounts Under GST Compliance
Learn how to maintain proper books of accounts for GST compliance with My Startup Solution. Stay accurate, audit-ready and penalty-free
How to Maintain Proper Books of Accounts for GST Compliance – Complete Guide by My Startup Solution
Keeping correct books of accounts is an essential aspect of a business that is registered under GST in India. If you do not have proper records, you will miss out on input tax credit, get penalized and face difficulties in a GST audit. My Startup Solution, the top Chartered Accountant firm gives you the necessary information to be in line with GST when it comes to your accounting.
The following is a simple, detailed, and sequential guide on how to keep books of accounts that are in compliance with the GST regulation, the importance of it and the best practices that you can implement.
Why Maintaining GST-Compliant Accounts Book Matters
Accurate accounting under GST is not only part of good business practice but also a legal obligation as per the GST Act. As per the CGST Rules (Chapter 7), a registered person is required to keep proper records of inward supplies, outward supplies, stock, and tax liabilities. Not having them can result in:
- Restriction of Input Tax Credit (ITC) which will lessen your profit margin.
- Fines imposed due to non-compliance of regulations.
- The danger of being selected for a tax audit and the hardship of a departmental inspection.
Therefore, a startup creating the right accounting framework at the outset will be in a position to steer clear of troubles later on.
What Records and Accounts Are Required for GST Account Book Maintenance?
Every taxpayer registered under the GST regime is required to keep certain accounts and records as per the GST law. Some of the essential records are:
- Inward (purchases) and outward (sales) supplies of goods or services.
- Records related to production or manufacture of goods (if applicable).
- Details of stock: opening balance, receipts, shipments, losses, closing balance.
- Input Tax Credit (ITC) availed, ITC reversed, or utilized.
- Output tax (GST) payable and paid.
- Records of goods or services that are imported or exported, or are liable to reverse charge.
Through the maintenance of these records, your startup will be able to calculate tax liabilities and have audit trails available.
Mandatory Ledgers under GST
GST accounting imparts to you some special ledgers which are mandatory for you to keep:
- Input CGST / SGST / IGST ledgers – these accounts should separately reflect the input credit of each head.
- Output CGST / SGWT / IGST ledgers – keep track of what you owe under each head.
- Electronic Cash Ledger – is a GST portal maintained account, performs the function of a wallet for the payment of GST.
- E-Liability Ledger – gives the view of your net tax liability for a period after credit has been utilized.
These ledgers enable you to reconcile ITC with liabilities and assure that your payments are correct.
Know the Types and How to Maintain an Account Book Under GST
These are the compulsory books and records that a business needs to keep as a part of their accounts and records under GST:
- Sales Register (Outward Supplies)
It is a register for all the sales made within the taxable, exempted and export categories with the details of invoice number, date, value, tax charged and GSTIN of the recipient. - Purchase Register (Inward Supplies)
Here should be the reflective details of each and every purchase (also non-taxable) of the vendor with the GSTIN, invoice details, tax components included. - Stock Register
This document records the stock at the beginning, goods received and issued and stock at the end. Necessary for ITC reconciliation and filing of the annual return. - Input Tax Credit (ITC) Ledger
The ledger shows the account of the eligible and ineligible ITC that has been claimed, utilized, or reversed in each tax head- CGST, SGST, IGST and Cess. - Tax Payment and Liability Register
The register that shows the GST liabilities and payments made on a continuous basis and also, includes the details of challans and offsetting from ITC. - Invoice Copies
The retention of the three types of invoices is a must—original for the recipient, duplicate for the transporter and triplicate for the supplier.
To understand and for maintaining proper books of accounts under GST compliance choose My Startup Solution, we are the top GST consultancy service provider for individuals, small business and large enterprises.
Location and Format of Books
Where you keep your books of accounts is equally important:
- Maintain books at your principal place of business mentioned in your GST registration certificate.
- If you have more than one business place, keep relevant books at each place of business.
- Make sure that audit trails are available for digital records, in that every change or removal must be recorded.
- Wrong entries should not be removed, but crossed out with an attestation and the corrected entries should be recorded.
Such an arrangement keeps your records as a lawful source and resistant to any kind of manipulation.
Period of Retention: How Long to Keep Records
According to the GST act, it is mandatory to keep your books and records for a minimum period of 6 years counting from the date of filing the annual return.
For example: when your annual return for the financial year 2022-23 is filed on 31st December 2023, then you need to keep these records till 31st December 2029.
If there are any appeals, investigations or confusions, then documents might also have to be kept for an extended period of time, as interval specified.
Common Mistakes Avoid to Maintain Accounts in Under GST
A large number of businesses are breaking GST rules unintentionally due to their inadequate record-keeping. Below are some of the mistakes frequently made which you should avoid:
- Not keeping records of non-GST or exempt supplies.
- Not having e-invoice details or IRN numbers.
- Wrong coding of HSN/SAC.
- Not updating stock records on a daily basis.
- Employing unapproved formats for invoices.
Such failures in the account and record maintenance operations under the GST regime can result in the levying of penalties which may include the disallowance of ITC and the payment of late fees.
Penalties for Non-Compliance
The non-maintenance or improper maintenance of accounts and records under Goods and Services Tax (GST) may result in the following:
- Imposition of a fine of Rs 25,000 under Section 125 of the CGST Act
- Assessment by tax authorities based on their best judgment
- Refusal of, or delay in, debit of input tax credit (ITC)
- Hardship at the time of GST audit or departmental inspection
My Startup Solution taking the initiative to maintain records that comply with the regulations, you will be able to steer clear of such difficulties.
Best tips for Maintaining GST-Compliant Books
Here are the best tips for maintaining GST-compliant books:
- Record every sale, purchase or expense transaction on the same day or at most within 24 hours.
- Keep a separate ledger for Sales, Purchases, Input Tax Credit, Stock and E-way bills.
- Provide proper GST tax invoices having all the mandatory fields (GSTIN, HSN/SAC, tax rate, place of supply).
- Every month reconcile GSTR-2B with the purchase register in order to claim the correct ITC.
- Submit GSTR-1 & GSTR-3B returns timely and ensure that the data matches the books 100%.
- Keep the digital copies of all invoices and records for a minimum period of 72 months.
- Employing a GST-compliant accounting software will lessen the chances of manual errors.
- Separate RCM transactions should be tracked and the corresponding GST should be paid on time.
- Paying should be recorded accurately according to whether they are GST or Non-GST and the returns should be filed with the correct mention
- Carry internal audits monthly or quarterly so that errors can be detected at a very early stage.
My Startup Solution helps to maintain GST books of accounts and reduce your stress.
Conclusion
Maintaining accurate books of accounts for GST compliance is definitely not just a burden imposed by the regulatory authorities. In fact, it is a powerful tool that can assist your business in cutting down costs, making wiser decisions and avoiding legal proceedings. Our services at My Startup Solution is to help startups like you in setting up GST-compliant accounting systems, making the correct software choice and providing team training By implementing best practices, using serially numbered books, maintaining secure digital records, having audit trails and carrying out regular reconciliation, you will be able to fulfill your GST obligations without any worries. For guidance and expert help, call My Startup Solution at +91-7081220800.
