11. Invoices and Accounts
This article is part of the book named " Comprehensive Guide to GST" authored by CA. Brijesh Thakar. You can access the full book on following link.
Invoice is a primary evidence of any financial transaction. Hence, invoice and its related debit note and credit note has special importance in GST. Section 31 to section 34 of the CGST Act, 2017 provides for invoices/debit note/credit notes in GST. Further section 35 and section 36 provides for accounts and records. Let’s understand these provisions in detail.
Invoice in case of supply of goods and services
Section 31(1) and section 31(2) provides for invoicing in case of supply of goods and invoicing in case of supply of services respectively.
As per section 31(1),
A registered person supplying taxable goods shall, before or at the time of,—
(a) removal of goods for supply to the recipient, where the supply involves movement of goods; or
(b) delivery of goods or making available thereof to the recipient, in any other case, issue a tax invoice showing the description, quantity and value of goods, the tax charged thereon and such other particulars as may be prescribed:
Provided that the Government may, on the recommendations of the Council, by notification, specify the categories of goods or supplies in respect of which a tax invoice shall be issued, within such time and in such manner as may be prescribed.
Readers can note from above provisions that the invoice needs to be issued before or at the time of removal of goods. It means the goods cannot be removed for supply to recipient without issuance of invoice.
As per section 31(2),
A registered person supplying taxable services shall, before or after the provision of service but within a prescribed period, issue a tax invoice, showing the description, value, tax charged thereon and such other particulars as may be prescribed:
Provided that the Government may, on the recommendations of the Council, by notification,–(a) specify the categories of services or supplies in respect of which a tax invoice shall be issued, within such time and in such manner as may be prescribed;(b) subject to the condition mentioned therein, specify the categories of services in respect of which––(i) any other document issued in relation to the supply shall be deemed to be a tax invoice; or(ii) tax invoice may not be issued.”.
Commentary
Readers can observe that as per section 31(2), a registered person shall issue invoice for supply of service within a prescribed period. Hence we need to check what is the “prescribed period” here. As per Rule 47, in the case of the taxable supply of services, shall be issued within a period of thirty days from the date of the supply of service
It also provides that where the supplier of services is an insurer or a banking company or a financial institution, including a non-banking financial company, the period within which the invoice or any document in lieu thereof is to be issued shall be forty five days from the date of the supply of service.
Let us discuss other important provisions of section 31
Revision of invoice when new registration is applied by a taxpayer.
Commentary
Readers can recall that we have discussed section 22 to section 25 provisions for new registrations. As per Section 25, every person liable to take registration is required to apply for registration within 30 days from the date on which he becomes liable. The effective date of registration will be the date on which he becomes so liable. For example, aggregate turnover of Mr. A exceeds Rs. 20 Lakh on 9th September 2021. He applies for registration on 25th September 2018 and registration is granted on 28th September 2021. Here, effective date of registration will be 9th September 2021. The invoices issued by Mr. A from 9th September 2021 to 28th September 2021 are required to be revised.
As per Rule 10(2), the registration shall be effective from the date on which the person becomes liable to registration where the application for registration has been submitted within a period of thirty days from such date. Hence here there is a possibility that the taxpayer has made certain supplies between the date of application for registration and the date on which registration is actually granted. He needs to pay GST on these supplies. However, at the time of making the supply he would not have issued invoice showing GST as at that time the registration was not effective. In this situation, he needs to revise such invoices as per section 31(3)(a)
As per section 31(3) (a), a registered person may, within one month from the date of issuance of certificate of registration and in such manner as prescribed under Rule 53(2), issue a revised invoice against the invoice already issued during the period beginning with the effective date of registration till the date of issuance of certificate of registration to him.
Provisions of Rule 53(2) are as under:
Every registered person who has been granted registration with effect from a date earlier than the date of issuance of certificate of registration to him, may issue revised tax invoices in respect of taxable supplies effected during the period starting from the effective date of registration till the date of the issuance of the certificate of registration.
Provided that the registered person may issue a consolidated revised tax invoice in respect of all taxable supplies made to a recipient who is not registered under the Act during such period.
Provided further that in the case of inter-State supplies, where the value of a supply does not exceed two lakh and fifty thousand rupees, a consolidated revised invoice may be issued separately in respect of all the recipients located in a State, who are not registered under the Act.
Attention of readers is also invited to provisions of section 40 of the CGST Act, 2017 which provides that every registered person who has made outward supplies in the period between the date on which he became liable to registration till the date on which registration has been granted shall declare the same in the first return furnished by him after grant of registration.
Hence, by combined reading of Rule 10(2), section 31(3)(a), Rule 53(2) and section 40 we can understand that the registered person can revise invoices issued by him between the effective date of registration and the date of grant of registration and he needs to show these details in the first return he files after the grant of registration.
Exemptions from issuance of invoice.
A question arises as to is there anyone who is exempted from issuance of invoice? These provisions are given under section 31(1)(b) and (c). As per theses clauses(b) a registered person may not issue a tax invoice if the value of the goods or services or both supplied is less than two hundred rupees subject to such conditions and in such manner as may be prescribed(c) a registered person supplying exempted goods or services or both or paying tax under the provisions of section 10 shall issue, instead of a tax invoice, a bill of supply containing such particulars and in such manner as may be prescribed
Provided that the registered person may not issue a bill of supply if the value of the goods or services or both supplied is less than two hundred rupees subject to such conditions and in such manner as may be prescribed.
Commentary
Let us understand these provisions. A registered person who is supplying exempted goods or services or who is covered under composition scheme under section 10 cannot issue invoice, instead he needs to issue Bill of Supply. Content of invoice and Bill of supply is given under Rule 46 and Rule 49 respectively. ( content given at the end of the discussion).
As per proviso to Rule 46 a registered person other than the supplier engaged in making supply of services by way of admission to exhibition of cinematograph films in multiplex screens, may not issue a tax invoice in accordance with the provisions of clause (b) of sub-section (3) of section 31 subject to the following conditions, namely,-
(a) the recipient is not a registered person; and
(b) the recipient does not require such invoice, and
shall issue a consolidated tax invoice for such supplies at the close of each day in respect of all such supplies.
Combined reading of section 31(3)(b), 31(3)(c) and proviso to Rule 46 gives us an idea that
If supply is exempt or the supplier is covered under composition scheme under section 10 then he will issue Bill of supply. But if value of such supply is less than Rs 200 then he is not required to issue even a bill of supply.
In other cases a tax invoice shall be issued. But here also if value of supply is less than Rs 200 and recipient is not a registered person then there is no need to issue tax invoice. However, if such unregistered recipient requires an invoice, then invoice has to be issued to him even if value of supply is less than Rs 200. Further, for all such supplies where invoice is not issued, a combined invoice shall be issued at the end of each day.
Receipt of advance and refund of advance
Readers can recall that we have discussed in the chapter of time of supply that as per section 13 (2), in case of supply of services if advance is received then the time of supply is the date of receipt of such advance. It is interesting to note that in case of supply of goods if advance is received then tax shall not be paid at the time of receipt of advance but in case of services, if advance is received tax is payable at the tax of receipt of such advance as per provisions of time of supply. Many a times a question arises that if advance is received against supply of service then how can we determine the nature of supply and rate of tax and whether we need to issue any document at the time of receipt of such advance?
As per proviso to rule 50, where at the time of receipt of advance,-
(i) the rate of tax is not determinable, the tax shall be paid at the rate of eighteen per cent
(ii) the nature of supply is not determinable, the same shall be treated as inter-State supply
We also need to discuss clause (d) and (e ) of section 31(3) which are as under-
(d) a registered person shall, on receipt of advance payment with respect to any supply of goods or services or both, issue a receipt voucher or any other document, containing such particulars as may be prescribed, evidencing receipt of such payment.
(e) where, on receipt of advance payment with respect to any supply of goods or services or both the registered person issues a receipt voucher, but subsequently no supply is made and no tax invoice is issued in pursuance thereof, the said registered person may issue to the person who had made the payment, a refund voucher against such payment.
Readers can observe that as per these clauses, supplier needs to issue receipt voucher when advance payment is received and if such advance is refunded when supply is not subsequently made then he needs to issue refund voucher. Rule 50 and Rule 51 provides content of the recipient voucher and payment voucher respectively. ( Content is given at the end of the discussion).
Invoicing in case of reverse charge mechanism
We have discussed reverse charge mechanism (RCM) in earlier chapter. Under reverse charge, instead of supplier, recipient is the person liable to pay GST. Here question arises as to who will prepare invoice? Supplier or recipient? In case the supplier is not registered and the supply is covered under RCM then usually the supplier shall not issue invoice. Here provisions of clause (f) and (g) are as under-
(f) a registered person who is liable to pay tax under sub-section (3) or sub-section (4) of section 9 shall issue an invoice in respect of goods or services or both received by him from the supplier who is not registered on the date of receipt of goods or services or both;
(g) a registered person who is liable to pay tax under sub-section (3) or sub-section (4) of section 9 shall issue a payment voucher at the time of making payment to the supplier.
Here readers can observe that the responsibility of issuance of invoice and payment voucher is on the recipient when the supply is covered under RCM. Content of the payment voucher is given in Rule 52.
Invoicing in case of continuous supply
Subsection 4 and 5 of section 31(3) provides that in case of continues supply of goods, where successive statements of accounts or successive payments are involved, the invoice shall be issued before or at the time each such statement is issued or, as the case may be, each such payment is received.
Example:
A Ltd. supplies Gas by a pipeline. Monthly payments are made by the recipient as per contract. Every quarter, invoice is issued by the supplier supported by a statement of the goods dispatched and payments made, and the recipient has to pay the differential amount, if any. The details are as under:
October 6, November 6, December 5
Payments of Rs.2 lakh made in each month.
January 5
Statement of accounts issued by supplier, with invoice for the quarter October – December
Answer:
In the above case, invoice is required to be issued on or before January 5.
In case of continuous supply of services, provision is as under-
(a) where the due date of payment is ascertainable from the contract, the invoice shall be issued on or before the due date of payment
(b) where the due date of payment is not ascertainable from the contract, the invoice shall be issued before or at the time when the supplier of service receives the payment
(c) where the payment is linked to the completion of an event, the invoice shall be issued on or before the date of completion of that event.
It has also been provided under section 31(6) that in a case where the supply of services ceases under a contract before the completion of the supply, the invoice shall be issued at the time when the supply ceases and such invoice shall be issued to the extent of the supply made before such cessation.
Example:
A Ltd. entered into an AMC with B Ltd. for one year (April to March) for the machinery in their factory. As per the contact, payment for the said services had to be made on 10th June. Since services provided by B Ltd. to A Ltd. is a continuous supply of services and due date of payment is ascertainable from the contract, Peer Services Ltd. has to issue a tax invoice on or before such due date, viz. 10th June.
Invoicing in case of sale on approval
Sale on approval transactions also known as sale or return are not actual supplies till specific time is lapsed or the supply is accepted by the recipient.
As per section 31(7), where the goods being sent or taken on approval for sale or return are removed before the supply takes place, the invoice shall be issued earlier of
a. before or at the time of supply or
b. six months from the date of removal.
Example:
Mr. A sends goods on approval basis to Mr. B on 1st April 2018. Find out the date on which Mr. A is required to issue invoice in following cases:
1. Mr. B approves the goods on 30th June 2018
2. Mr. B approves the goods on 15th October 2018
3. Mr. B returns the goods on 16th August 2018
Answer:
1. As the goods are approved before expiry of 6 months, the supply has taken place on 30th June 2018. Hence, the invoice will be issued on or before 30th June 2018
2. As the supply has taken place on 15th October 2018 (date of approval), after expiry of 6 months, invoice will be issued within a period of 6 months from the date of removal, i.e. on or before 30th September 2018.
3. As the goods are returned within 6 months, from the date of its removal, there is no need to issue invoice.
Other important points
In other important points for invoices are as under
I. Mentioning of HSN/SAC in invoice
Proviso to Rule 46 has been amended by notification 78/2020 dated 15th October, 2020. As per this notification it is compulsory with effect from 1st day of April, 2021 to mention HSN code in invoice as under-
Aggregate turnover in the preceding financial year
Number of digits of HSN required to be mentioned in invoice
Up to Five Crores
Four
More than Five Crores
Six
It has also been provided that in case a person has aggregate turnover up to 5 crores rupees then he is not required to mention HSN for suppliers made to unregistered person.
Following chart will clear the provision
II. Content of invoice under Rule 46
As per Rule 46, following should be contained in invoice
a) name, address and Goods and Services Tax Identification Number of the supplier;
(b) a consecutive serial number not exceeding sixteen characters, in one or multiple series, containing alphabets or numerals or special characters- hyphen or dash and slash symbolised as ― and ―/ respectively, and any combination thereof, unique for a financial year;
(c) date of its issue;
(d) name, address and Goods and Services Tax Identification Number or Unique Identity Number, if registered, of the recipient;
(e) name and address of the recipient and the address of delivery, along with the name of the State and its code, if such recipient is un-registered and where the value of the taxable supply is fifty thousand rupees or more;
(f) name and address of the recipient and the address of delivery, along with the name of the State and its code, if such recipient is un-registered and where the value of the taxable supply is less than fifty thousand rupees and the recipient requests that such details be recorded in the tax invoice;
(g) Harmonised System of Nomenclature code for goods or services;
(h) description of goods or services;
(i) quantity in case of goods and unit or Unique Quantity Code thereof;
(j) total value of supply of goods or services or both;
(k) taxable value of the supply of goods or services or both taking into account discount or abatement, if any;
(l) rate of tax (central tax, State tax, integrated tax, Union territory tax or cess);
(m) amount of tax charged in respect of taxable goods or services (central tax, State tax, integrated tax, Union territory tax or cess);
(n) place of supply along with the name of the State, in the case of a supply in the course of inter-State trade or commerce;
(o) address of delivery where the same is different from the place of supply;
(p) whether the tax is payable on reverse charge basis; and
(q) signature or digital signature of the supplier or his authorised representative:
III. Content of Bill of Supply under Rule 49
(a) name, address and Goods and Services Tax Identification Number of the supplier;
(b) a consecutive serial number not exceeding sixteen characters, in one or multiple series, containing alphabets or numerals or special characters - hyphen or dash and slash symbolised as ―- and ―/ respectively, and any combination thereof, unique for a financial year;
(c) date of its issue;
(d) name, address and Goods and Services Tax Identification Number or Unique Identity Number, if registered, of the recipient;
(e) Harmonised System of Nomenclature Code for goods or services;
(f) description of goods or services or both;
(g) value of supply of goods or services or both taking into account discount or abatement, if any; and
(h) signature or digital signature of the supplier or his authorised representative
Similar content is also for receipt voucher, refund voucher and payment voucher under Rule 50, Rule 51 and Rule 52 respectively.
IV. Manner of issue of invoice under Rule 48
As per Rule 48, invoice shall be prepared in triplicate for supply of goods and in duplicate for supply of services.
Let’s understand this rule with the help of following chart
V. Invoices issued by specified suppliers.
Rule 54 provides for special provisions for issuance of invoice by some specified suppliers. Provisions of this Rule is as under-
Invoice in case of input service distributor
Readers can recall that we have discussed section 20 of the CGST Act which provides for distribution of input tax credit by input service distributor. In case of input service distributor rule 54 provides for two kinds of invoices. One which is issued by input service distributor for distribution of credit and second is invoice issued by a person having same PAN and state code as an input service distributor to transfer common input tax credit to Input service distributor.
In first case rule 54(1) provides as under-
The invoice issued by ISD shall contain-
- Name, address and Goods and Services Tax Identification Number of the Input Service Distributor
- a consecutive serial number not exceeding sixteen characters, in one or multiple series, containing alphabets or numerals or special characters hyphen or dash and slash symbolised as- “-”, “/” respectively, and any combination thereof, unique for a financial year
- date of its issue;
- name, address and Goods and Services Tax Identification Number of the recipient to whom the credit is distributed;
- amount of the credit distributed; and
- signature or digital signature of the Input Service Distributor or his authorized representative:
A relaxation is given to banking company or financial institution by proviso to Rule 54(1) which provides as- where the Input Service Distributor is an office of a banking company or a financial institution, including a non-banking financial company, a tax invoice shall include any document in lieu thereof, by whatever name called, whether or not serially numbered but containing the information as mentioned above.
In the second case Rule 54(1A) provides as under-
A registered person, having the same PAN and State code as an Input Service Distributor, may issue an invoice or, as the case may be, a credit or debit note to transfer the credit of common input services to the Input Service Distributor, which shall contain the following details:-
- name, address and Goods and Services Tax Identification Number of the registered person having the same PAN and same State code as the Input Service Distributor;
- a consecutive serial number not exceeding sixteen characters, in one or multiple series, containing alphabets or numerals or special characters -hyphen or dash and slash symbolised as ―-‖ and ―/‖ respectively, and any combination thereof, unique for a financial year;
- date of its issue
- Goods and Services Tax Identification Number of supplier of common service and original invoice number whose credit is sought to be transferred to the Input Service Distributor;
- name, address and Goods and Services Tax Identification Number of the Input Service Distributor;
- taxable value, rate and amount of the credit to be transferred. Taxable value shall be same as the value of the common services.
- signature or digital signature of the registered person or his authorised representative.
Invoice by an insurer or a banking company or financial institution
As per Rule 54(2),Where the supplier of taxable service is an insurer or a banking company or a financial institution, including a non-banking financial company, the said supplier may issue a consolidated tax invoice or any other document in lieu thereof, by whatever name called for the supply of services made during a month at the end of the month, whether issued or made available, physically or electronically whether or not serially numbered, and whether or not containing the address of the recipient of taxable service but containing other information as mentioned under rule 46.
As provided in this rule, banking company or a financial institution can issue a consolidated tax invoice or other document in place of tax invoice and such invoice may not be serially numbered. It is also not necessary that such invoice contain address of the recipient of service.
Invoice by Goods Transport Agency.
While Rule 54(2) provides some relaxation to banking company or financial institution from mentioning some of the particulars mentioned under Rule 46, Rule 54(3) provides for mentioning of some additional particulars by GTA in addition to those of rule 46. These additional particular are as under-
- the gross weight of the consignment,
- name of the consigner and the consignee,
- registration number of goods carriage in which the goods are transported,
- details of goods transported,
- details of place of origin and destination,
- Goods and Services Tax Identification Number of the person liable for paying tax whether as consigner, consignee or goods transport agency
Invoice in case of passenger transportation service.
Rule 54(3) provides for some relaxation to supplier of passenger transportation service from some of the requirements of Rule 46.
The provision is as under
where the supplier of taxable service is supplying passenger transportation service, a tax invoice shall include ticket in any form, by whatever name called, whether or not serially numbered, and whether or not containing the address of the recipient of service but containing other information as mentioned under rule 46.
Transportation of goods without issuance of invoice
Rule 55 contains special provisions where goods can be transported without invoice. As per this rule, in following cases, supplier can transport goods by issuance of delivery challan in place of invoice-
- supply of liquid gas where the quantity at the time of removal from the place of business of the supplier is not known,
- transportation of goods for job work,
- transportation of goods for reasons other than by way of supply, or
- such other supplies as may be notified by the Board
It has also been mentioned that when goods are transported on delivery challan instead of invoice the same shall be declared in E way bill as per Rule 138.
Further as per Rule 55A, the person-in- charge of the conveyance shall carry a copy of the tax invoice or the bill of supply issued in accordance with the provisions of rules 46, 46A or 49 in a case where such person is not required to carry an e-way bill under these rules
VII. transported in a semi knocked down or completely knocked down condition or in batches or lots
As per rule 55 (5), where the goods are being transported in a semi knocked down or completely knocked down condition or in batches or lots -
- the supplier shall issue the complete invoice before dispatch of the first consignment
- the supplier shall issue a delivery challan for each of the subsequent consignments, giving reference of the invoice
- each consignment shall be accompanied by copies of the corresponding delivery challan along with a duly certified copy of the invoice
- the original copy of the invoice shall be sent along with the last consignment.
VIII. As per section 32, a person who is not a registered person shall not collect in respect of any supply of goods or services or both any amount by way of tax under this Act.
No registered person shall collect tax except in accordance with the provisions of this Act or the rules made thereunder.
It is also important to note that as per section 10(4), a registered person paying tax under composition scheme shall not collect tax from the recipient on supplies made by him.
Further, as per section 33, notwithstanding anything contained in this Act or any other law for the time being in force, where any supply is made for a consideration, every person who is liable to pay tax for such supply shall prominently indicate in all documents relating to assessment, tax invoice and other like documents, the amount of tax which shall form part of the price at which such supply is made.
Hence, it is mandatory to mention amount of tax separately in the invoice.
Debit Note and Credit Note under Section 34
As we have understood the provisions of invoice, now we can discuss provisions of debit note/credit note. Debit note/ credit note provisions are given under section 34 of the CGST Act, 2017. Section 34(1) and 34(2) prescribes provision for credit note whereas section 34(3) and 34(4) prescribes provision for debit note.
Credit Note
As per section 34 (1), Where a tax invoice has been issued for supply of any goods or services or both and
1. the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable in respect of such supply, or
2. where the goods supplied are returned by the recipient, or
3. where goods or services or both supplied are found to be deficient,
The registered person, who has supplied such goods or services or both, may issue
to the recipient a credit note containing such particulars as prescribed under rule 53.
By GST Amendment Act, 2018, it is provided that a single credit note can be issued against multiple invoices. Before this amendment invoice and credit note matching was compulsory. However, after this amendment matching of single invoice against single credit note is not required.
For example, Mr. A has issued 3 invoices of Rs. 50,000, Rs. 60,000 and Rs. 80,000 respectively during the month of November 2019. He can issue a single credit note of Rs. 10,000 against these 3 invoices without showing invoice number against which this credit note is issued.
Time limit for issuing credit note
As per section 34(2), Any registered person who issues a credit note in relation to a supply of goods or services or both shall declare the details of such credit note in the return for the month during which such credit note has been issued but not later than September following the end of the financial year in which such supply was made, or the date of furnishing of the relevant annual return, whichever is earlier, and the tax liability shall be adjusted as per Section 43
No reduction in output tax liability of the supplier shall be permitted, if the incidence of tax and interest on such supply has been passed on to any other person.
Example: Mr. A sold goods worth Rs. 1 Lakh to Mr. B on 15th January 2021. Goods are returned by Mr. B in the month of August 2021. Here, if Mr. A has not already filed annual return, then he can adjust his tax liability by showing details of Credit Note till the due date of filing the return for the month of September 2021. However, if annual return is already filed, this adjustment cannot be made.
Credit Note under Section 34 v/s Financial Credit Note
In many businesses there is a practice of giving discount on invoice price or reducing the invoice price based on various factors. As per section 15(3) discounts given after the supply has been effected can be reduce from value of supply if-
- Such discount is established in terms of an agreement entered in to at or before the Time of such supply and specifically linked to relevant invoices and
- Input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversal by the recipient of the supply.
Example of above situation can be suppose Mr. A sold goods worth Rs. 100000 on 15-4-2019 to Mr. B applicable GST rate is 12% On 15-07-2019, Suppose Mr. B makes payment to Mr. A after deductions discount of 10% then the transaction shall be treated as under.
Mr. A will issue invoice of Rs. 112000 (100,000 + GST 12000) to Mr. B on 15-04- 2019 and shall pay GST of Rs. 12000 to Government by credit ledger or cash ledger in the month of may,2019. In the month of July Mr.A shall issued credit note showing (10,000+1200 GST) 11200/- amount to Mr. B and Mr. B shall accept the credit note. Based on the credit note Mr.B shall reverse ITC of Rs. 1200 and MR. A shall reduced his output liability for the month of July by Rs. 1200/- Suppose Mr. B does not reverse ITC of Rs. 1200 then output liability of Mr. A cannot be reduced as per section 15(3).
Now, there arises a question when a reduction in value of supply is done which is not in accordance of provisions of section 15(3), what will be the treatment of GST.
Following are some of the examples-
(i) A discount is given but ITC is not reversal by the recipient.
(ii) Discount is not linked to a particular invoice.
(iii) Company gives incentive (discount) by issuing credit note at the end of the year to its dealers.
(iv) Credit Note is issued after the period specified under section 34(2).
In above situations, as conditions of sections 15(3) are not fulfilled, value of supply cannot be reduced.
Here Credit note can not be issued under section 34. In such a situation, a financial credit note having no GST effect shall be issued such financial credit note shall not be mentioned on GST portion .
Further they will not be shown anywhere in GST return.
As these financial credit notes are not shown anywhere in GST returns, turnover as per financial statement shall not match with turnover as per GST return. Such financial credit notes will become an item of reconciliation between audited financial statement and annual return. It will be shown in reconciliation statement in GSTR 9C.
Debit Note
As per section 34 (3), Where a tax invoice has been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to be less than the taxable value or tax payable in respect of such supply, the registered person, who has supplied such goods or services or both, shall issue to the recipient a debit note containing such particulars as prescribed under Rule 53.
As per section 34 (4) Any registered person who issues a debit note in relation to a supply of goods or services or both shall declare the details of such debit note in the return for the month during which such debit note has been issued and the tax liability shall be adjusted in such manner as prescribed in Section 43
As per Rule 53(3), any invoice or debit note issued in pursuance of any tax payable in accordance with the provisions of section 74 or section 129 or section 130 shall prominently contain the words “INPUT TAX CREDIT NOT ADMISSIBLE”.
Accounts and Records
Provisions of accounts and records are given under section 35 and section 36 ( with Rules 56 to 58). Following are the important provisions.
(1)Every registered person ,at his principal place of business, as mentioned in the certificate of registration, a true and correct account of—
(a) production or manufacture of goods;
(b) inward and outward supply of goods or services or both;
(c) stock of goods;
(d) input tax credit availed;
(e) output tax payable and paid; and
(f) such other particulars as may be prescribed:
It is also mentioned that where more than one place of business is specified in the certificate of registration, the accounts relating to each place of business shall be kept at such places of business.
In addition to above particulars, a registered person needs to maintain following details as per Rule 56 as under
- Every registered person shall keep and maintain a true and correct account of all the financial transactions.
- Every registered person other than the composition tax payer shall also keep an account of the stock (details).
- Every registered person shall keep and maintain a separate account of advances received, paid and adjustments made thereto.
- Every registered person other than the composition tax shall keep and maintain an account, containing the tax details.
- Every registered person shall keep the particulars of names and complete addresses of suppliers, customers and the storage and transit storage places.
- If any taxable goods are found to be stored at any place(s) other than those declared, without the cover of any valid documents, the proper officer shall determine the amount of tax payable on such goods as if such goods have been supplied by the registered person.
- Every registered person shall keep the books of accounts at the principal place of business.
- The books of accounts of any branch shall be stored in the electronic form or in any electronic device.
- Any entry in registers, accounts and documents shall not be erased, effaced or overwritten, and all incorrect entries, otherwise than those of clerical nature, shall be scored out under attestation and thereafter, the correct entry shall be recorded and where the registers and other documents are maintained electronically, a log of every entry edited or deleted shall be maintained.
- Each volume of books of account maintained manually by the registered person shall be serially numbered.
- Unless proved otherwise, if any documents, registers, or any books of account belonging to a registered person are found at any premises other than those mentioned in the certificate of registration, they shall be presumed to be maintained by the said registered person.
- Every agent shall maintain accounts depicting particulars of principal authorization, description regarding value and quantity of goods or services received or supplied on behalf of the every principal, details of accounts furnished to every principal, tax paid or receipt on supply of goods or services effected on behalf of every principal.
- Every registered person manufacturing goods shall maintain monthly production accounts showing quantitative details of raw materials or services used in the manufacture and quantitative details of the goods so manufactured including the waste and by products thereof.
- Every registered person supplying services shall maintain the accounts showing quantitative details of goods used in the provision of services, details of input services utilised and the services supplied.
- Every registered person executing works contract shall keep separate accounts for works contract showing the names and addresses of the persons on whose behalf the works contract is executed, description, value and quantity (wherever applicable) of goods or services received for the execution of works contract, description, value and quantity (wherever applicable) of goods or services utilized in the execution of works contract the details of payment received in respect of each works contract and the names and addresses of suppliers from whom he received goods or services.
- The records under the provisions of this Chapter may be maintained in electronic form and the record so maintained shall be authenticated by means of a digital signature.
- Accounts maintained by the registered person together with all the invoices, bills of supply, credit and debit notes, and delivery challans relating to stocks, deliveries, inward supply and outward supply shall be preserved for the period as provided in section 36 and shall, where such accounts and documents are maintained manually, be kept at every related place of business mentioned in the certificate of registration and shall be accessible at every related place of business where such accounts and documents are maintained digitally.
- Any person having custody over the goods in the capacity of a carrier or a clearing and forwarding agent for delivery or dispatch thereof to a recipient on behalf of any registered person shall maintain true and correct records in respect of such goods handled by him on behalf of such registered person and shall produce the details thereof as and when required by the proper officer.
- Every registered person shall, on demand, produce the books of accounts which he is required to maintain under any law for the time being in force.
Maintenance of accounts and records in electronic form
Second proviso to section 35(1) provides that registered person may keep and maintain such accounts and other particulars in electronic form in such manner as prescribed in Rule 57. This rule requires-
- Backup must be maintained so that in case of accidents or natural causes, the info can be restored within a reasonable period of time.
- Registered person maintaining electronic records shall produce the hard copy of the same on demand, or provide the files or passwords as required.
Maintenance of records by godown/warehouse owner
As per section 35(2) of the CGST Act, 2017, every owner or operator of warehouse or godown or any other place used for storage of goods and every transporter, irrespective of whether he is a registered person or not, shall maintain records of the consigner, consignee and other relevant details of the goods as mentioned in Rule 58
- Every person required to maintain records and accounts in accordance with the specified provisions if not already registered under the Act shall submit the details regarding his business electronically on the common portal in FORM GST ENR-01 and upon validation of the details furnished, a unique enrolment number shall be generated and communicated to the said person.
- The person enrolled above in any other State or Union territory shall be deemed to be enrolled in the State or Union territory.
- Every person who is enrolled above shall, where required, amend the details furnished in FORM GST ENR-01 electronically on the common portal either directly or through a Facilitation Centre notified by the Commissioner.
- Subject to the specified provisions:
- any person engaged in the business of transporting goods shall maintain records of goods transported, delivered and goods stored in transit by him along with the Goods and Services Tax Identification Number of the registered consigner and consignee for each of his branches
- every owner or operator of a warehouse or godown shall maintain books of accounts with respect to the period for which particular goods remain in the warehouse, including the particulars relating to dispatch, movement, receipt and disposal of such goods.
- The owner or the operator of the godown shall store the goods in such manner that they can be identified item-wise and owner-wise and shall facilitate any physical verification or inspection by the proper officer on demand.
Additional powers to commissioner regarding maintenance of accounts and records
It has been provided in section 35(3) and section 35(4) that
- the Commissioner may notify a class of taxable persons to maintain additional accounts or documents for such purpose as may be specified therein.
- Where the Commissioner considers that any class of taxable persons is not in a position to keep and maintain accounts in accordance with the provisions of this section, he may, for reasons to be recorded in writing, permit such class of taxable persons to maintain accounts in such manner as may be prescribed.
Period of Maintenance of Accounts and Records
As per section 36, every registered person required to keep and maintain books of account or other records in accordance with the provisions of sub-section (1) of section 35 shall retain them until
- The expiry of seventy-two months from the due date of furnishing of annual return for the year pertaining to such accounts and records
- For a period of one year after final disposal of appeal or revision or proceedings or investigation,
Whichever is later.
Example:
Records for the Financial Year 2017-18 is required to be maintained for 31st December 2024. However, suppose, a case for the year 2017-18 is in appeal and an appeal is disposed of on 30th June 2024, then the records for the Financial Year 2017- 18 should be maintained till 30th June 2025.
Important Note :
Readers can note that by Finance Act, 2021 section 35(5) has been omitted. However, for FY 2017-18 to FY 2019-20 taxpayers need to get their books of accounts audited by Chartered Accountant or Cost Accountant. This section needs to be read with Rule 80 (3) which got amended from time to time and as per this rule if aggregate turnover of a registered person does not exceed Rupees Five Crore then he is not required to get his books of accounts audited under section 35(5).
Rule 80(3) provides for limit of aggregate turnover beyond which a person is required to get his books of accounts audited by a chartered accountant or cost accountant under section 35(5). According to this rule, a person is required to get books of accounts audited under section 35(5) and furnish a statement under GSTR 9 C, if his aggregate turnover during the financial year exceeds Rs. 2 Crore.
For FY 2017-18 and Fy 2018-19, a proviso was inserted which increased the above limit of 2 crore to 5 crore. Now for FY 2019-20 also the higher limit of 5 crore is provided for audit under section 35(5) by way of substitution of proviso to rule 80(3). Consequently, for FY 2019-20 also, there is no need to get books of accounts audited under section 35(5) and furnish statement in form GSTR-9C if aggregate turnover does not exceed Rs. 5 Crore. (notification 79/2020 dated 15th October 2020)
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