GST Section 36: Record Retention Period, Rules, and Legal Provisions Explained

Section 36 of the CGST Act, 2017 mandates that every registered GST taxpayer must retain books of accounts and related records for a minimum period of 72 months (6 years) from the due date of filing the annual return for the relevant financial year. In cases involving appeals, revisions, legal proceedings, or investigations, the retention period is extended to one year after the final disposal of such matters, if that is later than the standard period.

This provision ensures legal compliance, supports audit processes, enables accurate Input Tax Credit (ITC) claims, and upholds financial transparency. Maintaining records in physical or electronic form is allowed, but proper backup and accessibility are essential.

GST Section 36: Understanding the Period of Retention of Accounts

Effective Date: July 1, 2017 (as per Notification No. 9/2017-Central Tax, G.S.R. 658(E), dated 28.06.2017)

Section 36 of the Central Goods and Services Tax (CGST) Act, 2017, mandates that every registered person who is required to maintain books of accounts and other records under Section 35(1) of the CGST Act, shall retain these records. The primary retention period is seventy-two months (6 years) from the due date for furnishing the annual return for the financial year to which such accounts and records pertain.

Calculation Example for the Primary Retention Period:

Let’s consider a financial year:

• Financial Year: 2023-2024
• Due date for filing the annual return (GSTR-9/9C) for FY 2023-24: Generally, by December 31, 2024 (unless extended by the government).
• Retention Period Calculation: 72 months (6 years) from December 31, 2024.
• End of Retention Period: December 31, 2030.

Therefore, for the financial year 2023-24, a registered person in Barrackpore, West Bengal, India, would need to retain their GST-related accounts and records until December 31, 2030.

Proviso – Extended Retention Period:

The law recognizes situations where a longer retention period is necessary. The proviso to Section 36 specifies an extended retention period in the following scenarios:

1. Pendency of Legal Proceedings: If a registered person is a party to an appeal, revision, or any other proceedings before:
   • Any Appellate Authority
   • Revisional Authority
   • Appellate Tribunal
   • Court (whether such proceedings are initiated by the registered person or by the Commissioner)
2. Under Investigation for an Offence: If the registered person is under investigation for an offence under Chapter XIX of the CGST Act, 2017 (which deals with offences and penalties).

In such cases, the books of account and other records pertaining to the subject matter of that specific appeal, revision, proceedings, or investigation must be retained for a period of one year after the final disposal of such appeal, revision, proceedings, or investigation.

Crucially, the retention period in these extended scenarios will be the later of the following two periods:

• One year after the final disposal of the appeal, revision, proceedings, or investigation.
• The standard seventy-two months (6 years) from the due date of furnishing the annual return, as specified in the main provision.

Example for Extended Retention Period:

Let’s say for financial year 2020-2021:

• Due date for annual return: December 31, 2021.
• Standard retention period ends: December 31, 2027.
• Assume an appeal related to the FY 2020-21 accounts is filed in January 2023 and is finally disposed of on June 15, 2026.
• One year after final disposal: June 15, 2027.

In this case, the registered person must retain the relevant records until December 31, 2027 (as it is later than June 15, 2027).

However, if the appeal was disposed of much later, say on July 1, 2027:

One year after final disposal: July 1, 2028.

Standard retention period ends: December 31, 2027.

Here, the registered person must retain the relevant records until July 1, 2028, as it is later than December 31, 2027.

Importance of Retention:

The meticulous retention of accounts and records is paramount for every registered person under GST for several reasons:

Compliance: Adherence to Section 36 is a statutory requirement, and non-compliance can lead to penalties.

Audits and Assessments: These records are crucial for supporting the information declared in GST returns during departmental audits, assessments, or investigations.

Dispute Resolution: In case of any dispute with tax authorities, comprehensive and well-maintained records serve as vital evidence.

Input Tax Credit (ITC) Verification: Proper records enable taxpayers to substantiate their claims for Input Tax Credit.

Financial Integrity: Good record-keeping practices contribute to overall financial integrity and transparency of the business.

Types of Records to be Retained (Referencing Section 35(1) and Rules):

While Section 36 dictates the period of retention, Section 35(1) read with Rule 56 of the CGST Rules, 2017, provides details on the types of accounts and records to be maintained. These generally include:

• Records of production or manufacture of goods
• Records of inward and outward supply of goods or services or both
• Stock records
• Input tax credit availed
• Output tax payable and paid
• Other particulars as may be prescribed.

Specific documents would include:

1. Tax invoices
2. Bills of supply
3. Delivery challans
4. Credit notes
5. Debit notes
6. Receipt vouchers
7. Payment vouchers
8. Refund vouchers
9. e-Way Bills
10. Ledgers (Purchase, Sales, ITC, Cash, Bank)
11. Annual financial statements
12. GSTR-1, GSTR-3B, GSTR-9, GSTR-9C filings

Mode of Retention:

Records can be maintained in electronic form or in physical form. However, if maintained electronically, proper backups and accessibility must be ensured.

Consequences of Non-Compliance:

Failure to maintain or retain records as per the provisions of Section 36 can attract penalties under the CGST Act, 2017. Section 122 of the CGST Act, for instance, can impose a penalty for non-maintenance of accounts.

Conclusion:

GST Section 36 is a critical provision that underscores the importance of robust record-keeping for every registered person. Understanding both the standard and extended retention periods is essential for compliance and to safeguard against potential disputes or penalties. Businesses in Barrackpore, West Bengal, and across India, must ensure their accounting and record management systems are aligned with these requirements to facilitate smooth operations and maintain a strong position in the event of any scrutiny by the tax authorities.

FAQs on Period of Retention of Accounts

What is Section 36 of the CGST Act, 2017?
Section 36 specifies the duration for which GST-registered taxpayers must retain their books of accounts and related records.

From when is Section 36 of the CGST Act effective?
Section 36 came into effect on July 1, 2017, as per Notification No. 9/2017-Central Tax, G.S.R. 658(E), dated 28.06.2017.

What is the standard period of retention of accounts under GST?
Taxpayers must retain their GST-related records for 72 months (6 years) from the due date of furnishing the annual return for the relevant financial year.

Does the 6-year retention period start from the end of the financial year?
No, the 6-year period starts from the due date for filing the annual return (usually December 31 following the financial year).

What happens if there are ongoing legal proceedings or investigations?
In such cases, the taxpayer must retain the relevant records for 1 year after the final disposal of the case, if that date is later than the standard 6-year period.

Which legal proceedings qualify for the extended retention period?
Appeals, revisions, proceedings before the Appellate Authority, Tribunal, courts, or investigations under Chapter XIX of the CGST Act qualify.

If a case is disposed of after the standard retention period ends, what should be followed?
You must retain records for 1 year from the date of final disposal, even if it goes beyond the 6-year period.

What types of records must be retained under GST?
Records related to inward and outward supplies, production, stock, input tax credit, output tax, and all GST returns and vouchers must be retained.

Are invoices and vouchers included in the retention requirement?
Yes, all tax invoices, credit notes, debit notes, e-Way Bills, payment vouchers, and refund vouchers must be preserved.

What if records are maintained electronically?
Records maintained electronically must be backed up properly and made accessible whenever required by authorities.

Is it mandatory to keep physical copies of records under GST?
No, physical copies are not mandatory if records are maintained electronically with reliable backup and retrievability.

What is the penalty for not retaining GST records as per Section 36?
Failure to maintain or retain records may attract penalties under Section 122 of the CGST Act, which includes monetary fines.

Is Section 36 applicable to composition scheme taxpayers?
Yes, all registered persons under GST, including those under the composition scheme, must retain records as prescribed.

What is the relevance of Rule 56 of CGST Rules to Section 36?
Rule 56 outlines the specific types of records and formats to be maintained, supporting the enforcement of Section 35 and Section 36.

Do I need to retain financial statements under GST?
Yes, financial statements, including annual balance sheets and profit & loss accounts, should also be retained.

What forms are considered annual returns under GST?
GSTR-9 and GSTR-9C are considered annual returns for regular taxpayers, and the due date for these determines the retention start.

Can digital records be stored in cloud systems?
Yes, digital records may be stored in cloud storage as long as they are secure, backed up, and accessible on demand.

Are unregistered persons required to maintain GST records?
Section 36 applies only to registered persons. However, unregistered entities may still need to maintain records for income tax or other laws.

Is the retention requirement linked to filing status of returns?
Yes, the 6-year period starts from the due date of the annual return, regardless of whether the return was actually filed late or on time.

Who is responsible for maintaining records in a company?
The registered person under GST or their authorized representative (e.g., accountant, tax consultant) is responsible for record retention.

Can the retention period be reduced by the government?
Currently, no provision allows for a reduction of the prescribed retention period of 6 years under GST law.

Is there any exception to the retention period under GST?
No general exceptions exist. However, specific government notifications or circulars may provide procedural relaxations in rare cases.

Is retention of records important for availing Input Tax Credit (ITC)?
Yes, proper records help substantiate claims for ITC and prevent disallowances during audits or investigations.

Does retention of records help in resolving disputes?
Yes, maintained records serve as vital evidence in case of disputes, reassessments, or scrutiny by tax authorities.

Is there any prescribed format for maintaining GST records?
While GST law mandates the type of records, no strict format is prescribed, giving flexibility in record-keeping practices.