GST Record Keeping Rules: Books, Retention Period and Penalties

GST law does not just ask you to file returns; it asks you to keep the books that prove those returns. If an officer audits you years later, your invoices, stock records and ledgers are your only defence. This guide explains what sections 35 and 36 of the CGST Act and the accounts and records rules require, how long to keep each record, and how to meet the rules with electronic books.

What does Section 35 of the CGST Act require?

Section 35(1) requires every registered person to keep and maintain, at the principal place of business named in the registration certificate, 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.

Two provisos matter in practice. Where more than one place of business is listed in the registration, accounts relating to each place are kept at that place. And accounts may be kept in electronic form as prescribed.

Section 35(2) extends record keeping to warehouse and godown owners and transporters, registered or not, who must keep records of consignor, consignee and other details of goods.

Section 35(6) is the teeth: where a registered person fails to account for goods or services as required, the proper officer determines tax on them as if they had been supplied, using the demand provisions of section 73 or 74.

What do the accounts and records rules add?

Rules 56 to 58 of the CGST Rules spell out the detail: Rule 56 covers the accounts themselves, Rule 57 covers electronic records, and Rule 58 covers warehouse and godown operators and transporters. Key requirements:

Requirement	Who	What to keep
Imports, exports, reverse charge	All registered persons	Accounts with invoices, bills of supply, challans, credit/debit notes, receipt, payment and refund vouchers, e-way bills
Activity-wise accounts	All registered persons	Separate accounts for manufacturing, trading, services etc.
Stock account	Registered persons other than composition	Commodity-wise opening balance, receipts, supplies, goods lost, stolen, destroyed, written off, gifts, free samples, closing balance including raw material, finished goods, scrap and wastage
Advances	All registered persons	Separate account of advances received, paid and adjusted
Tax account	Registered persons other than composition	Tax payable (including reverse charge), collected and paid, input tax, ITC claimed, register of invoices, credit notes, debit notes, delivery challans
Party and premises details	All registered persons	Names and addresses of suppliers and customers; addresses of premises where goods are stored, including goods in transit
Manufacturers	Manufacturers	Monthly production accounts with quantities of raw material and output, including waste and by-products
Service providers	Service providers	Quantitative details of goods used, input services used, services supplied
Works contractors	Works contractors	Separate account per contract

Two more rules apply to how entries are made:

• No erasing or overwriting. Incorrect entries must be scored out under attestation and the correct entry recorded. Where records are electronic, a log of every entry edited or deleted must be maintained.
• Serial numbering. Each volume of books of account must be serially numbered.

The rules also say that if taxable goods are found stored at a place not declared, without valid documents, the officer can determine tax as if those goods were supplied. Keep your registered addresses current; see GST registration process for amendments.

What are the rules for electronic records?

Most businesses now keep books in software. The electronic-record rules require:

1. Proper electronic backup, preserved so that if records are destroyed by accident or natural causes, the information can be restored within a reasonable time.
2. Production on demand of the relevant records, duly authenticated, in hard copy or any electronically readable format.
3. Audit trail on demand: an account of the audit trail and inter-linkages, including the source document, the financial accounts, record layout, data dictionary and explanation for codes used, total number of records in each field and sample copies of documents.

For companies there is a parallel requirement: ICAI guidance on the Companies (Accounts) Rules explains that companies using accounting software must use software with an audit-trail (edit log) feature, and that the audit trail forms part of the books to be preserved. Your billing software should therefore never allow silent edits or deletions.

How long must GST records be kept?

Section 36 says records under section 35(1) must be retained until the expiry of 72 months from the due date of furnishing the annual return for the year to which they relate.

The proviso extends this: a registered person who is party to an appeal, revision or other proceeding before an appellate or revisional authority, tribunal or court, or who is under investigation for an offence under Chapter XIX, must retain the records relating to that matter for one year after final disposal, or for the 72-month period, whichever is later.

Worked example: when can a Pune distributor discard FY 2025-26 records?

The GST portal's FAQ states that GSTR-9 for a financial year is due by 31 December of the following financial year, unless extended by notification.

• Financial year: 1 April 2025 to 31 March 2026
• Annual return due date: 31 December 2026 (assuming no extension)
• Add 72 months (6 years): 31 December 2032

So the distributor keeps FY 2025-26 records at least until 31 December 2032. If the due date is extended by notification, the 72 months run from the extended due date.

Now suppose the distributor received a demand order for FY 2025-26 in 2031 and filed an appeal, which is finally decided on 15 March 2033. The records relating to that appeal must be kept until 15 March 2034 — one year after final disposal, because that is later than 31 December 2032.

Financial year	Annual return due (no extension)	Keep at least until
2023-24	31 Dec 2024	31 Dec 2030
2024-25	31 Dec 2025	31 Dec 2031
2025-26	31 Dec 2026	31 Dec 2032
2026-27	31 Dec 2027	31 Dec 2033

Check the actual due date for each year on the portal, since extensions change the start point. Details of the annual return are in GSTR-9 annual return.

Which documents should be in your GST file?

A practical checklist, organised by month and financial year:

1. Outward supply: tax invoices, bills of supply, export invoices, e-invoice IRN acknowledgements, credit and debit notes, delivery challans, e-way bills.
2. Inward supply: purchase invoices, import documents, reverse-charge self-invoices and payment vouchers, debit and credit notes received.
3. Advances: receipt vouchers, refund vouchers, adjustment records; see advance payment under GST.
4. Stock: stock register, production records, write-off approvals, sample and gift records, physical count sheets.
5. Tax: GSTR-1, GSTR-3B and annual return copies, challans, electronic ledger statements, ITC reconciliation working.
6. Registration: certificate, amendments, list of places of business and godowns.
7. Correspondence: notices, replies, orders, appeals.
8. Backup: periodic full export of billing and accounting data, stored off-site.

How does the GST period compare with other laws?

Law	Retention	Applies to
CGST Act, section 36	72 months from annual return due date; longer if proceedings pending	GST-registered persons
Companies Act, section 128	Not less than 8 financial years immediately preceding the current year, with vouchers (s.128(5))	Companies
Income-tax law	Separate rules by assessee type	Check with your accountant

When laws differ, keep records for the longest period that applies.

How does software help with GST record keeping?

Good billing software makes the rules easy to follow by default: sequential invoice numbers, no hard deletes, an edit log, credit notes instead of edits, and exports for backup. Billing Software by Betterwork, for example, keeps GST invoices, credit and debit notes, e-invoice and e-way bill details and GSTR-ready reports in one place, so the outward supply register and tax account come from the same transactions. You still need to store purchase documents, stock counts and notices, and take regular backups.

How should you organise records for a GST audit or inquiry?

When a notice or audit arrives, the question is rarely whether a document exists but whether you can find it quickly and show how it links to your returns. A simple structure helps:

1. One folder per financial year, with sub-folders by month.
2. Monthly return pack: GSTR-1 and GSTR-3B as filed, the sales register, purchase register, ITC reconciliation with GSTR-2B and the payment challan.
3. Document index: invoice number ranges used each month for each series, so gaps can be explained (cancelled invoices, voided numbers).
4. Stock pack: count sheets, valuation working and write-off approvals for each year end.
5. Notices pack: every notice with your reply and the final order.

Worked example: tracing an ITC claim

An officer asks a Nagpur trader to support ITC of ₹54,000 claimed in August 2025. The trader produces:

• the purchase invoice (taxable value ₹3,00,000, GST at 18% = ₹54,000),
• the goods receipt entry in the stock register,
• the bank payment to the supplier,
• the GSTR-2B line showing the invoice, and
• the GSTR-3B for August 2025 where the credit was claimed.

Each document points to the next. If any link is missing — say the goods never appear in the stock register — the claim is weak even though the invoice exists. That chain is exactly what the audit-trail and inter-linkage requirement in the electronic-record rules is about.

Common mistakes

• Deleting wrong invoices instead of cancelling or issuing credit notes; electronic records need an edit log.
• No stock account for free samples, gifts, damaged or destroyed goods.
• Undeclared godowns, which lets an officer treat stored goods as supplied.
• Discarding records six years from the end of the financial year rather than 72 months from the annual return due date.
• Forgetting the appeal extension for years under dispute.
• Losing data when switching software because no full export was taken.
• Keeping only PDFs without the underlying ledgers and audit trail.

Key takeaways

• Section 35: keep true accounts of production, supplies, stock, ITC and output tax at each registered place of business.
• Rules 56-58: stock account, tax account, advances, party details and activity-wise accounts.
• No erasing or overwriting; electronic records need edit logs and backups.
• Section 36: keep records 72 months from the annual return due date, or one year after any appeal or investigation ends, whichever is later.
• Keep records for the longest period any applicable law requires.

This guide is general information, not tax advice. Rules last checked on 20 October 2026; confirm with your tax professional for your situation.