CGST Section 36 — Period of retention of accounts

Section 36 of the CGST Act outlines the mandated period for which registered taxpayers must preserve their accounting records. Essentially, it dictates how long businesses need to keep their books and documents related to GST. This applies to every registered person who is required to maintain books of account and other records as per Section 35(1) of the CGST Act. This means nearly every business registered under GST is subject to this retention rule.

The general rule is that you must retain all your books of accounts and records for 72 months (six years) from the due date of filing the annual return for the relevant financial year. Let's break that down:

• Who: This applies to every registered person required to keep and maintain books of accounts or other records as per Section 35(1) of the CGST Act.
• What: All books of accounts and other records. This encompasses sales invoices, purchase invoices, credit notes, debit notes, e-way bills, stock records, input tax credit availed, output tax paid, and any other document relevant to your GST compliance.
• When: From the due date of filing the annual return (GSTR-9) for the year to which the accounts relate. Remember, the due date for filing GSTR-9 is usually 31st December of the year following the financial year.

Here's a simplified example:

Let's say you're running a business in FY 2022-23. The annual return (GSTR-9) for FY 2022-23 is due on 31st December 2023. According to Section 36, you must retain all your books and records related to FY 2022-23 until 31st December 2029 (6 years from 31st December 2023).

However, there's an important exception to this general rule as articulated in the proviso to the section:

• Exception: If your business is involved in any appeal, revision, proceedings before any Appellate Authority/Tribunal/Court, or an investigation for an offence under Chapter XIX of the CGST Act (related to offenses and penalties), the retention period changes.

In such cases, you must retain the relevant books of account and records pertaining to the subject matter of the appeal, revision, proceedings, or investigation until one year after the final disposal of that appeal, revision, proceedings, or investigation, or the standard 72-month period, whichever is later.

Let's illustrate this with another example:

Assume your business in FY 2020-21 is under investigation for an alleged GST fraud. The investigation starts in 2022. The annual return for FY 2020-21 was due on 31st December 2021. Ordinarily, you'd have to retain the records until 31st December 2027. However, the investigation is only concluded on 30th June 2028. In this scenario, you must retain all relevant records until 30th June 2029 (one year after the final disposal of the investigation). This is because it is later than 31st December 2027.

Practical Implications for Business Owners:

• Storage: Plan for adequate physical or digital storage space to accommodate records for at least six years. Cloud storage solutions are a popular and efficient option for digital records.
• Organization: Implement a robust system for organizing and indexing your records. This will significantly reduce the time and effort required to retrieve specific documents during audits or investigations.
• Backup: Regularly back up your digital records to prevent data loss due to hardware failure, cyberattacks, or other unforeseen events.
• Compliance: Ensure that all relevant employees are aware of the record retention requirements under Section 36.
• Legal Advice: If your business is involved in any dispute with the GST authorities, consult with a tax professional to ensure compliance with the extended retention period.

It's important to note that Section 36 has not seen any significant amendments since the implementation of GST. The core principles of the section remain unchanged.

Failing to comply with Section 36 can lead to penalties and other adverse consequences under the GST law. Therefore, understanding and adhering to these requirements is crucial for all GST-registered businesses. Always remember to consult with a qualified GST professional for specific advice tailored to your business circumstances.