Companies will have to maintain an array of accounting and tax records

The upcoming Goods and Services Tax (GST) regime, which the Centre intends to roll out from July 1, may turn out to be a record-keeping headache for firms, based on draft rules issued for accounts and records.

As per the rules, a registered tax-paying entity under the GST system for indirect taxation would have to maintain records of imported and exported goods or services and tax-paid supplies — separately for each activity, including manufacturing, trading and services.

Apart from maintaining accounting and tax invoice registers, entities will also have to record the complete address of premises where goods are stored, including goods in transit. If the goods are found to be stored elsewhere than the declared place, a tax would be payable as if they were supplied by the same entity.

“Considering the government’s stated intention of introduction of GST with effect from 01 July 2017, it would be a very difficult task for the industry to make changes in the IT systems to adhere to the recordkeeping requirements,” said PwC India’s tax and regulatory services team in a note on the draft rules.

Stringent requirements

“The industry needs to consider representing against some of the stringent requirements, like maintenance of separate records for different activities, which seem to defy the objective of simplification and rationalisation of compliances and ease of doing business in the GST regime,” Pwc India said.

Additional requirements have been specified for different firms — based on whether they are into manufacturing, services, execution of works contracts or a warehouse owner or operator, apart from the general obligations proposed for all entities in the GST net.

For instance, any entry in registers, accounts and documents should not be overwritten or deleted in any manner. Where the registers are maintained electronically, a log of every entry edited or deleted is needed.

The rules also require every registered entity to maintain its books of accounts in its principal place of business as well as every other registered place under the new indirect tax system.

The accounts and records rules, PwC India said, prescribe ‘extremely onerous recordkeeping requirements, such as separate records for manufacturing, trading, provision of services, and stringent norms for agents, transporters, clearing and forwarding agents as well as warehouse owners.

Records can be maintained in an e-form but must be preserved for 72 months from the due date of furnishing of annual return for the year. A group of retailers had written to the Finance Minister seeking a two-month extension from the proposed rollout date of July 1, on account of complexities in business processes to comply with the GST legislation.

While records can be maintained in an electronic form, they are to be preserved until the expiry of seventy-two months from the due date of furnishing of annual return for the year and are to be kept at every related place of business mentioned in the certificate of registration. These records must include all invoices, bill of supply, debit and credit notes.