Records of goods lost, stolen, gifted a must under GST draft rules

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Entities will have to keep records of goods lost, stolen, destroyed and given as gifts or free samples under the goods and services tax (GST) regime, expected from July 1.

Complying with the “accounts and record” draft rules, put in public domain on Wednesday, will add to the compliance burden of industry.

“Every registered person … shall maintain accounts of stock in respect of each commodity received and supplied by him, and … particulars of the opening balance, receipt, supply, goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples and balance of stock, including raw materials, finished goods, scrap and wastage thereof,” the rule said. Each volume of books of account maintained by the registered person should also be serially numbered.

Excise, a production-based tax, was to be subsumed under GST, which is a supply-based tax. Every registered person manufacturing goods will have to maintain monthly production accounts. 

They will now have to show quantitative details of raw materials or services used in manufacturing and the quantitative details of the goods so manufactured, including the waste and by-products.

“Keeping the accounting records look quite onerous on the industry with just two months to go,” said Pratik Jain, leader, indirect tax, PwC. “It will be a big challenge. They will also need to keep accounts of monthly production, despite moving away from excise to the supply-based GST regime.”

These excise-related record-keeping will apply to a service provider, too, requiring the service industry to maintain accounts showing quantitative details of goods used in the provision of each service, details of input services used and the services supplied.

Moreover, entities will be required to maintain separate accounts for each activity, including manufacturing, trading, and provision of services, among others. This may be quite challenging for large entities. “Since there will be a lot of common expenditure, it is unclear how allocation will be done between those activities,” said Jain of PwC added.

Taxpayers will need to maintain invoices, bills of supply, delivery challans, credit notes, debit notes, receipt vouchers, payment vouchers, refund vouchers and e-way bills separately for each activity. However, the government has allowed books of accounts to be maintained in the electronic form. 

“Rules for accounts and records could be outlandish for taxpayers,” said Rakesh Nangia, managing partner, Nangia and Co. “When books are maintained electronically, a log of every entry edited or deleted shall be maintained in a separate register. This log of deleted or edited entries could pose a serious challenge when it comes to explaining deleted or edited entries to tax officers.”

Preeti Khurana, chief editor of, said complying with the new draft rules will be a major challenge. “This may pose a compliance challenge for small businesses who may be using a readily available basic accounting software. It may also require certain amount of awareness and training for record-keepers,” she said.

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