Published 13 October 2026
An audit notice usually arrives three or four years after the year it covers. By then the accountant may have changed, the accounting software may have been replaced and the godown may have moved. The question the audit team asks is simple: show us the records behind the returns. GST law says what those records are, where they must be kept, in what form, and for how long. It also says what happens when they cannot be produced. Goods that are not accounted for can be taxed as if supplied, and documents found at an undeclared place are presumed to be the business’s own.
This guide sets out the obligations in section 35 and section 36 of the CGST Act and rules 56, 57 and 58 of the CGST Rules. It covers the separate enrolment of warehouses, godowns and transporters, and the documents that an audit under section 65 typically calls for. The audit itself is in the next guide, Departmental Audit: Section 65.
What section 35 requires
Section 35(1) requires every registered person to keep, “at his principal place of business, as mentioned in the certificate of registration, a true and correct account of”:
- production or manufacture of goods
- inward and outward supply of goods or services or both
- stock of goods
- input tax credit availed
- output tax payable and paid
- such other particulars as may be prescribed
Where the registration lists more than one place of business, “the accounts relating to each place of business shall be kept at such places of business”. A second proviso allows the accounts to be kept “in electronic form in such manner as may be prescribed”.
Two further powers sit in the section. Under section 35(3), the Commissioner may notify a class of taxable persons to keep additional accounts or documents. Under section 35(4), the Commissioner may, “for reasons to be recorded in writing”, permit a class that cannot keep accounts in the prescribed way to keep them in another prescribed manner.
Section 35(5), which once required accounts above a turnover limit to be audited by a chartered accountant or cost accountant, was omitted by the Finance Act, 2021 from 1 August 2021. The reconciliation in GSTR-9C is now self-certified, as explained in Filing the Reconciliation Statement, GSTR-9C.
The detail in rule 56
Rule 56 adds to section 35 in eighteen sub-rules. Grouped by subject, they require the following.
Transactions and documents (sub-rules (1), (3), (4) and (5))
- accounts of goods or services imported or exported, and of supplies attracting reverse charge, “along with the relevant documents, including invoices, bills of supply, delivery challans, credit notes, debit notes, receipt vouchers, payment vouchers and refund vouchers”
- “a separate account of advances received, paid and adjustments made thereto”
- for all but composition taxpayers, an account of tax payable, including reverse charge tax under section 9(3) and (4), tax collected and paid, input tax and credit claimed, with “a register of tax invoice, credit notes, debit notes, delivery challan issued or received during any tax period”
- names and complete addresses of suppliers of taxable goods or services, and of customers where required
- “the complete address of the premises where goods are stored by him, including goods stored during transit along with the particulars of the stock stored therein”
Stock and production (sub-rules (2), (12), (13) and (14))
- for all but composition taxpayers, stock accounts showing “the opening balance, receipt, supply, goods lost, stolen, destroyed, written off or disposed of by way of gift or free sample and the balance of stock including raw materials, finished goods, scrap and wastage thereof”
- for manufacturers, “monthly production accounts showing quantitative details of raw materials or services used in the manufacture and quantitative details of the goods so manufactured including the waste and by products”
- for suppliers of services, accounts of the quantity of goods used in providing services, the input services used and the services supplied
- for works contractors, separate accounts for each works contract: the persons for whom it is executed, goods and services received and used, payments received, and suppliers
Agents and carriers (sub-rules (11) and (17))
- an agent under section 2(5) keeps accounts principal by principal: the authorisation, goods or services received and supplied on each principal’s behalf, accounts furnished, and tax paid
- a carrier or clearing and forwarding agent holding goods for a registered person keeps “true and correct records” of those goods and produces them when required
Place, form and integrity (sub-rules (7) to (10), (15), (16) and (18))
- books are kept at the principal place of business and, for an additional place, at that place. They “shall include any electronic form of data stored on any electronic device”
- entries “shall not be erased, effaced or overwritten”. Incorrect entries, other than clerical ones, are “scored out under attestation” and the correct entry recorded. Where records are electronic, “a log of every entry edited or deleted shall be maintained”
- manual books are serially numbered, volume by volume
- documents or books found at premises not in the registration certificate are, “unless proved otherwise”, presumed to be maintained by the registered person
- electronic records “shall be authenticated by means of a digital signature”
- accounts with all invoices, bills of supply, credit and debit notes and delivery challans are preserved for the period in section 36. Manual records are kept at every related place of business, and digital records must be “accessible at every related place of business”
- every registered person “shall, on demand, produce the books of accounts which he is required to maintain under any law for the time being in force”
Electronic records: rule 57
Rule 57 adds three requirements for records kept electronically:
- “Proper electronic back-up” is kept so that, if records are destroyed “due to accidents or natural causes, the information can be restored within a reasonable period of time”.
- The relevant records are produced on demand, “duly authenticated by him, in hard copy or in any electronically readable format”.
- On demand, the person provides “the details of such files, passwords of such files and explanation for codes used”, any other information needed for access, and “a sample copy in print form of the information stored in such files”.
Read with rule 56(8), this means accounting software that allows entries to be altered without a trail does not meet the rules. The edit log is itself a record.
Warehouses, godowns and transporters: rule 58
Section 35(2) reaches beyond registered persons. “Every owner or operator of warehouse or godown or any other place used for storage of goods and every transporter, irrespective of whether he is a registered person or not”, must keep records of the consigner, consignee and other relevant details of the goods.
Enrolment. Under rule 58(1), such a person, “if not already registered”, submits details electronically on the common portal in FORM GST ENR-01, directly or through a facilitation centre. On validation a unique enrolment number is generated. ENR-01 is headed “[only for un-registered persons]”. It asks for the type of enrolment, from warehouse or depot, godown, transport services and cold storage. It also asks for PAN, Aadhaar for a proprietorship, the constitution, the principal and additional places of business with latitude and longitude, and the nature of the premises. It closes with an Aadhaar authentication consent and a verification by the authorised signatory. Enrolment in one State is deemed to be enrolment in every State, and amendments are made in ENR-01 itself.
For transporters, CBIC’s FAQs on the e-way bill system describe the result of enrolment as the TRANSIN, a fifteen-digit transporter ID “similar to GSTIN format”, generated by the e-way bill system and given to clients for use in e-way bills. The FAQs state that a person already registered under GST is told to use the GSTIN instead.
One number across States. Rule 58(1A), inserted by Notification No. 28/2018-Central Tax, allows a transporter registered in more than one State or Union territory under the same PAN to apply in FORM GST ENR-02 for “a unique common enrolment number”. Once obtained, the transporter “shall not be eligible to use any of the Goods and Services Tax Identification Numbers” for the e-way bill provisions in Chapter XVI.
What they must keep. Under rule 58(4), a transporter keeps records of goods transported, delivered and stored in transit, with the GSTIN of the registered consigner and consignee, for each branch. A warehouse or godown operator keeps books “with respect to the period for which particular goods remain in the warehouse, including the particulars relating to dispatch, movement, receipt and disposal”. Under rule 58(5), the godown operator stores goods “in such manner that they can be identified item-wise and owner-wise” and “shall facilitate any physical verification or inspection by the proper officer on demand”.
How long: section 36
Section 36 requires the books and records under section 35(1) to be kept “until the expiry of seventy-two months from the due date of furnishing of annual return for the year pertaining to such accounts and records”. The annual return under section 44 is due by 31 December after the financial year, unless that date is extended. For 2023-24, it was due on 31 December 2024, so the records for that year are kept at least until 31 December 2030.
Pending proceedings extend the period. Under the proviso, a person who is a party to an appeal, revision or “any other proceedings” before an Appellate Authority, Revisional Authority, the Appellate Tribunal or a court, or who “is under investigation for an offence under Chapter XIX”, keeps the records “pertaining to the subject matter”. They are kept until one year after final disposal, or for the seventy-two months, “whichever is later”. This applies whether the appeal was filed by the person or by the Commissioner.
The seventy-two months outlast every limit for a demand. A notice under section 74A must issue within forty-two months of the same due date, and an order under section 74 or section 63 within five years of it.
What an audit asks for
Section 71(2) lists what the person in charge of the business premises must make available to an authorised officer or audit party, “within a period not exceeding fifteen working days from the day when such demand is made, or such further period as may be allowed”:
- the records prepared or maintained and declared to the proper officer
- the trial balance or its equivalent
- annual financial statements, “duly audited, wherever required”
- the cost audit report, if any, under section 148 of the Companies Act, 2013
- the income-tax audit report, if any, under section 44AB of the Income-tax Act, 1961
- any other relevant record
The Model All India GST Audit Manual 2023, prepared by a Committee of Officers of the Centre, States, GSTN and the GST Council Secretariat for audit officers, gives a fuller picture. Annexure 4 lists what an auditee may be asked to produce:
| Document | Source |
|---|---|
| Annual report and directors’ report, profit and loss account, balance sheet, trial balance, notes to accounts | Financial statements |
| Tax audit report; cost audit report where maintained; statement of income-tax TDS | Income-tax and Companies Act filings |
| Trial balance for the GSTIN, where GSTR-9C was not filed and there are several GSTINs | Books |
| List of HSN and SAC codes for the goods and services dealt in | Books; GSTR-1 |
| Reconciliation of GSTR-9, GSTR-1 and GSTR-3B | Books and returns |
| Supplier list with GSTINs, and supplier ledger accounts | Books |
| Outward supplies, party-wise and by place of supply | Books |
| Inward supplies on which tax was paid under reverse charge, and outward supplies on which the recipient pays it | Books |
| Bank statements for the period | Bank |
| Stock register | Books under rule 56(2) |
The Manual’s sample letter, sent with the audit notice, asks for some of these on the first day. They include a party-wise statement of inward and outward supplies, a reconciliation of turnover in GSTR-3B, GSTR-1 and the books, and credit in GSTR-3B against GSTR-2A. Its sample questionnaire asks:
- how many invoice series are used and whether tax is paid on each
- whether invoice numbers are generated automatically, and who can cancel an invoice
- which accounting software is used, and whether it changed during the period
- whether accounts are kept on a mercantile or cash basis
- whether there are transactions with related or distinct persons, or supplies without consideration
- whether any receivable has been netted off against a payable
- the name and contact details of the statutory auditor
The Manual also tells officers to “obtain as much information as possible from the data sources available in the system”, to avoid repeated requests, and to avoid asking for original invoices or for “ALL/complete set of all invoices”, relying instead on samples. It describes these as guidance for officers only, and states that they “do not constitute any legal authority”.
Who signs and authenticates
- Electronic records are authenticated by digital signature under rule 56(15).
- Copies produced on demand are “duly authenticated” by the registered person under rule 57(2).
- ENR-01 and ENR-02 are verified by the authorised signatory.
- Corrections to manual records are “scored out under attestation” under rule 56(8).
Consequences of missing or defective records
- Unaccounted goods or services taxed as supplied. Under section 35(6), where a registered person “fails to account for the goods or services or both”, the proper officer determines the tax “as if such goods or services or both had been supplied”. Sections 73, 74 or 74A apply to that determination. Goods “lost, stolen, destroyed, written off or disposed of by way of gift or free samples” are dealt with instead under section 17(5)(h), which blocks the credit on them.
- Goods at undeclared places. Under rule 56(6), taxable goods found stored at a place not declared under rule 56(5) “without the cover of any valid documents” are taxed “as if such goods have been supplied by the registered person”.
- Documents at undeclared places. Rule 56(10) presumes them to be the registered person’s, “unless proved otherwise”.
- Penalty. Section 122(1) covers a taxable person who “fails to keep, maintain or retain books of account and other documents” (clause (xvi)) or “fails to furnish information or documents called for by an officer” (clause (xvii)). The penalty is ten thousand rupees or the tax evaded, whichever is higher. Where no specific penalty applies, section 125 allows up to twenty-five thousand rupees.
- In an audit. FORM GST ADT-01 warns that if the notice is not complied with, “it would be presumed that you are not in possession of such books of account”. The Model Manual suggests that an auditee who does not co-operate may face a show cause notice for penalty under section 125 and referral to the enforcement wing.
Rights and duties
| Person | Duty | Right or limit |
|---|---|---|
| Registered person | Keep the accounts in section 35(1) and rules 56 and 57 at each registered place, and retain them for section 36’s period | May keep them electronically, authenticated by digital signature |
| Registered person | Produce books and records on demand, within fifteen working days under section 71(2) | The officer may allow a further period |
| Warehouse, godown or transporter | Keep consigner and consignee records; enrol in ENR-01 if unregistered; store goods identifiably and allow verification | Enrolment in one State counts for all |
| Proper officer | May call for records, inspect and verify | Must act under the provision relied on; the Manual’s guidance asks officers not to seek what is already in the system |
What can still be put right
- Undeclared places. A godown or additional place of business can be added by an amendment of registration, covered in Amending a Registration. Rule 56(5)© requires the address of every storage premises to be kept, including goods in transit.
- Errors in books. Rule 56(8) allows correction by scoring out under attestation, or through the edit log for electronic records. It does not allow erasure.
- Returns. A difference between the books and the returns found before the department finds it can be corrected or paid, within the limits explained in Correcting Mistakes in Returns. Section 39(9) does not extend to errors found as a result of audit.
- Lost records. Rule 57(1) requires a back-up from which records can be restored. Where records have genuinely been destroyed, the evidence of the event is itself a record worth keeping.
The procedure in order
- List every place of business and every premises where goods are stored, and check that each is declared in the registration.
- Keep the rule 56 accounts for each place: supplies, stock, advances, tax, credit, and the activity-specific records for manufacturing, services, works contracts and agency.
- For electronic books, keep the edit log, the back-up and the digital signature authentication, and record which software held each year’s books.
- Retain each year’s records for seventy-two months from the annual return due date, and longer where an appeal, proceeding or investigation on the subject matter is pending.
- For an unregistered warehouse, godown or transport business, enrol in ENR-01, or ENR-02 for a multi-State transporter, and keep consigner and consignee records.
- When an audit notice arrives, assemble the section 71(2) records and the Manual’s Annexure 4 list, with reconciliations of the books to GSTR-1, GSTR-3B, GSTR-2A/2B and GSTR-9.
The next guide covers the audit itself under section 65: the ADT-01 notice, the three months for completion, the findings in ADT-02 and what happens when tax is found short.