Section 36 of the Central Goods and Services Tax (CGST) Act, 2017 deals with the period for which a registered person must retain books of account and other records maintained under GST law.
Maintaining proper records is an important GST compliance requirement. However, maintaining records alone is not enough. A registered person must also preserve those records for the period prescribed under the law so that they remain available for scrutiny, audit, assessment, investigation, appeal, revision, or other proceedings.
Under Section 36, the general retention period is 72 months (six years) from the due date of furnishing the annual return for the relevant financial year. The law also provides a longer retention requirement in certain cases where an appeal, revision, other proceedings, or investigation is pending.
What is Section 36 of the CGST Act?
Section 36 of the CGST Act, 2017 specifies how long a registered person must retain books of account and other records required to be maintained under Section 35.
The provision states that every registered person required to keep and maintain books of account or other records under Section 35(1) must retain those records until the expiry of 72 months from the due date of furnishing the annual return for the year to which those accounts and records relate.
In simple terms, Section 35 tells a registered person what records need to be maintained, while Section 36 tells the person how long those records need to be retained.
Section 36 CGST Act – Statutory Provision
The main requirement under Section 36 can be understood as follows:
Every registered person required to maintain books of account or other records under Section 35(1) must retain them for 72 months from the due date of furnishing the annual return for the relevant year.
There is also a special provision for cases involving appeals, revisions, other proceedings, or investigation for an offence under Chapter XIX. In such cases, the relevant records must be retained for one year after the final disposal of the relevant matter or for the normal statutory period, whichever is later.
How Long Should GST Records Be Kept?
The normal retention period under Section 36 is:
72 months = 6 years
However, an important point is that the six-year period is not simply calculated from the date of the invoice, transaction, or financial year-end.
The starting point is the due date for furnishing the annual return for the relevant financial year.
For example, suppose a business has records relating to a particular financial year. The retention period under Section 36 is calculated with reference to the due date for furnishing the annual return for that financial year.
Therefore, businesses should not adopt a practice of automatically deleting records six years after the date of the transaction.
Example of the 72-Month Retention Period
Suppose the records relate to Financial Year 2024–25.
Assume the statutory due date for furnishing the annual return for that year is 31 December 2025.
The 72-month retention period would then be calculated from that due date.
This means the records should generally be retained until the expiry of 72 months from 31 December 2025, rather than merely until six years from the transaction date.
The exact calculation should always be made with reference to the applicable due date for the annual return.
Why Does GST Law Require Record Retention?
GST is a transaction-based indirect tax system in which tax liability, input tax credit, refunds, exports, purchases, sales, and other tax positions are supported by documentary records.
Records may be required later for several reasons, including:
- Verification of GST returns
- Scrutiny of transactions
- Assessment or determination of tax
- GST audit or departmental verification
- Investigation
- Refund-related verification
- Input tax credit verification
- Appeals and revisions
- Court or tribunal proceedings
- Verification of tax invoices and other supporting documents
- Establishing the correctness of GST liability
For this reason, the GST law requires records to remain available for the prescribed period.
What Records Are Covered by Section 36?
Section 36 covers books of account and other records that a registered person is required to maintain under Section 35.
The related GST rules require various supporting documents and records to be preserved for the period prescribed under Section 36. These include, among other things:
- Books of account
- Tax invoices
- Bills of supply
- Credit notes
- Debit notes
- Delivery challans
- Records relating to stock
- Records relating to inward supplies
- Records relating to outward supplies
- Records relating to deliveries
- Other relevant GST records
Rule 56 of the CGST Rules specifically provides that accounts maintained by a registered person, together with invoices, bills of supply, credit notes, debit notes and delivery challans relating to stocks, deliveries, inward supplies and outward supplies, are to be preserved for the period specified in Section 36.
Retention of Invoices and Other GST Documents
A business should not retain only its accounting ledger and discard the supporting documents.
For example, if a business has recorded a purchase in its books, it should also preserve the relevant documentation supporting that transaction, such as the applicable tax invoice and related records.
Similarly, records supporting outward supplies should be retained along with the relevant invoices and other applicable documents.
This is important because the books of account generally show the accounting treatment, while invoices and other documents provide evidence supporting the underlying GST transaction.
Electronic Records Under GST
GST law permits records to be maintained electronically.
Businesses increasingly maintain their accounting records, invoices, ledgers, inventory information and other GST documents through accounting software, ERP systems, cloud platforms and other electronic systems.
The GST rules contain specific requirements for electronic records. Proper electronic backup should be maintained so that information can be restored within a reasonable period if records are destroyed because of an accident or natural cause.
A registered person maintaining electronic records must also be able to produce relevant records or documents when demanded, in hard copy or in an electronically readable format.
Therefore, electronic storage does not remove the obligation to preserve records.
Importance of Electronic Backup
Businesses should maintain reliable backups of GST records.
For example, a business may maintain its accounts on a computer. If that computer’s hard drive fails and the business has no backup, important GST records could become unavailable.
A proper backup system can help protect records against:
- Hardware failure
- Accidental deletion
- Malware or ransomware
- Fire or physical damage
- System corruption
- Data loss
- Other unexpected events
The GST rules specifically require proper electronic backup and provide for restoration of records within a reasonable period when records are destroyed due to accidents or natural causes.
Audit Trail and Electronic GST Records
Electronic record-keeping also involves maintaining information that helps establish how records were created, edited or deleted.
The GST rules provide requirements relating to electronic records and audit trails, including the ability to provide relevant information and inter-linkages when demanded by the proper officer.
The current CBIC Accounts and Records rules also provide that electronic records should be capable of being produced on demand and that relevant audit trail and inter-linkage information may need to be provided.
Businesses using accounting software should therefore avoid systems that make it impossible to retrieve historical transaction data when required.
What Happens If an Appeal or Other Proceeding Is Pending?
Section 36 contains an important proviso for cases involving legal or departmental proceedings.
If a registered person is a party to:
- An appeal,
- A revision,
- Any other proceeding before an Appellate Authority,
- A proceeding before a Revisional Authority,
- A proceeding before the Appellate Tribunal,
- A court proceeding,
or is under investigation for an offence under Chapter XIX, the person must retain the records relating to the subject matter of that matter for a longer period in accordance with the proviso to Section 36.
The special retention period is one year after the final disposal of the appeal, revision, proceeding or investigation, or the normal 72-month period, whichever is later.
Example of Extended Retention
Suppose the normal 72-month retention period for a particular year’s records would expire on 31 December 2031.
However, the registered person is involved in an appeal concerning those records and the appeal is finally disposed of on 30 June 2032.
Under the special rule, the relevant records must be retained for one year after final disposal, which would take the extended period to 30 June 2033.
Since the extended date is later than the normal retention date, the records should be retained until 30 June 2033.
The important point is that the special rule applies to records pertaining to the subject matter of the appeal, revision, proceeding or investigation.
What If the Proceeding Is Filed by the GST Department?
The extended retention rule is not limited to proceedings initiated by the registered person.
Section 36 specifically covers proceedings whether filed by the registered person or by the Commissioner.
Therefore, a business should not assume that its record-retention obligation ends merely because it has not itself filed an appeal or proceeding.
Where the records are connected with a relevant proceeding, the special retention requirement may apply.
Retention of Records During Investigation
Section 36 also specifically refers to investigation for an offence under Chapter XIX of the CGST Act.
Where a registered person is under such investigation, records relating to the subject matter of the investigation must be retained according to the extended period prescribed by the proviso.
The records should therefore not be destroyed simply because the normal 72-month period has expired if the special conditions under Section 36 continue to apply.
Section 36 and Section 35 – Difference
Section 35 and Section 36 are closely connected but deal with different aspects of GST record keeping.
| Section | Main purpose |
|---|---|
| Section 35 | Deals with accounts and other records that must be maintained |
| Section 36 | Deals with the period for which those records must be retained |
For example, Section 35 establishes the record-keeping requirement, while Section 36 establishes the retention period.
This distinction is important for businesses because maintaining records and preserving records are separate compliance responsibilities.
Section 36 and GST Compliance
Proper record retention supports several areas of GST compliance.
Input Tax Credit
Purchase invoices and related records may be required to substantiate input tax credit claims.
A business should therefore preserve documents supporting its ITC position for the applicable statutory period.
Output Tax Liability
Sales invoices, credit notes, debit notes and accounting records help establish the taxable value and GST liability reported by the business.
Refund Claims
Records supporting exports, zero-rated supplies, eligible input tax credit and other refund-related matters can be important during departmental verification.
Tax Proceedings
If a transaction later becomes subject to scrutiny, investigation, appeal or another proceeding, historical records may become necessary to establish the facts.
Should a Business Keep Records for More Than Six Years?
Section 36 prescribes a statutory minimum retention period in ordinary circumstances.
However, businesses may choose to maintain records for longer where there are commercial, accounting, contractual, legal or other legitimate reasons for doing so.
More importantly, where the special proviso to Section 36 applies, relevant records must be retained beyond the ordinary period where required by that provision.
Businesses should also consider other applicable laws that may prescribe their own record-retention requirements.
Practical Record Retention Policy for Businesses
A good GST record-retention system should identify records by financial year and maintain them in an organised manner.
A business can consider maintaining separate folders or electronic repositories for:
- Sales invoices
- Purchase invoices
- Credit notes
- Debit notes
- Delivery challans
- GST returns
- Input tax credit documentation
- E-way bill records
- E-invoice records, where applicable
- Bank and payment records
- Stock records
- Expense records
- Refund documentation
- Correspondence relating to GST proceedings
- Notices and replies
- Orders issued by GST authorities
- Appeal and revision documents
The business should also maintain a system for identifying records that are connected with pending proceedings.
Common Mistakes Related to Section 36
Businesses can face record-retention problems when they follow an overly simple approach.
Mistake 1: Counting Six Years From the Invoice Date
Section 36 does not prescribe the normal retention period as six years from the invoice date.
The statutory calculation is linked to the due date of furnishing the annual return for the relevant year.
Mistake 2: Deleting Records After Six Years Without Checking Proceedings
If relevant records are connected with an appeal, revision, other proceeding or investigation covered by Section 36, the extended retention requirement must be considered.
Mistake 3: Keeping Only Accounting Data
Accounting entries alone may not be sufficient. Supporting GST documents such as invoices, credit notes, debit notes and delivery challans may also need to be preserved.
Mistake 4: No Electronic Backup
Keeping records on a single computer without proper backup can expose a business to data loss.
Mistake 5: Inability to Produce Electronic Records
Electronic records must remain accessible and capable of being produced when required.
How Small Businesses Can Comply With Section 36
Small businesses do not necessarily need complicated systems to comply with the record-retention requirement.
A practical approach is to:
- Organise records financial year-wise.
- Keep sales and purchase documents together with supporting records.
- Maintain proper accounting backups.
- Preserve GST returns and reconciliation records.
- Keep notices and GST orders separately.
- Identify records connected with disputes or proceedings.
- Avoid deleting records merely because a transaction is old.
- Maintain electronic records in a format that can be retrieved when required.
- Periodically verify that backups are working.
- Consult a tax professional where a proceeding or investigation affects record retention.
Record Retention for Different Types of Businesses
The exact documents maintained by a business can vary according to its activities.
Traders
A trader may need to preserve purchase invoices, sales invoices, stock records, delivery documents, credit notes, debit notes and GST return-related records.
Manufacturers
Manufacturers may have additional production, raw material, finished goods, waste and other records relevant to their GST compliance.
Service Providers
Service providers may need to preserve invoices, agreements, payment records, input service documentation and records supporting the services supplied.
E-commerce Businesses
Businesses operating through electronic commerce platforms may have extensive transaction data and should maintain appropriate records relating to supplies, tax invoices, returns and payments.
The GST rules contain specific accounting and record requirements for different types of activities.
Importance of Preserving Records at the Place of Business
The GST rules provide requirements concerning where accounts and documents are maintained.
Rule 56 provides that accounts maintained by a registered person, together with specified invoices and related documents, are to be preserved for the period specified under Section 36. Where records are maintained manually, they are to be kept at the relevant places of business mentioned in the registration certificate; where maintained digitally, they are required to be accessible at the relevant places of business.
This means record management should also take into account the registered business locations and the manner in which records are stored.
Key Points of Section 36 CGST Act
The important points can be summarised as follows:
- Section 36 deals with the retention period of GST accounts and records.
- It applies to registered persons required to maintain records under Section 35(1).
- The normal retention period is 72 months.
- 72 months means six years.
- The period is calculated from the due date of furnishing the annual return for the relevant year.
- The calculation is not simply six years from the date of an individual transaction.
- Relevant invoices and supporting GST documents should also be preserved as required under the GST Rules.
- Electronic records can be maintained electronically, subject to the applicable requirements.
- Proper electronic backup should be maintained.
- Records should remain capable of being produced when demanded.
- A longer retention requirement can apply where relevant records are connected with an appeal, revision, other proceeding or investigation.
- In such cases, the relevant records are retained for one year after final disposal or for the normal statutory period, whichever is later.
👉 Read More → Section 37 – Furnishing details of outward supplies
Conclusion
Section 36 of the CGST Act, 2017 establishes the period for which GST books of account and other required records must be retained. In normal circumstances, a registered person must retain the relevant records for 72 months from the due date of furnishing the annual return for the relevant financial year.
The provision is particularly important because the retention period is not calculated simply by counting six years from the date of an invoice or transaction. Businesses must identify the applicable annual return due date and calculate the retention period accordingly.
The law also provides an extended retention requirement where relevant records are connected with an appeal, revision, other proceeding or investigation covered by the provision. In addition, the GST Rules require supporting documents and electronic records to be preserved and made available in the prescribed manner.
For businesses, the safest approach is to maintain organised, retrievable and properly backed-up GST records and to separately identify records connected with any pending dispute, proceeding or investigation.
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