Quick summary
A practical guide to maintaining GST-compliant books of accounts for Indian businesses. What records you must keep, how input tax credit works, and how to avoid the most common GST errors.
What GST-compliant bookkeeping requires
GST-registered businesses in India must maintain specific records under Section 35 of the CGST Act, 2017. These records must be maintained at each place of business for a minimum of 72 months (six years) from the due date of the annual return for the relevant financial year.
The GST record-keeping requirement goes beyond general bookkeeping. You must maintain separate ledgers for input tax credit (ITC) by tax type (IGST, CGST, SGST), track the HSN/SAC codes for every supply, reconcile your GSTR-2A (auto-populated purchase data) against your purchase register monthly, and maintain documentation for every ITC claim.
- Production or manufacture register (for manufacturers)
- Inward supply register (purchases and imports)
- Outward supply register (sales)
- Stock register
- ITC availed and utilised ledger
- Output tax payable and paid ledger
- Invoice register with sequential numbering
Input Tax Credit. The most important concept to understand
Input Tax Credit (ITC) allows you to offset the GST you pay on your purchases against the GST you collect on your sales. Getting ITC right is the difference between an accurate GST liability and overpaying tax. Getting it wrong triggers demand notices.
Under Section 16 of the CGST Act, you can claim ITC only if: the supplier has filed their returns and the ITC reflects in your GSTR-2B; you have received the goods or services; the tax has been paid by the supplier to the government; and you have filed your own returns. The reconciliation between your purchase register and GSTR-2B every month is therefore not optional. It is the foundation of your ITC eligibility.
- Blocked credits (Section 17(5)): ITC cannot be claimed on motor vehicles (with limited exceptions), food and beverages, membership of clubs/health fitness centres, works contract for construction of immovable property, and personal consumption.
- Reversal rules: If you do not pay your supplier within 180 days of the invoice date, you must reverse the ITC claimed.
- Export of services: Zero-rated supply. You can claim ITC on inputs and either claim a refund or carry forward.
- Exempt supplies: ITC is not available on inputs used for making exempt supplies. Proportionate reversal under Rule 42/43 applies if you make both taxable and exempt supplies.
- Annual reconciliation: Differences between GSTR-2B and your books flagged in GSTR-9C (for turnover >₹5 crore) must be explained and reconciled.
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Get quotes from bookkeepers near youMonthly GST compliance checklist
For most businesses, GST compliance follows a monthly cycle. Missing any step creates errors that compound in subsequent months.
- By the 11th: File GSTR-1 (outward supplies for the previous month). Or 13th for QRMP scheme filers
- By the 20th: File GSTR-3B (summary return) and pay net GST liability
- Ongoing: Reconcile GSTR-2B against purchase register; flag mismatches for follow-up with suppliers
- Ongoing: Match e-invoices (mandatory for B2B supplies above ₹5 crore threshold) against books
- Ongoing: Update HSN/SAC codes for any new products or services
- Monthly: Verify ITC ledger balance matches books; investigate any unexplained differences
- Annually: File GSTR-9 (annual return) by 31 December; GSTR-9C reconciliation statement if turnover >₹5 crore
Common GST bookkeeping errors
- Not reconciling GSTR-2B monthly: The most common cause of ITC mismatches and demand notices. Reconcile every month, not just at year-end.
- Wrong HSN/SAC codes: Using incorrect codes leads to wrong tax rate application and potential penalties under Section 125.
- Claiming ITC on blocked credits: Claiming ITC on motor vehicles, food, or personal expenses triggers reversal demands with interest.
- Not reversing ITC for unpaid invoices: If you have not paid a supplier within 180 days, the ITC must be reversed. This is frequently missed.
- Incorrectly classifying inter-state vs. intra-state supply: Wrong classification leads to wrong tax (IGST vs. CGST+SGST split). This requires amendments and can trigger compliance queries.
- Invoice numbering gaps: GST requires sequential invoice numbering. Gaps attract scrutiny. Use software with auto-numbering.
Frequently asked questions
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