Think of Section 35 as the GST law's way of saying: keep your books clean, or we'll assume the worst. Every registered person must maintain true and correct accounts — and if those accounts are missing or incomplete, the tax officer is empowered to treat unaccounted goods as if they were supplied and raise a demand on you. That's the real bite here.
Where and what to maintain: Records must be kept at your principal place of business as shown in your GST registration certificate. If your certificate lists multiple branches, each branch must maintain its own accounts — you can't dump everything at head office. The law requires six categories of records: (a) production or manufacture of goods, (b) inward and outward supplies of goods or services, (c) stock of goods, (d) input tax credit (ITC) availed, (e) output tax payable and paid, and (f) any other particulars prescribed by rules. In practice, think: purchase register, sales register, stock register, and ITC ledger — all must be in order. Good news: electronic records (Tally, SAP, etc.) are explicitly permitted.
Who else is covered — the surprise sub-section: Section 35(2) pulls in warehouse operators, godown owners, and transporters — even if they are unregistered under GST. They must maintain records of consignors, consignees, and goods details. This closes the loop on goods vanishing in transit with no paper trail.
Consequence of non-compliance: Under sub-section (6), if goods or services are not accounted for, the proper officer determines the tax as if you supplied those goods and invokes Section 73 (normal cases) or Section 74 (fraud/suppression) for demand and recovery. Messy books = automatic tax liability.
Critical exam alert for May 2026: Section 35(5) used to require a mandatory GST audit by a CA or Cost Accountant for taxpayers above a prescribed turnover. This sub-section was omitted by the Finance Act, 2021 (effective 01.08.2021). GSTR-9C (reconciliation statement) is now self-certified by the taxpayer — no external GST audit is mandatory under the law today. This is a favourite trick question. This section is asked frequently as a 4–6 mark question in theory format.
Example 1: Multiple Places of Business
Rajesh & Co. Pvt. Ltd. is a Mumbai-based manufacturer. Their GST registration certificate lists:
- Principal place of business: Nariman Point, Mumbai (head office)
- Additional place of business: Bhiwandi, Maharashtra (warehouse)
Question: Can Rajesh & Co. maintain all accounts only at their Nariman Point head office for simplicity?
Working:
- Section 35(1) proviso 1: Where more than one place of business is specified in the registration certificate, accounts relating to each place must be kept at that place.
- Head office → must maintain accounts for HO transactions.
- Bhiwandi warehouse → must maintain separate stock records, inward/outward supply details, and ITC records at Bhiwandi itself.
- Centralising everything at head office is not permissible.
Answer: No. Rajesh & Co. must maintain separate accounts at both Nariman Point and Bhiwandi. Failure to do so can invite a tax demand under Section 35(6) read with Section 73/74.
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Example 2: Unregistered Transporter's Obligations
Mr. Verma owns three trucks in Rajasthan. His annual freight income is ₹18,00,000 (₹18 lakh) — below the GST registration threshold. He transports goods between factories for various clients but is not registered under GST.
Question: Is Mr. Verma required to maintain any records under Section 35 of the CGST Act?
Working:
- Section 35(2) applies to "every transporter, irrespective of whether he is a registered person or not."
- Mr. Verma must maintain records of:
- Name and GSTIN/address of the consignor (sender)
- Name and GSTIN/address of the consignee (receiver)
- Other relevant details of the goods as prescribed
- His unregistered status gives him zero exemption from this obligation.
Answer: Yes. Despite being unregistered, Mr. Verma must maintain consignor/consignee records. Non-compliance can lead to detention and seizure of goods under Section 129.
📖 Bare Act text — Section 35, CGST Act 2017
(click to expand)
(1) Every registered person shall keep and maintain, at his principal place of business, as mentioned in the certificate of registration, a true and correct account of—
(a) production or manufacture of goods;
(b) inward and outward supply of goods or services or both;
(c) stock of goods;
(d) input tax credit availed;
(e) output tax payable and paid; and
(f) such other particulars as may be prescribed:
Provided that where more than one place of business is specified in the certificate of registration, the accounts relating to each place of business shall be kept at such places of business: Provided further that the registered person may keep and maintain such accounts and other particulars in electronic form in such manner as may be prescribed.
(2) 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, shall maintain records of the consigner, consignee and other relevant details of the goods in such manner as may be prescribed.
(3) The Commissioner may notify a class of taxable persons to maintain additional accounts or documents for such purpose as may be specified therein.
(4) Where the Commissioner considers that any class of taxable person is not in a position to keep and maintain accounts in accordance with the provisions of this section, he may, for reasons to be recorded in writing, permit such class of taxable persons to maintain accounts in such manner as may be prescribed.
(5) Every registered person whose turnover during a financial year exceeds the prescribed limit shall get his accounts audited by a chartered accountant or a cost accountant and shall submit a copy of the audited annual accounts, the reconciliation statement under sub-section (2) of section 44 and such other documents in such form and manner as may be prescribed: [Provided that nothing contained in this sub-section shall apply to any department of the Central Government or a State Government or a local authority, whose books of account are subject to audit by the Comptroller and Auditor-General of India or an auditor appointed for auditing the accounts of local authorities under any law for the time being in force.]
(6) Subject to the provisions of clause (h) of sub-section (5) of section 17, where the registered person fails to account for the goods or services or both in accordance with the provisions of sub-section (1), the proper officer shall determine the amount of tax payable on the goods or services or both that are not accounted for, as if such goods or services or both had been supplied by such person and the provisions of section 73 or section 74, as the case may be, shall, mutatis mutandis, apply for determination of such tax.