Taxation - GST Ch 10: Accounts Records - Test 1: answer key

Question 1 · 2 marks · Taxation - GST Ch 10: Accounts Records · hard

Scenario. Vikramaditya Tech Labs LLP (VTL), a registered person in Karnataka, has its principal place of business (PPoB) at Bengaluru and additional places of business at Hubballi and Mangaluru in the registration certificate. VTL manufactures smart meters, imports sensors from Vietnam, exports controllers to the UAE, pays legal fees under reverse charge, receives customer advances, and stores goods at a third-party godown in Nelamangala during transit. It keeps sales and purchase records on a cloud platform, while the Hubballi branch keeps a manual purchase register. The cloud records are authenticated by the designated partner's digital signature; backup is taken on the last day of each quarter. On 12 November 2026, the proper officer asks for the purchase register, file passwords, code explanation and a print sample. VTL's accountant says cloud records need no print and passwords are internal. VTL also supplies installation services and receives advances of Rs. 4,80,000; imports sensors valued at Rs. 18,50,000; exports controllers worth Rs. 22,40,000; and pays reverse charge legal fees of Rs. 1,25,000. Its manufacturing unit consumed 12,400 kg of raw material and produced 11,900 smart meters, with 180 kg scrap and 320 rejected units during November 2026.

Where must VTL keep the accounts relating to its Hubballi additional place of business, and how is a document found at another premises treated?

1. The Hubballi accounts may be kept at the Bengaluru PPoB if consolidated; a document found at another premises is ignored unless it bears a partner's signature.
2. The Hubballi accounts must be kept at Hubballi; documents found at any other premises are presumed maintained by VTL unless proved otherwise. (correct answer)
3. All branch accounts must be kept at the PPoB; a branch document found elsewhere is treated as a third-party record in every case.
4. The Hubballi accounts may be kept at the Mangaluru additional place; the presumption applies only to records kept in electronic form.

Answer: B — The Hubballi accounts must be kept at Hubballi; documents found at any other premises are presumed maintained by VTL unless proved otherwise.

Explanation. Section 35(1) requires every registered person to keep true and correct accounts at the principal place of business. Where more than one place of business is specified in the registration certificate, the accounts relating to each place must be kept at that place. Thus Hubballi accounts belong at Hubballi. The study material also states that documents, registers or books found at premises other than those mentioned in the certificate are presumed to be maintained by the registered person unless the contrary is proved. Option (b) states both steps correctly; no consolidation at Bengaluru is permitted for the Hubballi branch records.

Where it goes wrong. Students often assume all branch accounts can be centralised at the PPoB; the proviso requires place-wise maintenance.

Authority. Section 35(1) of the CGST Act, 2017; Rule 56 of the CGST Rules, 2017

Question 2 · 2 marks · Taxation - GST Ch 10: Accounts Records · hard

VTL keeps accounts on a cloud platform with digital signature and quarterly backup. On demand, it declines to give passwords and a print sample. Which statement states VTL's electronic-records obligations correctly?

1. Cloud records are invalid unless printed monthly; digital signature is optional if backup is taken every quarter.
2. Digital signature is needed only for outward supply invoices; the proper officer cannot ask for passwords of files.
3. Electronic records must be authenticated by digital signature, backed up properly, and on demand VTL must give file details, passwords, code explanation and a print sample. (correct answer)
4. Electronic records need no backup if stored on cloud; only manual registers must be serially numbered.

Answer: C — Electronic records must be authenticated by digital signature, backed up properly, and on demand VTL must give file details, passwords, code explanation and a print sample.

Explanation. Records may be kept electronically. Such records must be authenticated by digital signature, and a proper electronic backup must be preserved so that information can be restored within a reasonable period after accidental loss. On demand, the registered person must produce the records in hard copy or electronically readable format and must provide file details, passwords, explanation of codes and a sample print copy. VTL's digital signature is fine, but refusing passwords and print sample breaches the rule. Quarterly backup may not by itself satisfy the restoration requirement if it is not proper; the demand-related obligation is clearly breached.

Where it goes wrong. Students may think cloud storage removes production and password obligations; the rule expressly requires access details and print sample on demand.

Authority. Section 35(1) proviso of the CGST Act, 2017; Rule 56 of the CGST Rules, 2017

Question 3 · 2 marks · Taxation - GST Ch 10: Accounts Records · medium

Which record is additionally required to be maintained by VTL as a registered person under Rule 56, apart from the basic accounts in Section 35(1)?

1. Principal-wise authorisation for supplies made through agents, even if VTL has appointed no agent.
2. Branch-wise GSTIN of every consignor and consignee for goods stored in transit by a transporter.
3. Monthly production accounts only if aggregate turnover crosses Rs. 5 crore.
4. Separate account of advances received, paid and adjustments made, and supplier or recipient names and addresses where required. (correct answer)

Answer: D — Separate account of advances received, paid and adjustments made, and supplier or recipient names and addresses where required.

Explanation. Rule 56 requires a registered person to maintain, in addition to Section 35(1) accounts, records of imported or exported goods, reverse charge supplies with relevant documents, a separate account of advances received, paid and adjustments, names and complete addresses of suppliers and recipients where required, and the address of premises where goods are stored, including transit storage. Option (d) lists the advances account and supplier or recipient particulars. Agent-wise authorisation is an agent's record; transporter branch GSTIN records belong to a transporter; and monthly production accounts are not subject to a Rs. 5 crore threshold.

Where it goes wrong. The Rs. 5 crore threshold is a common invented condition; monthly production accounts apply to a registered manufacturer without that threshold.

Authority. Section 35(1) of the CGST Act, 2017; Rule 56 of the CGST Rules, 2017

Question 4 · 2 marks · Taxation - GST Ch 10: Accounts Records · hard

For November 2026, VTL manufactured 11,900 smart meters from 12,400 kg raw material, with 180 kg scrap and 320 rejected units, and also supplied installation services. Which accounts are mandated?

1. Monthly production accounts showing quantitative raw material or services used and goods manufactured including waste and by-products; and service records showing goods used, input services utilised and services supplied. (correct answer)
2. Only the value of smart meters sold and GST paid; quantity details are needed only for export supplies.
3. Only scrap and rejected units, because raw material consumption already appears in the purchase register.
4. Only the input tax credit register; production quantity is not an account under Section 35.

Answer: A — Monthly production accounts showing quantitative raw material or services used and goods manufactured including waste and by-products; and service records showing goods used, input services utilised and services supplied.

Explanation. A registered manufacturer must maintain monthly production accounts showing quantitative details of raw materials or services used in manufacture and quantitative details of goods manufactured, including waste and by-products. Here 12,400 kg input, 11,900 smart meters, 180 kg scrap and 320 rejected units are quantitative production data. A registered service provider must additionally maintain accounts showing quantitative details of goods used in providing services, details of input services utilised and services supplied. Therefore installation services need separate service records. Purchase register or ITC register alone does not replace the mandated production and service accounts.

Where it goes wrong. Students may treat the purchase register or ITC ledger as a substitute for monthly production and service records; the rule requires separate quantitative accounts.

Authority. Section 35(1) of the CGST Act, 2017; Rule 56 of the CGST Rules, 2017

Question 5 · 2 marks · Taxation - GST Ch 10: Accounts Records · hard

Scenario. Om Cold Storage, an unregistered warehouse at Nashik, stores pulses and spices for Krishna Traders and Vasant Agro, both registered persons. Om records only total bags and stores the two owners' bags mixed. Aryan Steels Transports has branches at Chandigarh, Ludhiana and Amritsar; it records goods transported and delivered, but not goods stored in transit, and for each branch it records only the consignor GSTIN. Ashoka Clearing & Forwarding Agency, Kandla, holds imported machinery for Precision Engineering Pvt Ltd for delivery; it keeps only its own invoice copies and says it need not record goods handled for the registered person. In February 2026, Om's godown receives 1,200 bags from Krishna Traders and 800 bags from Vasant Agro; Aryan moves 14 consignments; Ashoka handles 6 machinery cases. Om has not obtained any GST registration or enrolment number. Aryan is registered in Punjab. Ashoka is registered in Gujarat.

Which obligation applies to Om Cold Storage as an unregistered warehouse operator?

1. No records are needed because Om is not registered; only the registered principals must record storage.
2. Om must maintain consigner, consignee and goods details, obtain a unique enrolment number from the common portal, and cannot use GSTIN. (correct answer)
3. Om must obtain regular GSTIN under Section 25 and issue tax invoices for storage charges.
4. Om must maintain only total bags; item-wise and owner-wise identification is required only for registered warehouses.

Answer: B — Om must maintain consigner, consignee and goods details, obtain a unique enrolment number from the common portal, and cannot use GSTIN.

Explanation. Section 35(2) casts an obligation on every owner or operator of a warehouse or godown, irrespective of GST registration, to maintain records of the consigner, consignee and other relevant details of goods. If such a person is not registered, a unique enrolment number is obtained electronically at the common portal. Such enrolment does not permit use of GSTIN. Om cannot avoid records merely because it is unregistered. It also cannot store goods in a commingled manner; item-wise and owner-wise identification is required for a warehouse operator.

Where it goes wrong. The key trap is assuming that absence of GST registration removes record-keeping duties; Section 35(2) applies irrespective of registration.

Authority. Section 35(2) of the CGST Act, 2017; Rule 58 of the CGST Rules, 2017

Question 6 · 2 marks · Taxation - GST Ch 10: Accounts Records · medium

Which statement correctly states Aryan Steels Transports' record-keeping obligation?

1. Only goods transported must be recorded; stored-in-transit records are needed only if detention exceeds 24 hours.
2. Only the consignor GSTIN is recorded at head office; branch records may be centralised.
3. Goods delivered and consignee GSTIN are recorded only for inter-State consignments.
4. Goods transported, delivered and stored in transit, with GSTIN of registered consignor and consignee for each branch, must be recorded. (correct answer)

Answer: D — Goods transported, delivered and stored in transit, with GSTIN of registered consignor and consignee for each branch, must be recorded.

Explanation. A transporter must maintain records of goods transported, delivered and goods stored in transit by it, along with the GSTIN of the registered consignor and consignee for each of its branches. The obligation is not limited to 24-hour detention, not limited to inter-State movements, and not satisfied by recording only the consignor GSTIN at head office. Aryan's branch-wise records are required. The requirement applies even if the transporter is not the owner of the goods, and it applies irrespective of GST registration.

Where it goes wrong. Students often remember only 'goods transported' and forget 'stored in transit' and the consignee GSTIN; the rule covers all three records.

Authority. Section 35(2) of the CGST Act, 2017; Rule 56 of the CGST Rules, 2017

Question 7 · 2 marks · Taxation - GST Ch 10: Accounts Records · hard

Which statement correctly describes Om Cold Storage's warehouse books and storage arrangement?

1. Books are needed only for receipts; dispatch and disposal details remain with the owners.
2. Storage can be commingled if total quantity matches; physical verification is not required.
3. Books must cover the period goods remain in the warehouse including dispatch, movement, receipt and disposal; goods must be stored item-wise and owner-wise to facilitate physical verification. (correct answer)
4. Records are needed only for goods lying beyond 30 days; owner-wise identification applies only to cold storage.

Answer: C — Books must cover the period goods remain in the warehouse including dispatch, movement, receipt and disposal; goods must be stored item-wise and owner-wise to facilitate physical verification.

Explanation. An owner or operator of a warehouse or godown must maintain books of account showing the period for which particular goods remain in the warehouse, including particulars of dispatch, movement, receipt and disposal of such goods. The goods must be stored so that they can be identified item-wise and owner-wise, and physical verification or inspection by the proper officer must be facilitated. Om's practice of recording only total bags and mixing owners' bags fails both requirements. The rule does not apply only to goods beyond 30 days or only to cold storage.

Where it goes wrong. Students may focus only on total quantity and miss the owner-wise and item-wise identification requirement for physical verification.

Authority. Section 35(2) of the CGST Act, 2017; Rule 56 of the CGST Rules, 2017

Question 8 · 2 marks · Taxation - GST Ch 10: Accounts Records · medium

Which statement correctly states Ashoka Clearing & Forwarding Agency's obligation as custodian of imported machinery?

1. It must maintain true and correct records of goods handled on behalf of the registered person and produce details when required by the proper officer. (correct answer)
2. It needs records only if it is an agent under Section 2(5); a custodian is outside Rule 56.
3. It may rely on Precision Engineering's records and need not keep its own records.
4. It must maintain records only of its service charges and invoice copies.

Answer: A — It must maintain true and correct records of goods handled on behalf of the registered person and produce details when required by the proper officer.

Explanation. A person having custody of goods as a carrier or clearing and forwarding agent for delivery or dispatch to a recipient on behalf of a registered person must maintain true and correct records of such goods handled and produce the details when required by the proper officer. Ashoka holds imported machinery for Precision Engineering, a registered person, so it must keep its own records. Invoice copies and service-charge records do not satisfy the requirement. The obligation is not confined only to a person falling within the Section 2(5) agent definition.

Where it goes wrong. Students may think a custodian can rely on the principal's records; the custodian must maintain its own records of goods handled.

Authority. Section 35(1) of the CGST Act, 2017; Rule 56 of the CGST Rules, 2017

Question 9 · 2 marks · Taxation - GST Ch 10: Accounts Records · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Raghuvir Traders makes a non-clerical wrong entry in its manual stock register and overwrites it. In its cloud ledger, an entry is edited without keeping a log. Which action complies with the record-keeping manner?

1. Erase both entries and enter corrected figures; no log is needed if correction is within the same tax period.
2. Overwrite the manual entry and keep a diary note; electronic log is optional.
3. Score out the manual entry under attestation and record the correct entry; for electronic records maintain a log of every entry edited or deleted. (correct answer)
4. Leave the manual entry unchanged and issue a credit note; electronic log is needed only for deleted invoices.

Answer: C — Score out the manual entry under attestation and record the correct entry; for electronic records maintain a log of every entry edited or deleted.

Explanation. Entries in registers, accounts and documents cannot be erased, effaced or overwritten. Incorrect entries other than clerical entries must be scored out under attestation, and then the correct entry is recorded. Where records are maintained electronically, a log of every entry edited or deleted must be kept. Raghuvir's overwriting and unlogged cloud edit breach these requirements. Erasing, overwriting or relying only on a diary note is not permitted. The correction process therefore requires both scoring out under attestation and an electronic edit log.

Where it goes wrong. Students may treat correction as a simple overwrite; the rule requires scoring out under attestation and, for electronic records, an edit log.

Authority. Rule 56 of the CGST Rules, 2017

Question 10 · 2 marks · Taxation - GST Ch 10: Accounts Records · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Smt. Anuradha Sen is a commission agent for three principals. Which record is not mandated for an agent under the GST account-keeping rules?

1. Particulars of authorisation received from each principal to receive or supply goods or services on behalf of that principal separately.
2. Monthly production accounts showing quantitative raw material consumed and waste or by-products. (correct answer)
3. Description, value and quantity of goods or services received or supplied on behalf of every principal.
4. Details of accounts furnished to every principal and tax paid on receipts or supply effected on behalf of each principal.

Answer: B — Monthly production accounts showing quantitative raw material consumed and waste or by-products.

Explanation. An agent must maintain accounts showing particulars of authorisation received from each principal separately; description, value and quantity of goods or services received and supplied on behalf of every principal; details of accounts furnished to every principal; and tax paid on receipts or supply effected on behalf of every principal. Monthly production accounts showing raw material consumption and waste are required for a manufacturer, not for an agent as such. Option (b) therefore is the record not mandated for Smt. Anuradha Sen in her capacity as commission agent.

Where it goes wrong. Students may mix manufacturer-specific monthly production accounts with agent records; agent records centre on principal-wise authorisation and supplies.

Authority. Rule 56 of the CGST Rules, 2017

Question 11 · 2 marks · Taxation - GST Ch 10: Accounts Records · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Nandini Real Estates Pvt Ltd has opted for the composition scheme. Which detailed record is it not required to maintain under the GST account-keeping rules?

1. Records of advances received and adjustments made, where applicable.
2. Names and addresses of suppliers for reverse charge supplies, where applicable.
3. Records of goods stored at premises, including goods stored during transit, where applicable.
4. Detailed stock account showing opening balance, receipt, supply, loss, gift, sample and balance, plus tax register with ITC claimed and invoice, credit, debit and delivery challan register. (correct answer)

Answer: D — Detailed stock account showing opening balance, receipt, supply, loss, gift, sample and balance, plus tax register with ITC claimed and invoice, credit, debit and delivery challan register.

Explanation. A supplier who has opted for the composition scheme is not required to maintain the detailed stock account containing opening balance, receipt, supply, goods lost, stolen, destroyed, written off or disposed of by gift or sample, and balance. Such a supplier is also not required to maintain the detailed tax account with tax payable, tax collected and paid, input tax, ITC claimed and the register of invoices, credit notes, debit notes and delivery challans. Other applicable records under Section 35 and Rule 56 continue. Option (d) describes the detailed records not required for a composition supplier.

Where it goes wrong. Students may think composition suppliers keep no records at all; only the detailed stock and tax registers are relaxed, not every obligation.

Authority. Rule 56 of the CGST Rules, 2017

Question 12 · 2 marks · Taxation - GST Ch 10: Accounts Records · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Aryan Steels Ltd is a registered person supplying installation services and uses goods and input services. Which additional accounts must it maintain as a service provider?

1. Quantitative details of goods used in providing services, details of input services utilised and services supplied. (correct answer)
2. Only the value of services supplied and GST collected; quantity details are not required.
3. Monthly production accounts of goods manufactured, even if it does not manufacture any goods.
4. Agent-wise authorisation from principals, because every service provider is deemed to be an agent.

Answer: A — Quantitative details of goods used in providing services, details of input services utilised and services supplied.

Explanation. Every registered person supplying services must additionally maintain accounts showing quantitative details of goods used in the provision of services, details of input services utilised and the services supplied. Aryan uses goods and input services for installation, so these records are required. It need not maintain monthly production accounts unless it manufactures goods. A service provider is not automatically an agent; agent records apply where a person carries on supply or receipt on behalf of another. Value and GST collection records alone do not cover the quantitative and input-service details.

Where it goes wrong. Students may apply manufacturer records to a service provider; the service-provider account has its own three-part content.

Authority. Rule 56 of the CGST Rules, 2017

Question 13 · 2 marks · Taxation - GST Ch 10: Accounts Records · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

A registered person fails to account for goods in accordance with Section 35(1). What is the correct consequence?

1. The proper officer may impose a fixed penalty of Rs. 10,000; tax cannot be determined without seizure of goods.
2. Only interest at 18% applies; Sections 73, 74 and 74A do not apply to unaccounted goods.
3. The proper officer determines tax on the unaccounted goods as if they had been supplied by that person; Sections 73, 74 or 74A apply mutatis mutandis. (correct answer)
4. Tax is determined only if goods are found in transit; records found elsewhere are ignored.

Answer: C — The proper officer determines tax on the unaccounted goods as if they had been supplied by that person; Sections 73, 74 or 74A apply mutatis mutandis.

Explanation. Where a registered person fails to account for goods or services under Section 35(1), the proper officer determines the tax payable on the goods or services not accounted for as if they had been supplied by that person. The provisions of Section 73, 74 or 74A, as applicable, apply mutatis mutandis for determination of such tax. This is not a fixed Rs. 10,000 penalty, not merely an interest charge, and not dependent on seizure or transit detention. The deeming supply mechanism is the core consequence of failure to account.

Where it goes wrong. Students may look for a penalty amount or seizure condition; Section 35(6) uses a deeming supply and determination provisions.

Authority. Section 35(6) of the CGST Act, 2017

Question 14 · 2 marks · Taxation - GST Ch 10: Accounts Records · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Which statement correctly describes the Commissioner's power regarding accounts and records?

1. The Commissioner may exempt all taxpayers from Section 35 by a general notification.
2. The Commissioner may notify a class of taxable persons to maintain additional accounts or documents, or permit a class unable to maintain accounts in the prescribed manner for reasons recorded in writing. (correct answer)
3. The Commissioner may waive record maintenance only for composition taxpayers.
4. The Commissioner may prescribe a single format and make electronic maintenance compulsory for every registered person.

Answer: B — The Commissioner may notify a class of taxable persons to maintain additional accounts or documents, or permit a class unable to maintain accounts in the prescribed manner for reasons recorded in writing.

Explanation. Section 35(3) allows the Commissioner to notify a class of taxable persons to maintain additional accounts or documents for specified purposes. Section 35(4) allows the Commissioner, where a class of taxable persons is not in a position to keep accounts in accordance with Section 35, to permit that class to maintain accounts in the prescribed manner for reasons recorded in writing. There is no general exemption from Section 35, no composition-only waiver and no compulsory single electronic format for all. The power is class-based and conditional.

Where it goes wrong. Students may overstate the Commissioner's power as a general exemption or universal electronic format; the statute uses class-based notification and recorded reasons.

Authority. Section 35(3) and 35(4) of the CGST Act, 2017

Question 15 · 2 marks · Taxation - GST Ch 10: Accounts Records · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Which person is required to maintain specified records even if that person is not registered under GST?

1. Only a registered manufacturer.
2. Only a registered agent.
3. Only a registered service provider.
4. Owner or operator of a warehouse or godown and a transporter, irrespective of registration. (correct answer)

Answer: D — Owner or operator of a warehouse or godown and a transporter, irrespective of registration.

Explanation. Section 35(2) expressly requires every owner or operator of a warehouse or godown or any other place used for storage of goods, and every transporter, irrespective of whether such person is a registered person or not, to maintain records of the consigner, consignee and other relevant details of goods. If not already registered, such a person obtains a unique enrolment number; this does not permit use of GSTIN. The obligation is not confined to registered manufacturers, agents or service providers. Option (d) correctly identifies the persons covered irrespective of registration.

Where it goes wrong. Students may assume only registered persons have record duties; Section 35(2) specifically covers warehouse operators and transporters even when unregistered.

Authority. Section 35(2) of the CGST Act, 2017; Rule 58 of the CGST Rules, 2017