Taxation - GST Ch 10: Accounts Records - Test 2: answer key

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

Scenario. Nandini Real Estates Pvt Ltd (NREPL), a registered person in Maharashtra, has the following record-retention issues. For FY 2023-24, it filed its annual return on 30th December 2024 (due date 31st December 2024). NREPL is a party to an appeal before the Appellate Authority for FY 2023-24, which was finally disposed of on 15th September 2027. For FY 2024-25, NREPL filed its annual return on 31st December 2025 (due date 31st December 2025) and is under investigation under Chapter XIX, which is still pending as on 1st November 2027. For FY 2025-26, NREPL filed its annual return on 31st December 2026 (due date 31st December 2026) and no dispute or proceeding is pending. For FY 2026-27, NREPL has not yet filed its annual return; the due date is 31st December 2027. NREPL also failed to account for goods worth Rs. 12,00,000 (taxable at 18%) in its books for FY 2024-25; the proper officer initiated action under Section 35(6) read with Section 74, determining tax of Rs. 2,16,000 and penalty equal to tax. NREPL contends that since the investigation is pending, all records must be kept indefinitely. Determine the retention periods and consequences.

For FY 2023-24, what is the last date until which NREPL must retain its books of account and other records?

1. 15th September 2028, being one year after final disposal of the appeal.
2. 31st December 2031, being 72 months from the due date of annual return.
3. 15th September 2027, being the date of final disposal of the appeal.
4. 31st December 2030, being later of 72 months from due date and one year after final disposal. (correct answer)

Answer: D — 31st December 2030, being later of 72 months from due date and one year after final disposal.

Explanation. Due date of annual return for FY 2023-24 is 31st December 2024. 72 months from 31st December 2024 = 31st December 2030. Final disposal of appeal is 15th September 2027; one year after = 15th September 2028. Section 36 requires retention until the later of 72 months from due date or one year after final disposal. Later date is 31st December 2030. Hence answer is (d).

Where it goes wrong. Students may pick 15th September 2028 as one year after appeal disposal, but the statute requires the later of the two periods.

Authority. Section 36 of the CGST Act, 2017

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

For FY 2024-25, which statement correctly states NREPL's retention obligation while the Chapter XIX investigation is pending?

1. Records must be retained until 31st December 2031, being 72 months from the due date of annual return.
2. Records must be retained until one year after the investigation concludes, regardless of the 72-month period.
3. Records must be retained until the later of 31st December 2031 or one year after final disposal of the investigation. (correct answer)
4. Records must be retained indefinitely because an investigation is pending.

Answer: C — Records must be retained until the later of 31st December 2031 or one year after final disposal of the investigation.

Explanation. For FY 2024-25, due date is 31st December 2025; 72 months = 31st December 2031. Since an investigation under Chapter XIX is pending, Section 36 requires retention for one year after final disposal of the investigation or 72 months, whichever is later. The final disposal date is not yet known. Therefore retention must continue until the later of 31st December 2031 or one year after final disposal. It is not indefinite, and not merely the 72-month period.

Where it goes wrong. Students may think pending investigation automatically means indefinite retention; the statute uses a later-of test.

Authority. Section 36 of the CGST Act, 2017

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

For FY 2025-26, where no dispute or proceeding is pending, until what date must NREPL retain its records?

1. 31st December 2032, being 72 months from the due date of annual return. (correct answer)
2. 31st December 2031, being 72 months from the due date of annual return for FY 2024-25.
3. 31st December 2033, being 72 months from the actual date of filing annual return.
4. 31st December 2030, being 72 months from the due date of annual return for FY 2023-24.

Answer: A — 31st December 2032, being 72 months from the due date of annual return.

Explanation. FY 2025-26 annual return due date is 31st December 2026. 72 months from 31st December 2026 = 31st December 2032. No appeal, revision, proceeding or investigation is pending, so the 72-month period applies. Hence records must be retained until 31st December 2032. Option (a) correctly computes from the due date of annual return for the relevant year.

Where it goes wrong. Students may use the actual filing date or the due date of another year; the period runs from the due date for the year to which records pertain.

Authority. Section 36 of the CGST Act, 2017

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

For FY 2026-27, if NREPL does not file its annual return by the due date, the 72-month retention period is computed from:

1. The actual date on which the annual return is filed.
2. The due date of furnishing the annual return for that year. (correct answer)
3. The end of the financial year 2026-27.
4. The date of issue of notice by the proper officer.

Answer: B — The due date of furnishing the annual return for that year.

Explanation. Section 36 prescribes retention until 72 months from the due date of furnishing the annual return for the year pertaining to the accounts and records. The period is linked to the due date, not the actual filing date. Therefore even if the annual return is not filed by the due date, the 72-month period is computed from the prescribed due date. Option (b) correctly states the starting point.

Where it goes wrong. Students may use the actual filing date, but the statute uses the due date of furnishing the annual return.

Authority. Section 36 of the CGST Act, 2017

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

Scenario. Aryan Steels Ltd, a registered manufacturer in Gujarat, failed to account for 5,000 kg of steel coils in its stock and production records for FY 2025-26. The goods were not recorded in any books. During scrutiny, the proper officer found the unaccounted goods, whose market value is Rs. 15,00,000. The applicable GST rate is 18%. The proper officer invoked Section 35(6) read with Section 74, determining tax of Rs. 2,70,000 and penalty equal to tax. Aryan Steels argued that since the goods were neither supplied nor removed from the factory, no tax can be levied; alternatively, only Section 73 should apply with a 10% penalty. The proper officer also demanded interest under Section 50 from the date of availment of input tax credit on the unaccounted goods, which was Rs. 1,20,000. Aryan Steels had availed ITC on the raw material. Determine the correct legal position on tax, penalty, and interest.

Under Section 35(6), the tax on goods not accounted for by Aryan Steels Ltd is determined:

1. Only when the goods are seized by the proper officer.
2. At 50% of the market value of the unaccounted goods.
3. Only if the goods are removed from the factory premises.
4. As if such goods had been supplied by the registered person. (correct answer)

Answer: D — As if such goods had been supplied by the registered person.

Explanation. Section 35(6) provides that 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 such goods or services had been supplied by that person. The provision does not require seizure or removal, and it does not use 50% of market value. The deeming supply mechanism is the basis for determination.

Where it goes wrong. Students may look for seizure or removal conditions; Section 35(6) deems the unaccounted goods to have been supplied.

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

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

For determining tax under Section 35(6) on unaccounted goods, which provisions apply?

1. Section 73 or Section 74 or Section 74A, as the case may be, mutatis mutandis. (correct answer)
2. Only Section 73, irrespective of the nature of the case.
3. Only Section 74, irrespective of the nature of the case.
4. Section 35 itself, without reference to any determination provision.

Answer: A — Section 73 or Section 74 or Section 74A, as the case may be, mutatis mutandis.

Explanation. Section 35(6) states that the provisions of Section 73 or Section 74 or Section 74A, as the case may be, shall apply mutatis mutandis for determination of tax on goods or services not accounted for. The applicable provision depends on the facts, such as whether fraud or wilful misstatement is involved. It is not restricted only to Section 73 or only to Section 74. Option (a) correctly reflects the statutory language.

Where it goes wrong. Students may assume only Section 73 applies; Section 35(6) expressly refers to Section 73, 74 or 74A as applicable.

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

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

If the proper officer invokes Section 74 for the unaccounted goods, the penalty payable by Aryan Steels Ltd is:

1. 10% of the tax determined.
2. 50% of the tax determined.
3. Equal to the tax determined. (correct answer)
4. Rs. 10,000, irrespective of the tax amount.

Answer: C — Equal to the tax determined.

Explanation. Where Section 74 is invoked for determination of tax not paid or short paid due to fraud or wilful misstatement, the penalty is equal to the tax determined. Since Section 35(6) applies Section 74 mutatis mutandis, the penalty for unaccounted goods determined under Section 74 is equal to the tax. A 10% penalty is associated with Section 73, and Rs. 10,000 is a minimum under Section 73, not the measure under Section 74.

Where it goes wrong. Students may apply the 10% penalty of Section 73 even when Section 74 is invoked; Section 74 uses penalty equal to tax.

Authority. Section 74 of the CGST Act, 2017; Section 35(6) of the CGST Act, 2017

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

Interest under Section 50 on input tax credit wrongly availed and utilised on the unaccounted goods is payable from:

1. The date of availment of input tax credit.
2. The due date of furnishing the return for the month.
3. No interest is payable on unaccounted goods.
4. The date of utilisation of the input tax credit. (correct answer)

Answer: D — The date of utilisation of the input tax credit.

Explanation. Section 50(3) provides that interest on input tax credit wrongly availed and utilised is payable from the date of utilisation of such credit. The proper officer's demand from the date of availment is not the statutory starting point. Since Aryan Steels availed and utilised ITC on the unaccounted raw material, interest runs from the date of utilisation. Option (d) correctly states the starting point.

Where it goes wrong. Students may use the date of availment, but Section 50(3) links interest to the date of utilisation.

Authority. Section 50 of the CGST Act, 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.

For FY 2024-25, the due date of furnishing the annual return is 31st December 2025. A registered person has no pending appeal, revision or investigation. Until what date must the records be retained?

1. 31st December 2031, being 72 months from the due date. (correct answer)
2. 31st December 2030, being 72 months from the due date for FY 2023-24.
3. 31st December 2032, being 72 months from the due date for FY 2025-26.
4. 31st December 2029, being 72 months from the end of FY 2023-24.

Answer: A — 31st December 2031, being 72 months from the due date.

Explanation. Section 36 requires retention until 72 months from the due date of furnishing the annual return for the year to which the records pertain. For FY 2024-25, due date is 31st December 2025. 72 months from 31st December 2025 = 31st December 2031. No appeal, revision or investigation is pending, so the 72-month period applies. Option (a) correctly computes the date.

Where it goes wrong. Students may count 72 months from the end of the financial year or from a different year's due date; the relevant due date is for FY 2024-25.

Authority. Section 36 of the CGST Act, 2017

Question 10 · 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.

A registered person files its annual return for FY 2024-25 on 31st March 2026, although the due date was 31st December 2025. From which date is the 72-month retention period computed?

1. 31st December 2025, the due date of furnishing the annual return. (correct answer)
2. 31st March 2026, the actual date of filing the annual return.
3. 31st December 2031, being 72 months from the due date.
4. 31st March 2032, being 72 months from the actual date of filing.

Answer: A — 31st December 2025, the due date of furnishing the annual return.

Explanation. Section 36 links the 72-month retention period to the due date of furnishing the annual return for the year pertaining to the accounts and records. For FY 2024-25, the due date is 31st December 2025. The actual date of filing, 31st March 2026, does not shift the starting point. Therefore the period is computed from 31st December 2025. Options (c) and (d) state the end date, not the starting point asked in the question.

Where it goes wrong. Students may use the actual filing date; the statute uses the due date, not the filing date.

Authority. Section 36 of the CGST Act, 2017

Question 11 · 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.

For FY 2023-24, the due date of annual return is 31st December 2024. A revision proceeding before the Revisional Authority is finally disposed of on 1st June 2027. Until what date must the records be retained?

1. 1st June 2027, the date of final disposal of the revision proceeding.
2. 1st June 2028, being one year after final disposal of the revision proceeding.
3. 31st December 2030, being later of 72 months from due date and one year after final disposal. (correct answer)
4. 31st December 2031, being 72 months from the due date of annual return for FY 2024-25.

Answer: C — 31st December 2030, being later of 72 months from due date and one year after final disposal.

Explanation. 72 months from 31st December 2024 = 31st December 2030. One year after final disposal on 1st June 2027 = 1st June 2028. Section 36 requires retention until the later of these two periods. The later date is 31st December 2030. Therefore records must be retained until 31st December 2030, not merely until 1st June 2028.

Where it goes wrong. Students may select one year after final disposal without comparing it with the 72-month period; the later date governs.

Authority. Section 36 of the CGST Act, 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.

Under Section 35(6), if a registered person fails to account for goods, the proper officer determines tax on:

1. Only the goods found in stock at the time of inspection.
2. Only the goods that have been removed from the premises.
3. Only the goods that have been exported.
4. The goods that are not accounted for, as if they had been supplied. (correct answer)

Answer: D — The goods that are not accounted for, as if they had been supplied.

Explanation. Section 35(6) applies where the registered person fails to account for goods or services in accordance with Section 35(1). The proper officer determines the tax payable on the goods or services that are not accounted for, as if such goods or services had been supplied by that person. The provision is not confined to goods found in stock, removed goods or exported goods. The deeming supply covers the unaccounted goods.

Where it goes wrong. Students may limit the provision to goods physically found or removed; Section 35(6) covers goods not accounted for.

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

Question 13 · 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.

Where a registered person fails to account for services under Section 35(1), the determination of tax under Section 35(6) is made by applying:

1. Section 35 only, without any other determination provision.
2. Section 73 or Section 74 or Section 74A, as the case may be, mutatis mutandis. (correct answer)
3. Section 122, relating to penalties.
4. Section 129, relating to detention of goods.

Answer: B — Section 73 or Section 74 or Section 74A, as the case may be, mutatis mutandis.

Explanation. Section 35(6) expressly states that the provisions of Section 73 or Section 74 or Section 74A, as the case may be, shall apply mutatis mutandis for determination of tax on goods or services not accounted for. This applies to services as well. Section 122 deals with penalties and Section 129 with detention, seizure and release of goods, not determination of tax on unaccounted services. Option (b) correctly identifies the applicable determination provisions.

Where it goes wrong. Students may think Section 35(6) applies only to goods; it covers services also, with Section 73/74/74A applying.

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.

A registered person is under investigation for an offence under Chapter XIX. The normal 72-month retention period from the due date of annual return ends on 31st December 2030. The investigation is finally disposed of on 15th March 2032. Until what date must the records be retained?

1. 31st December 2030, being 72 months from the due date of annual return.
2. 15th March 2032, being the date of final disposal of the investigation.
3. 15th March 2033, being later of 72 months or one year after final disposal. (correct answer)
4. 15th March 2031, being one year before final disposal.

Answer: C — 15th March 2033, being later of 72 months or one year after final disposal.

Explanation. Section 36 requires retention for one year after final disposal of the investigation or 72 months from the due date of annual return, whichever is later. Normal 72-month period ends 31st December 2030. One year after final disposal on 15th March 2032 = 15th March 2033. The later date is 15th March 2033. Therefore records must be retained until 15th March 2033, not merely until 31st December 2030 or 15th March 2032.

Where it goes wrong. Students may choose the final disposal date itself or the 72-month date; the statute adds one year after final disposal and compares.

Authority. Section 36 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.

The 72-month retention period under Section 36 is computed from:

1. The end of the financial year to which the records relate.
2. The due date of furnishing the annual return for the year pertaining to such accounts and records. (correct answer)
3. The actual date of filing the annual return for the relevant year.
4. The date of registration of the registered person.

Answer: B — The due date of furnishing the annual return for the year pertaining to such accounts and records.

Explanation. Section 36 states that every registered person required to keep books of account or other records under Section 35(1) shall retain them until the expiry of 72 months from the due date of furnishing of annual return for the year pertaining to such accounts and records. The starting point is the due date, not the end of the financial year, the actual filing date, or the registration date. Option (b) correctly states the statutory starting point.

Where it goes wrong. Students may use the end of the financial year or the actual filing date; the statute uses the due date of the annual return.

Authority. Section 36 of the CGST Act, 2017