In: Accounting
Why is it necessary to maintain adequate records to support the taxation accounting system and to code purchases and/or payments as per GST classifications?
Tax is calculated from the books that are prepared throughout the year, if the books are not prepared in accordance with the law then it is possible that the tax which is submitted to the authorities was also wrong.
Now how the authorities shall determines that the books are fair or not? They uses the supporting documents to judge whether the transaction that was in the book is recorded as per the supporting document or not. So this becomes very essential that the supporting documents are maintained as maintained for the time period that is specified in the law.
Under GST there are different tax rates and even for the goods that are same class. So this is important that purchases are also recorded as per the law. There can be various supporting documents that need to be maintained and they can be as below.
Maintenance of these above records are essential to prove that the input tax credit taken and the output tax is in line with the supporting documents.
For the payments that are made via bank or in cash this is essential that the bank statement and cash register is maintained and stored for the period of time specified by the law.
This is important to note that if any assess fails to store the documents for the period of time than there are many penalties specified in the law.
Suppose if any of the transaction that is recorded in the books to be not assessed to GST and at the time of audit from the authorities supporting document of that transaction is not there then the auditor many impose fines and may ask the full amount of transaction to be now assessed to tax.