Keep an item-level stock trail from opening balance to closing balance, backed by invoices and movement documents. A GST-registered online seller should be able to show what was received, where it was stored, what was supplied, and how losses, returns and disposals changed the balance. Maintain the complete address of every storage location (including stock in transit), retain the documents supporting each entry, and make the records exportable and readable on demand. If a third party operates the godown, that operator has separate receipt, movement, dispatch, disposal and owner-wise identification duties.
This is the general Indian CGST framework. The exact treatment can change with your registration category, state, goods, transport route and fulfilment arrangement. A person paying tax under section 10 is excluded from the specific Rule 56 stock-account requirement discussed below, so composition-tax questions need separate advice.
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1. What the seller’s stock account must show
For a registered person other than a section 10 taxpayer, Rule 56 of the CGST Rules requires records of goods received and supplied. In practical terms, your ledger should explain every quantity change:
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- Dated inward receipts, with the supplier and supporting purchase document.
- Dated outward supplies, linked to the relevant invoice or bill of supply.
- Goods lost, stolen, destroyed, written off, given as gifts or issued as free samples.
- Raw materials, finished goods, scrap and wastage where those categories apply.
- Closing balance at each location and in total.
The rules prescribe the information, not a particular spreadsheet, software package or paper form. A SKU-level ledger is usually the clearest way to reconcile online orders, returns and warehouse counts, but the format must fit your goods and explain your codes.
Use a documented adjustment trail
Never overwrite a quantity to make the balance agree with a count. Post an adjustment dated to the event, describe the reason, identify the approver, and attach evidence such as a damage report, theft report, disposal record, return receipt or cycle-count sheet. This lets an inspector distinguish a genuine loss from an unexplained stock shortage.
2. Keep the addresses and status of every storage place
Record the complete address of every premises where goods are stored, including goods in transit, together with the stock particulars for that place. Your location register should show the address, the goods held there, the owner of those goods and the dates of movements in and out.
The CGST Act requires books at the principal place of business and accounts at each registered additional place of business. Whether a particular warehouse must be added as an additional place of business depends on the facts and the applicable registration provisions; do not assume that a fulfilment centre is automatically covered or automatically exempt. Keep your registration particulars, lease or service agreement, warehouse correspondence and stock-location list consistent.
Why an undeclared location is risky
Rule 56 provides that when taxable goods are found stored at a place other than one declared, and valid documents are absent, the proper officer determines the tax payable as though those goods had been supplied. A current address register and documents showing how stock reached the site are therefore important even when the goods have not yet been sold.
3. The source-document file for inward and outward stock
Purchases and other inward receipts
For each receipt, preserve the supplier’s details and complete address, the purchase tax invoice or bill of supply as applicable, proof of receipt and the transport or delivery document. Link the document number to the ledger entry and location. Where goods move between your own sites or to a job worker without a sale, retain the document that supports that movement rather than treating it as a purchase.
Sales and dispatches
Keep the customer or recipient details required for the transaction, your tax invoice or bill of supply, the dispatch record and evidence of delivery where available. Marketplace order and settlement files are valuable reconciliation evidence for online sales, returns, cancellations and fees, but they do not replace the GST invoice, stock ledger or transport document.
Credit notes, debit notes and returns
Retain every credit and debit note and link it to the original supply. A return should produce both a commercial record and a stock movement: identify the returned item, quantity, condition, receipt date and whether it was returned to saleable stock, quarantined, repaired, scrapped or disposed of. Rule 56 expressly includes registers of credit and debit notes.
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4. Delivery challans and e-way bills for warehouse movements
When a delivery challan is appropriate
A delivery challan supports prescribed movements where an invoice is not the correct document. CBIC’s sectoral FAQ explains that goods sent on a returnable basis without transfer of title may move on a delivery challan where no sale is involved; other prescribed cases can also use challans. State the consignor, consignee, description and quantity, reason for movement and the relevant dates, then link the challan to the stock entry.
Do not issue a sale invoice merely because goods moved between your warehouse, a fulfilment centre, a repair location or an exhibition site. Decide first whether the movement is a supply, a returnable transfer or another prescribed movement.
When to retain an e-way bill
Keep the applicable e-way bill with the underlying invoice, bill of supply or delivery challan. CBIC’s e-way provisions contain a ₹50,000 movement-value context, but exceptions, movement particulars and state notifications affect whether an e-way bill is required. Treat ₹50,000 as a fact-dependent rule reference, not an unconditional trigger. Check the current CBIC e-way bill rules for the route and transaction before dispatch.
The same principle applies to stock transfers: an e-way bill, when required, documents transport; it does not by itself decide whether GST is payable or whether a warehouse is an additional place of business.
5. Duties of a third-party warehouse and transporter
Your contract with a warehouse operator should allocate data feeds and count procedures, but it cannot remove your own GST record responsibility. The operator has an independent traceability obligation under Rule 58. It must record goods held over time, including receipt, movement, dispatch and disposal, and keep them identifiable item by item and owner by owner.
“The owner or the operator of the godown shall store the goods in such manner that they can be identified item wise and owner wise and shall facilitate any physical verification or inspection by the proper officer on demand.”
Section 35(2) of the CGST Act also states:
“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 consignor, consignee and other relevant details of the goods in such manner as may be prescribed.”
The transporter’s records cover goods transported, delivered or held in transit, along with applicable branch or enrolment information. Obtain periodic warehouse statements that identify your stock separately from other owners and retain the receiving and dispatch evidence in your own records.
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For each sales channel, retain order or shipment exports, settlement statements, cancellation and return reports, tax collected or charged where shown, and fee statements that explain differences between gross order value and bank receipts. Use these files to find missing invoices, duplicate dispatches, unprocessed returns and warehouse-to-platform discrepancies.
GST reporting depends on the statutory category of the supply and the role of the electronic-commerce operator. The GST Portal’s GSTR-1 user guide describes reporting for specified supplies through operators; it does not mean that every online sale belongs in one identical table. Reconcile the channel export with your invoices and the return you actually file.
7. Electronic records, backup and audit-trail readiness
Electronic accounts are permitted, but they must remain available, readable and authenticated when demanded. Build controls that can:
- Restore data within a reasonable period after accidental or natural loss.
- Export the ledger, document register and location history in a readable format.
- Preserve links between each stock entry and its source invoice, challan, note or e-way bill.
- Show an edit history or other explanation for changes, including the user, date and reason where your system supports it.
- Explain record layouts, field meanings, product codes and data dictionaries to an inspecting officer.
- Produce record counts and sample source documents instead of relying on screenshots of a dashboard.
The current CBIC accounts-and-records rules page describes the information that may be required, including audit-trail or inter-linkage information, source documents, financial accounts, record layouts, data dictionaries or code explanations, record counts and sample documents. Test a restore and an export periodically; a backup that cannot be opened is not a usable control.
8. How long to retain the records
Section 36 of the CGST Act sets the general preservation period at 72 months (six years) from the due date of the annual return for the year to which the accounts and records relate. Calculate the period from that annual-return due date, not from the purchase or dispatch date.
The Act provides longer retention in relevant circumstances when an appeal, revision, proceeding or investigation is pending. Place a legal hold on affected records, including warehouse files and electronic exports, until the matter and the applicable extended period are resolved. The CBIC-hosted CGST Act compilation is dated 31 August 2021; verify subsequent amendments and current rules before relying on the exact period in a high-stakes dispute.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.9. A practical control system for an online seller
- Create the master item list. Assign a stable SKU or commodity code, unit of measure, tax classification and owner. Document how bundles, kits, serial numbers and batches are represented.
- Set up locations. List the principal place, registered additional places where applicable, third-party godowns, quarantine areas and stock in transit. Record the complete address and responsible operator.
- Capture every receipt. Enter the supplier document number, date, item, quantity, location and transport reference before goods become available for sale.
- Capture every dispatch. Link the customer order to the GST invoice or bill of supply, pick list, carrier handover and e-way bill or challan when applicable.
- Process returns separately. Record receipt, inspection outcome and the final disposition; issue or retain the related credit or debit note.
- Post controlled adjustments. Use a reason code and supporting evidence for damage, theft, destruction, write-off, gifts, samples, wastage and count differences.
- Reconcile on a fixed schedule. Compare opening balance plus receipts, less dispatches, plus or minus documented adjustments, with the closing count at each location. Investigate timing differences rather than carrying unexplained variances.
- Archive and test. Back up the data, restore a sample, export a readable period and confirm that a source document can be found from a ledger line.
10. Choosing paper, a spreadsheet or software
No cited rule mandates a particular product. Choose the format that can preserve the required information and produce it promptly.
| Format | Use it only if it can | Typical control to add |
|---|---|---|
| Paper register | Record item-level opening balance, receipts, supplies, adjustments and closing balance for every location | Numbered document folders, locked storage, periodic photocopy or scan and a separate location index |
| Spreadsheet | Keep protected formulas, dated revisions, source-document links and separate location or owner fields | Version control, access restrictions, automated backup and a tested export to readable PDF or CSV |
| Inventory or accounting software | Maintain an audit trail, item and owner identification, document attachments, location history and restoreable backups | Written code definitions, user permissions, retention settings and a procedure for exporting records after cancellation or migration |
A channel dashboard or warehouse portal can feed your system, but it should not be the only copy of the statutory records. Export data in a stable format and retain the underlying documents independently of a platform account.
11. Common failures and how to correct them
One combined balance for all warehouses
Correct it by creating location-level ledgers and recording inter-location movements. A total balance can conceal an undeclared storage site or an operator’s shortage.
Invoices stored separately from stock entries
Use a unique document key in the ledger and a matching filename or attachment. Run a report for entries with no source document before filing the period.
Returns deducted from sales but not added back to stock
Record the physical receipt and inspection disposition first, then post the tax and commercial adjustment. Unsaleable goods must remain traceable through disposal or write-off.
Warehouse reports identify pallets but not owners
Require item-wise and owner-wise identification in the warehouse statement and conduct sample counts against your own ledger. Rule 58 requires that identification and facilitates inspection on demand.
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Schedule authenticated exports and backups, preserve the document links and test restoration. Screenshots do not demonstrate a complete, readable record set or an audit trail.
Quick Recap
12. Official references
- CBIC Accounts and Records Rules — stock accounts, warehouse records and electronic-record requirements.
- CBIC Tax Invoice, Credit and Debit Notes Rules — invoice and note provisions.
- CBIC Sectoral FAQs — practical delivery-challan explanations.
- CBIC E-way Bill Rules — current movement provisions and exceptions.
- GST Portal GSTR-1 User Guide — return reporting screens and categories.
- CGST Act compilation updated 31 August 2021 — Act text including the preservation provision; check later amendments.
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