Free trial to help you get started

  • 30 Days
  • Single GSTIN
  • Single User
  • Single Month
  • Multiple GSTIN and PAN
  • Multi Month
  • Multi User
  • ERP Integrations
Contact us

Credit Note & Debit Note under GST

Meaning of Credit Note

For Registered Suppliers at the time of supply of Goods and services it is mandatory to issue a tax invoice.

However, there can be certain situation under Trade and business where original invoice which is issued at the time of sale needs to be amended.

There can be 2 situations

  • Either original invoice amount needs to reduced
  • Or Original Invoice amount needs to increased

Situations under which Original Invoice amount needs to reduced:

  • The supplier has wrongly declared a value which is more than the actual value of the goods or services provided.
  • The supplier has wrongly declared a higher tax rate than what is applicable for the kind of the goods or services or both supplied.
  • The quantity received by the recipient is less than what has been declared in the tax invoice.
  • The quality of the goods or services or both supplied is not to the satisfaction of the recipient thereby necessitating a partial or total reimbursement on the invoice value.
  • Any other similar reasons.

Above, reduction in original invoice amount can be made by issuing Credit Note.

What is a Credit Note?

Where a tax invoice has been issued for supply of any goods or services and the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable in respect of such supply, or where the goods supplied are returned by the recipient i.e. Sales Return, or where goods or services or both supplied are found to be deficient or not as per satisfaction of buyer, the registered person, who has supplied such goods or services or both, may issue to the recipient/Buyer  a note that is called as a credit note.

Situations under which Original Invoice amount needs to Increased:

  • The supplier has wrongly declared a value which is less than the actual value of the goods or services or both provided.
  • The supplier has wrongly declared a lower tax rate than what is applicable for the kind of the goods or services or both supplied.
  • The quantity received by the recipient is more than what has been declared in the tax invoice.
  • Any other similar reasons.

Above, Increase in original invoice amount can be made by issuing Debit Note.

What is a Debit Note?

When a tax invoice has been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to be less than the taxable value or tax payable in respect of such supply, the registered person, who has supplied such goods or services or both, shall issue to the recipient a note which is called Debit Note.

Format of Credit Note & Debit Note

There is no specific format of Credit Note and Debit Note but there is some mandatory field which required on credit note & Debit Note which is as follows:

  • Name, Address and GSTIN of supplier
  • Nature of document
  • Invoice number not exceeding 16 digits
  • Date of Issue
  • Name, Address, GSTIN of Buyer if registered
  • name and address of the recipient and the address of delivery, along with the name of State and its code, if such recipient is un-registered;
  • Serial number of original Invoice
  • value of taxable supply of goods or services, rate of tax and the amount of the tax credited to the recipient; and
  • Signature or digital signature of the supplier or his authorized representative.

Time Limit of issuing Debit/Credit Note

Supplier who is issuing credit note/Debit Note will declare the details of credit note/Debit Note issued under GSTR-1 of that month or later but not later than September following the end of the financial year in which such supply was made, or the date of furnishing of the relevant annual return, whichever is earlier.

But if credit note/debit note is issued after September or filings of annual return then it will be invalid.

By Issuing Credit note Supplier GST liability will reduce

For Example:

If Sales was Rs. 10,000/- and GST charged @ 18% so GST liability for that month was Rs. 1800/- and later Credit note of Rs. 5,000/- was issued so GST needs to pay only on Rs. 5,000 (10,000-5,000) i.e. Rs. 900/-

But, GST liability will reduce from Rs. 1800/- to Rs. 900/- if –

Amount is matched with corresponding Reduction in Input Tax Credit made by Buyer in his GSTR-2.

If amount is not matched with corresponding Buyer’s GSTR-2 then it shall be communicated to both Buyer and supplier.

By Issuing Debit note Supplier GST liability will Increase

The issuance of a debit note or a supplementary invoice creates additional tax liability. The treatment of a debit note or a supplementary invoice would be identical to the treatment of a tax invoice as far as returns and payment are concerned.

Records

The Records of credit note and Debit Note shall be retained at least upto 72 months from the due date of furnishing of annual return for the year pertaining to such accounts and records.

Where such accounts and documents are maintained manually, it should be kept at every related place of business mentioned in the certificate of registration and shall be accessible at every related place of business where such accounts and documents are maintained digitally.

Conclusion

Credit Note

The credit note is therefore a convenient and legal method by which the value of the goods or services in the original tax invoice can be amended or revised. The issuance of the credit note will easily allow the supplier to decrease his tax liability in his returns without requiring him to undertake any tedious process of refunds.

Debit Note

The debit note or a supplementary invoice is therefore a convenient and legal method by which the value of the goods or services in the original tax invoice can be enhanced. The issuance of the debit note will easily allow the supplier to pay his enhanced tax liability in his returns without requiring him to undertake any other tedious process.

Comments 9

Janet

March 7, 2018

When apply GST to Debit note or Credit note must I follow back the original invoice GST rate?
COs the DN /CN could be required many year later as the GST rate has been change.

Gomathi

March 10, 2018

sales return tax adjust our return it accept the return input tax or output

jayesh

June 22, 2018

Can I issue March 2017 bill`s Debit note in Next F.y.? will it be valid?

lakhotia

July 1, 2018

supplier issued credit note for qty discount for the whole year, but preferred not to reduce its tax liability, hence no reversal of ITC by buyer, is it valid

Bibhu Bhusan Maharaj

July 10, 2018

Sir,
If my Service recipient (Debtor) issued debit note against HSD supplied to my Equipment which is deployed as hire basis at site. The Debtor realized amount against my equipment hire charges after deducting HSD supplied amount and issued the debit note for fuel deduction against my bill, then in which table in GSTR shown the debit note amount which tax amount is Nil (HSD).

Srivalsan Menon

July 19, 2018

Since filing of GSTR 2 is not made compulsory, how can a supplier issue a credit note, file it in his GSTR 1 for the same month or later months within the permissible span, and expect the recipient to accept it in his GSTR 2 to exercise his right to claim and reserve the excess GST paid ? THE RECIPIENT IS NOT REQUIRED TO FILE GSTR 2 AT ALL FOR NOW….! And where does the recipient’s liability end if the supplier has issued the credit note but the same is not reflected in the autopopulated GSTR 2A for the period ? Should the recipient suo motu declare the receipt of the credit note and declare it in his GSTR 1 ? If so, only the option to declare in the tile for unregistered suppliers is active and it shows IGST only… Please advise

Abhay Jain

August 1, 2018

Not issue in Gst invoice only soda settle debit note issue so please enter this debit note

KARUNESH

August 3, 2018

A VENDOR ISSUE US A CREDIT NOTE IN MARCH ,2018 AND WE WERE ISSUED DEBIT NOTE AGST. THIS TO FILE THE G.S.T. RETURNS AFTER SOME TIME VENDOR CANCELLED THE CREDIT NOTE IN THE SAME MONTH.
RESULTING OUR DEBIT NOTE STILL UN RECONCILED UNDER G.S.T. PORTAL . WHAT SHOULD WE DO ?
RGDS

Rahul

September 26, 2018

If a vendor has paid the GST, then is possible the vendor can still raise the credit note.
Also will there be any deduction charges?