Credit Note and Debit Note under GST

Meaning of Credit Note

Debit and credit note in GST. For Registered Suppliers at the time of supply of goods and services it is mandatory to issue a tax invoice. In this article we’ll explain CDNR full form in GST, CDNR meaning in GST, What is CDNR in GST etc.

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. Let’s have a look at credit and debit note in GST

• 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 that 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 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 value of e invoice for debit note and credit note.
• Any other similar reasons.

Above, a reduction in the original invoice amount can be made by issuing credit note and debit note in GST

What is a Credit Note in GST?

Where a tax invoice has been issued for the 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 the satisfaction of the 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 in GST.

Situations Under Which Original Invoice Amount Needs to Increased

• The supplier has wrongly declared a value that 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 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 for which suppliers have to issue credit note under GST.

Above, an Increase in the 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 in GST.

Format of Credit Note and Debit Note

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

See the debit note and credit note in gst with 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.