What is Debit Note & Credit Note; & How to Revise GST Invoice?

In this guide by SahiGST, we will understand what debit and credit notes are; and how they are used to revise already issued GST invoices.

Debit Note and Credit Note

Debit Note and Credit Note are documents that are used to make changes in the previously issued invoices. The changes may be required for various reasons like errors in the invoice, excess goods supplied, goods returned due to defects or other reasons.

  • A debit note is a document issued by the buyer and sent to the seller to revise or adjust amount mentioned in a previously issued invoice.
  • The buyer issues it to inform the seller that he has debited seller’s account.
  • He can issue for any reason like goods returned due to defects.
  • On the other hand, a credit note is issued by the seller and sent to the buyer.
  • By issuing credit note, the seller informs the buyer that it has credited buyer’s account.
  • On the other hand, a supplier/seller can also sent debit notes to a buyer if the seller had mistakenly undercharged the buyer or have supplied additional items on the same invoice.
  • similarly, a buyer can also issue credit notes to a supplier if he/she finds that the buyer has undercharged them or sent them more items that billed.
  • A debit note reduces the liability for the buyer whereas a credit note increases the liability for the buyer.
  • Hence, it can be said that a debit or a credit note can be issued under two circumstances:
    • When the amount payable by buyer to seller decreases
    • When the amount payable by buyer to seller increases
  • The Credit Note can also be issued by the buyer or seller as a response or acknowledgement to the Debit Note received from their counterpart.

Debit Note under GST

After understanding the concept of debit note, let’s understand what GST laws say about it.

Debit Note is defined under section 2(38) of the CGST Act.

GST laws say that a Debit Note can be raised under 2 kinds of situations:

  • If the taxable value of the goods or services supplied changes post issuance of invoice
  • If the tax on the goods or services supplied changes post issuance of invoice

There are various situations under GST where a supplier can issue Debit Notes:

  • When the supplier has issued the tax invoice but the actual taxable value of supplies exceeds the amount of tax mentioned in the invoice.
  • When the supplier has issued the tax invoice but the tax payable exceeds the amount of tax payable mentioned in the invoice.
  • When the quantity of supplies made by the supplier and received by the recipient exceed the quantity declared in the invoice.

Note:

  • Debit note will include a supplementary invoice.
  • Issuing a debit note or a supplementary invoice adds to the tax liability of the supplier.

Credit Note under GST

Now let’s understand what GST laws say about Credit Note. Debit Note is defined under section 2(37) of the CGST Act.

GST laws say that a Debit Note can be raised under 3 kinds of situations:

  • If the goods are returned to the supplier from the recipient
  • If the supplier has incorrectly charged higher amount of tax on the supply
  • If the supplies made are defective or of poor quality and are therefore returned to the supplier

There are various situations under GST where a supplier can issue Credit Notes:

  • When the supplier has issued the tax invoice but the actual taxable value of supplies exceeds the amount of tax mentioned in the invoice.
  • When the supplier has issued the tax invoice but the tax payable exceeds the amount of tax payable mentioned in the invoice.
  • When the quantity of supplies made by the supplier and received by the recipient exceed the quantity declared in the invoice.
  • The service supplied is found to be deficient by the recipient.

Note:

  • Debit note will include a supplementary invoice.
  • Issuing a debit note or a supplementary invoice reduces the tax liability of the supplier.

Important Details in the Debit Notes and Credit Notes

The following details must be mentioned in the debit and credit note:

  • Name, address, and GSTIN of the supplier
  • Nature of the document
  • A consecutive serial number containing only alphabets and/or numerals, unique for a financial year
  • Date of issue of the document
  • Name, address and GSTIN/ Unique ID Number, if registered, of the recipient
  • Name and address of the recipient and the address of delivery, along with the name of State and its code, if such recipient is unregistered
  • Serial number and date of the corresponding tax invoice or, bill of supply
  • The taxable value of goods or services, rate of tax and the amount of the tax credited or, debited to the recipient
  • Signature or digital signature of the supplier or his authorised representative

The details regarding issued debit notes and credit notes have to be disclosed in GST returns in the following month for the month in which the note has been issued.

These details need to be disclosed prior to the following dates:

  • September following the end of the year in which such supply was made,
  • The date of filing of the relevant annual return

Time Limit to Maintain the Record of Debit Note and Credit Note

The records of the credit/debit note has to be retained until the expiry of seventy-two months from the due date of furnishing of annual return for the year pertaining to such accounts and records.

When a debit or credit note is created, the tax liability gets adjusted against the original invoice. However, reduction in output tax liability of the supplier is granted only when the amounts of tax and interest on that particular supply has been passed on to any other party.

Understanding Revised Invoice under GST

The entire taxable dealers, under GST, need to apply for provisional registration. Also, they have to carry out the formalities after which they will get the certificate of permanent registration.

The taxable dealers will have to issue a revised invoice against the invoices already issued between the period of

  • Date of implementation of GST and
  • Date of issue of the Registration certificate.

Dealers need to issue revised invoices within one month from the date of issue of the registration certificate.

Supplementary Tax Invoices

Supplementary tax invoice can be in the form of either a debit note or a credit note. It is an invoice issued by a taxable person when any deficiency is found in the already issued tax invoice. Both revised invoices and supplementary invoices aren’t same. The difference between the two is enlisted below:

  • Revised invoice is any invoice that is issued by a taxable person about any invoice already issued by him. Whereas, Supplementary tax invoice has to be issued by a taxable person in case where any deficiency is found in a tax invoice already issued by a taxable person.
  • Revised invoices can be issued only to registered taxable persons. Whereas, supplementary invoices can be issued to both registered and unregistered taxable persons.
  • The period considered for revised invoices is start from the effective date of registration till the date of issuance of certificate of registration. Whereas, supplementary invoices aren’t period-bound, they are specific to respective invoices.

Note: The due date to file GSTR-9 is approaching soon. It is important to be fully prepared and have a reliable tool for filing returns at hand to avoid unnecessary hassles in filing.

How can SahiGST help you?

When it comes to filing any GST return, SahiGST’s world class cloud-based platform can help you. The robust tax filing platform offered by SahiGST is fully capable of handling even the last day rush to give you a smooth and streamlined experience making the filing process a breeze for you.

SahiGST also offers everything you require to comply with the GST laws right from registration, filing and reconciliation of returns to cancellation of registration at one place.

Pls let me know, whether we can issue a Cred Note to customer in Oct 2019 against the Original Invoice issued to said customer in Oct 2019. ie Original Invocie & Credit note are in the same month. if so whether we can update the same in GSTR-1 report
Pls assis