What is Debit Note, Credit Note and Revised Invoice? How to Revise Already Issued Invoices Under GST?

While making various transactions errors may take place. For reconciliation of these errors debit notes or credit notes are required as applicable. When the goods supplied are returned or any revision of invoice is done debit note or credit note is issued by receiver and supplier of goods or services.

Credit notes

Credit notes is a document that is issued by a registered person under section 34(1) of CGST Act 2017 when supplies are returned or found deficient, or decrease in taxable value or GST charged in invoice. The tax liability of the supplier will reduce, as and when the Credit Note is issued by the registered person.

Issuance of Credit Note

Supplier who has supplied goods or services or both, shall issue a Credit Note to the recipient in following cases:

  • When the value declared in the invoice is more than the value of the actual goods or service
  • The tax amount or GST is charged at a higher rate than the applicable rate for the kind of goods or services.
  • The recipient received less quantity than mentioned in the tax invoice.
  • The recipient returned the goods supplied to him or her.
  • Services are found to be deficient by the recipient.

Credit Note under GST

  • Credit note cannot be issued with GST on account of renegotiation of prices after supply if prices are reduced. In this case credit note can be issued without showing GST.
  • This credit note will not be required to be filed with monthly return.
  • Credit note for bad debts cannot be issued with GST.
  • Credit note cannot be issued with GST in respect of B2C supply as the tax invoice does not have the GSTIN of the buyer.

Credit note includes the supplementary invoice.

If credit note is issued it should be furnished in GSTR 1 for the month in which it is to be issued. The details will be auto populated in GSTR 2A of the recipient after which it is to be accepted by him or her and submit it in his or her GSTR 2.

A supplier will only be allowed to reduce the tax liability if the recipient accepts the credit note details in his GSTR 2.


Issue of credit note in case of time expired goods

If the time expired goods are returned to the manufacturer or supplier, he or she can issue the credit note. The manufacturer can issue credit note with GST before 30th september of the following year under section (34)2 of CGST Act. after uploading this credit note the tax liability of the recipient will be adjusted.

If the goods are returned after 30th september of the following year, the manufacturer or supplier can issue the credit note without GST.

If such returned goods are destroyed by the manufacturer, he or she has to reverse the ITC attributable to the manufacture of such goods under section 17 (5)(h) of IGST Act.

If credit note is not accepted by the recipient and if he or she does not reverse the equivalent input tax credit, the supplier will not be allowed to the reduction of tax liability.

Debit notes

Debit note is a document issued by a supplier under Section 34(3)of CGST Act, 2017, when there is a need of increase in taxable value or increase in GST charged in invoice.

The tax liability of the supplier will increase, as and when the Debit Note is issued by the supplier.

It is to be noted that a debit note can be issued by a recipient also when the goods are returned or damaged in transit. But under GST, only supplier can issue the debit note.

Issuance of Debit Note

The person who supplies the goods shall issue a debit note in the following cases:

  • When the value of invoice is less than the actual value of goods or services.
  • When the taxable amount or GST charged is at a lower rate than what is applicable for such goods or services.

Debit Note under GST

Debit note is to be issued by supplier in following cases:

  • When the tax invoice that is issued and the taxable value in that invoice is less than the actual taxable amount.
  • When the tax invoice that is issued and the tax charged in that invoice is less than the actual tax to be paid.
Debit note includes the supplementary invoice.

If debit note is issued it should be furnished in GSTR 1 for the month in which it is to be issued. The details will be auto populated in GSTR 2A of the recipient after which it is to be accepted by him or her and submit it in his or her GSTR 2.

For a corresponding response of the debit note on the tax liability the recipient must accept it in his or her Form GSTR 2.


Recipient can issue debit note without GST

As per the act the issue of debit or credit note can only be done by the supplier. Both the notes can be issued with GST for increasing or decreasing the liability of GST of the supplier.

If in any case the recipient does not accept the value that is shown in the invoice of the supplier. The supplier do not issue credit note, the recipient has only option to issue debit note without GST otherwise his purchases will be inflated.

issue debit note
issue debit note
issue debit note

Format of Debit Note and Credit Note

The format for debit note or credit note is not prescribed. However, it must include the following particulars that are prescribed:

  • The word “Debit Note” or “Credit Note” should be clearly mentioned
  • Details of Name, Address and GSTIN of the Supplier should be included
  • Nature of the document
  • A consecutive serial number not exceeding 16 characters, containing letters, numbers or special characters for a Financial Year
  • Date of issue of the document
  • Name, address and GSTIN or UIN of the registered recipient
  • Name and address along with the address of delivery of the unregistered recipient
  • Serial number and date of the corresponding Tax Invoice
  • Value of Taxable supply of goods or services, rate of tax and the amount of tax credited or debited to the recipient
  • Signature or Digital signature of the supplier or his or her authorized representative

Time to issue Debit Note and Credit Note

Debit Note or Credit Note can be issued anytime that is there is no prescribed time limit for issuing them. Both the Debit Notes and Credit Notes that are issued should be declared in the returns of GST filed.

Credit Note and debit note is to be furnished in return for the month for which such note has been issued before :

  • September following the end of the financial year in which such supply was made or
  • the date of furnishing of Annual return

Whichever is earlier, and the liability of the tax should be adjusted in the manner prescribed.


Amendments made in CGST act 2018

The major impacts of amendments are as follows:

  • Credit notes and debit notes cannot be issued by recipients with GST. It is a unidirectional flow from supplier.
  • Multiple credit or debit notes for one tax invoice is permissible.
  • One credit note or debit note for multiple tax invoices are also allowed.
  • The credit note or debit mote should be financial year wise that is it cannot be used for multiple financial years.

Supplementary invoices and their uses

Any invoice that is issued by a taxable person when any deficiency is found in a tax invoice already issued by him or her is called as supplementary invoice . This document can be in the form of a debit note or a credit note.


Revised Invoice under GST

Under GST, all the taxable dealers have to apply for provisional registration and carry all the formalities to get permanent registration certificate.

For all the invoices that are issued between the date of issue of registration certificate and the date of implementation of GST, the dealer needs to issue a revised invoice.

This revised invoice have to be issued within one month from the date of issue of the certificate of registration.


Comparison between Revised invoice and Supplementary invoice

The difference between a revised invoice and a supplementary invoice can be enumerated as follows:

  • Concept- Revised invoice is issued for invoices already issued by a taxable person.
    While supplementary tax invoice is issued for any deficiency found in tax invoice already issued by taxable person.
  • Time of issue- Revised invoice should be issued between the effective date of registration till the date of issuance of certificates of registration.
    While for supplementary invoice it depends on invoice and not on the period.
  • Issued to- Revised invoice is issued to only registered person.
    While supplementary invoice can be issued to both registered or unregistered persons.

Conclusion

When there is revision in any of the taxable amount or tax charged, suppliers issues debit notes or credit notes mentioning all the details regarding changes. Under GST act this should be mentioned in the return of the supplier and accepted by the recipient for making the amendments in the tax liability of the supplier.

Frequently Asked Questions (FAQs)

Q- Who issues Debit note and credit note?

Only the registered supplier can issue debit or credit note under GST


Q- Is there any specified time to issue credit or debit note?

There is no prescribed time limit for issuance of debit note or credit note. It can be issued as and when required.


Q- What is the relation of debit note or credit note with GST?

As and when the credit note or debit note is issued it should be filed in the returns of the GST for adjustment of the tax liability.


Q- Do the registered person who issues debit note or credit note needs to declare it in his or her return?

Yes, the supplier has to declare the details of credit or debit note in his or her return for the month for which they have been issued.

CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.