Treatment of Debit & Credit Note in GST

Treatment of Debit and Credit Note in GST

Treatment of Debit and Credit Note in GST

What is a Credit Note?

Credit Note is a document issued by the supplier of goods and services i.e. registered person to reduce the taxable value and the tax amount of a Tax invoice which was raised with a higher value.


When to issue a Credit Note?

The supplier is allowed to issue a credit note to the recipient in the below circumstances:
  • The supplier has erroneously declared a value which is more than the actual value of the goods or services provided.
  • The supplier has erroneously 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 return on the invoice value etc.


What is Debit Note?

Debit Note is a document/tax invoice issued by the supplier of goods and services i.e. registered person to increase the taxable value and the tax amount which was raised with a lower value. 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 similar to the treatment of a tax invoice.

When to issue a Debit Note?

The supplier is allowed to issue a debit note to the recipient in the below circumstances:
  • The supplier has erroneously declared a value which is less than the actual value of the goods or services or both provided.
  • The supplier has erroneously 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.


What is the Format for Debit and Credit Note in GST:

There is no prescribed format but debit and credit note in GST must contain the following particulars, namely:
(a) name, address, and GST Number of the supplier;
(b) nature of the document;
(c) Serial number as prescribed under GST rules
(d) date of issue;
(e) name, address, and GST Number or Unique Identity Number, if registered, of the recipient; 
(f) 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;
(g) serial number and date of the corresponding tax invoice or, as the case may be, bill of supply;
(h) value of taxable supply of goods or services, rate of tax and the amount of the tax debited to the recipient; and
(i) the signature or digital signature of the supplier or his authorized representative.


Timeline to issue Debit and Credit Note in GST

There is no such Timeline to issue a Debit note in GST. However, the timeline to issue a credit note in GST is before September month due date falling after the end of the relevant financial year or date of filing annual return whichever is earlier.



Other Important Points with respect to Debit and Credit Note in GST

Below are some important points which are required to be kept in mind:
  • Debit and Credit Note must be issued by the supplier only.
  • The recipient can raise a Debit note and credit note only for the purpose of accounting but under GST, the recipient will have to accept debit note and credit note in GSTR which is issued by the supplier.
  • NON-GST Debit and Credit note which is also known as Financial Debit and Credit Note. It does not have any GST impact and need not be reported in GST returns.

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