"GST: Debit Note, Credit Note, and Revised Invoice"

Master the nuances of debit notes, credit notes, and revised invoices under the GST regime to navigate transactional errors effectively and ensure compliance with tax regulations.

Credit Notes:

Credit notes are documents issued by registered persons under section 34(1) of the CGST Act 2017 in various situations, such as returns of supplies, deficiencies found, or decreases in taxable value or GST charged in an invoice. When a credit note is issued, the tax liability of the supplier reduces accordingly.

Issuance of Credit Note:

Suppliers issue credit notes to recipients in the following cases:
1. When the value declared in the invoice exceeds the actual value of goods or services.
2. If the tax amount or GST is charged at a higher rate than applicable for the goods or services.
3. When the recipient receives a quantity less than mentioned in the tax invoice.
4. In case the recipient returns the goods supplied.
5. If services are found to be deficient by the recipient.

Credit Note under GST:

Credit notes can be issued without GST on account of renegotiation of prices after supply if prices are reduced.
These credit notes are not required to be filed with monthly returns.
Credit notes for bad debts cannot be issued with GST.
For B2C supplies where the tax invoice does not have the GSTIN of the buyer, credit notes cannot be issued with GST.

Processing and Reporting:

Credit notes should be furnished in GSTR 1 for the month of issuance.
Details of credit notes are auto-populated in GSTR 2A of the recipient.
The recipient needs to accept the credit note details in their GSTR 2 for the supplier to reduce their tax liability.

Issue of Credit Note for Time-Expired Goods:

Manufacturers or suppliers can issue credit notes for time-expired goods before 30th September of the following year under section 34(2) of the CGST Act.
If goods are returned after 30th September, credit notes can be issued without GST.
If returned goods are destroyed by the manufacturer, they have to reverse the ITC attributable to the manufacture of such goods under section 17(5)(h) of the IGST Act.

Reduction in Tax Liability Related to Unjust Enrichment:

If the credit note is not accepted by the recipient and they do not reverse the equivalent input tax credit, the supplier will not be allowed to reduce tax liability.

Debit Notes:

Debit notes are documents issued by suppliers under Section 34(3) of the CGST Act, 2017, in cases where there is an increase in taxable value or GST charged in an invoice. When a debit note is issued, the tax liability of the supplier increases.

Issuance of Debit Note:

Debit notes are issued by the supplier in cases where the value of the invoice is less than the actual value of goods or services, or when the taxable amount or GST charged is lower than applicable.

Processing and Reporting:

Debit notes should be furnished in GSTR 1 for the month of issuance.
Details of debit notes are auto-populated in GSTR 2A of the recipient.
The recipient needs to accept the debit note details in their GSTR 2 for the supplier to adjust their tax liability.

Recipient’s Option to Issue Debit Note without GST:

Recipients can issue debit notes without GST if the supplier does not issue a credit note and the recipient’s purchases will be inflated otherwise.

Difference Between Debit Note and Credit Note:

Debit notes are issued by buyers to sellers to request a credit adjustment for increased payable amounts, while credit notes are issued by sellers to buyers to acknowledge decreased payable amounts.
Debit notes are issued for reasons like return of goods, overcharging, or additional charges, while credit notes are issued for reasons like goods returned, overpayment, or discounts.

Format of Debit Note and Credit Note:

The format includes specific details such as the word “Debit Note” or “Credit Note,” details of the supplier and recipient, serial number and date of the corresponding tax invoice, and value of taxable supply, among others.

Time to Issue Debit Note and Credit Note:

There is no prescribed time limit for issuing debit notes or credit notes.
Both must be furnished in the return for the month of issuance or before September following the end of the financial year in which the supply was made, whichever is earlier.

Amendments Made in CGST Act 2018:

Credit notes and debit notes cannot be issued by recipients with GST; it is a unidirectional flow from the supplier.
Multiple credit or debit notes for one tax invoice are permissible, as are one credit note or debit note for multiple tax invoices.
Credit notes or debit notes should be financial year-wise and cannot be used for multiple financial years.

Supplementary Invoices and Their Uses:

Supplementary invoices are issued by taxable persons when deficiencies are found in tax invoices already issued, in the form of debit notes or credit notes.

Revised Invoice under GST:

Revised invoices are issued for invoices already issued by a taxable person between the date of issue of registration certificate and the date of implementation of GST.
They must be issued within one month from the date of issue of the registration certificate.

Comparison between Revised Invoice and Supplementary Invoice:

Revised invoices are issued for invoices already issued, while supplementary tax invoices are issued for deficiencies found in tax invoices.
Revised invoices should be issued between the effective date of registration till the date of issuance of certificates of registration, while supplementary invoices depend on the invoice and not on the period.
Revised invoices are issued only to registered persons, while supplementary invoices can be issued to both registered and unregistered persons.