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Credit Note and Debit Note under GST

After Tax Invoice has been issued and there are changes in value or tax amount, such changes are done through Credit Note and Debit Note.

Credit Note

After the invoice has been issued there could be situations like

  • 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 to the kind of the 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 supplied is not to the satisfactory thereby necessitating a partial or total reimbursement on the invoice value.
  • Any other similar reasons.

In order to regularize these kinds of situations, the supplier is allowed to issue the credit note to the recipient. Once the credit note has been issued, the tax liability of the supplier will reduce.

Meaning

Where 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 exceed the taxable value or tax payable in respect of such supply; or
  • where the goods supplied are returned by the recipient; or
  • where goods or services or both supplied are found to be deficient

the registered person can issue a credit note for the decrease in taxable value or tax or both.

Format

There is no prescribed format but credit note issued by a supplier must contain the following particulars, namely: –

  • Name, address and Goods and Services Tax Identification
    Number of the supplier;
  • nature of the document;
  • a consecutive serial number
  • date of issue;
  • Name, address, and Goods and Services Tax Identification Number or Unique Identity Number (if registered) of the recipient;
  • serial number and date of the corresponding tax invoice or bill of supply ;
  • value of taxable supply of goods or services, the 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.

Other Points

  • The person who issues a credit note must declare the details of such credit note in return in the return for the month during which such credit note has been issued 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

Debit Notes

After the invoice has been issued there could be situations like:

  • 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 to the kind of the 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.

In order to regularize these kinds of situations, the supplier is allowed to issue what is called a debit note to the recipient.

Meaning

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 debit note.

Format

  • Name, address and Goods and Services Tax Identification
    Number of the supplier;
  • nature of the document;
  • a consecutive serial number
  • date of issue;
  • Name, address, and Goods and Services Tax Identification Number or Unique Identity Number (if registered) of the recipient;
  • serial number and date of the corresponding tax invoice or bill of supply ;
  • value of taxable supply of goods or services, the rate of tax and the amount of the tax debited to the recipient; and
  • signature or digital signature of the supplier or his authorized representative.

Other Points

  • The issuance of a debit note creates the additional tax liability.
  • The treatment of a debit note would be identical to the treatment of a tax invoice as far as returns and payment are concerned.

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