Debit note and credit note are the things which come into the picture when there is any erroneous transaction. Any errors in invoices are revised with the help of these notes. Let’s throw more light on debit note and credit note and understand the process of revising GST invoices.
A document issued by the supplier/receiver of goods and services for adjusting amounts or revision/s in the already issued invoice are treated as debit notes/credit notes.
A document sent by the buyer to the seller, informing the seller that a debit has been made in the seller’s account is called a debit note. Usually, they are sent by the buyer when goods are to be returned or found unsatisfactory. A document, usually issued by a seller to a buyer, informing the buyer that credit has been provided in the buyers account is called a credit note.
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. And, 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.
Hence, it can be said that a debit or a credit note can be issued under TWO circumstances:
The seller issues a Credit Note as a response or acknowledgement to the Debit Note
The buyer as an acknowledgement of the receipt of Debit Note issues a Credit Note
Debit notes are defined u/s 2(38) of the GST Act.
Debit notes can be raised in GST under two situations:
Scenarios when a supplier issues Debit Notes:
Note: Debit note will include a supplementary invoice.
The issuance of a debit note or a supplementary invoice creates additional tax liability for the supplier.
Credit notes are defined u/s 2(37) of the GST Act.
Credit notes can be issued in GST under the following situations:
Scenarios when a supplier issues Credit Notes:
Issue of credit note reduces the tax liability of the supplier.
Note: Credit note will include a supplementary invoice
The debit note/ credit note shall contain the following particulars:
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:
How long should the record of credit/debit note be kept?
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.
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
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: