What are Debit Note, Credit Note and How to Revise GST Invoice?

Last Update Date : April 30, 2019
Estimated Read Time: 5 min

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.

Debit Note and Credit Note

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 Note under GST

Debit notes are defined u/s 2(38) of the GST Act.

Debit notes can be raised in GST under two situations:

  • When there is an amendment in the amount of taxable value of the goods after issuance of invoice
  • When there is a change in the tax after issuance of invoice

Scenarios when a supplier issues Debit Notes:

  • Original tax invoice has been issued and actual taxable value is more than the taxable value stated in the invoice.
  • Original tax invoice has been issued, and actual payable tax is more than the tax charged in the invoice.
  • The Quantity received by the recipient is more than quantity declared in the invoice.

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 Note under GST

Credit notes are defined u/s 2(37) of the GST Act.

Credit notes can be issued in GST under the following situations:

  • When the recipient returns the goods
  • When the supplier has charged excessive tax than the actual
  • When the goods supplied are of inferior quality, and the same are returned to the supplier

Scenarios when a supplier issues Credit Notes:

  • Original tax invoice has been issued and actual taxable value is less than the taxable value in the invoice.
  • Original tax invoice has been issued and actual payable tax is less than the tax charged in the invoice.
  • Goods are returned to the supplier by the recipient
  • The Quantity received by the recipient is less than quantity stated in the invoice.
  • Services availed are found to be deficient

Issue of credit note reduces the tax liability of the supplier.

Note:    Credit note will include a supplementary invoice

Details to be Captured in Debit Notes and Credit Notes

The debit note/ credit note shall contain the following particulars:

  • Name, address, and GSTIN of the supplier
  • Nature of the document
  • A consecutive serial number containing only alphabets and/or numerals, unique for a financial year
  • Date of issue of the document
  • Name, address and GSTIN/ Unique ID Number, if registered, of the recipient
  • Name and address of the recipient and the address of delivery, along with the name of State and its code, if such recipient is unregistered
  • Serial number and date of the corresponding tax invoice or, as the case may be, bill of supply
  • The taxable value of goods or services, rate of tax and the amount of the tax credited or, as the case may be, debited to the recipient
  • Signature or digital signature of the supplier or his authorised representative

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:

  • September following the end of the year in which such supply was made,
  • The date of filing of the relevant annual return

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.

Understanding Revised Invoice under GST

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

  1. Date of implementation of GST and
  2. Date of issue of the Registration certificate.

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:

  1. Revised invoice is any invoice that is issued by a taxable person about any invoice already issued by him. Whereas, Supplementary tax invoice has to be issued by a taxable person in case where any deficiency is found in a tax invoice already issued by a taxable person.
  2. Revised invoices can be issued only to registered taxable persons. Whereas, supplementary invoices can be issued to both registered and unregistered taxable persons.
  3. The period considered for revised invoices is start from the effective date of registration till the date of issuance of certificate of registration. Whereas, supplementary invoices aren’t period-bound, they are specific to respective invoices
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CA Chetan Shinde
CA Chetan Shinde
Chetan is the Lead Tax Advisor at H&R Block (India) with an experience of almost half a decade in audit and taxation. His professional areas of interest are GST advisory and statutory audit. Apart from taxation, he is passionate about social causes and works extensively towards rural school development and literacy.