Debit Note & Credit Note

Pramit Pratim Ghosh |Updated on: June 14, 2021

• Introduction
• What is Debit Note?
• What is Credit Note?
• Debit Note and Credit Note Details
• Furnishing details of Debit and Credit Note in GST
• Debit Note in GST
• Credit Note in GST

Introduction

Debit Notes and Credit Notes are unavoidable parts of business due to the system of returns. How to account for them in GST is thus crucial for businesses.

What is Debit Note?

A debit note in GST is a document issued by the supplier in the following cases:

• Increase in Taxable Value -When a supplier requires to increase the taxable value of a supply, he/she has to issue a debit note to the recipient.
• Increase in GST charged in invoice - When a supplier requires to increase the rate or value of GST charged in an invoice, he/she has to issue a debit note to the recipient.

What is Credit Note?

A credit note in GST is a document issued by the supplier in the following cases:

• Supplies are returned or found to be deficient by the recipient - When goods supplied are returned by the recipient of goods/services supplied are found to be deficient by the recipient, the supplier should issue a Credit Note. The credit note serves the purpose of reducing the value of the original supply.
• Decrease in taxable value - When a supplier requires to decrease the taxable value of a supply, he/she has to issue a credit note to the recipient.
• Decrease in GST charged in invoice - When a supplier requires to decrease the rate or value of GST charged in an invoice, he/she has to issue a credit note to the recipient.

Debit Note and Credit Note Details

As per the prescribed debit note format and credit note format, the following are the details which need to be captured:

• Nature of the document must be indicated prominently, such as ‘revised invoice’ or ‘supplementary invoice’
• Name, address, and GSTIN of the supplier
• A consecutive serial number containing only alphabets and/or numerals or special characters hyphen “-“ or slash “/”, unique for a financial year
• Date of issue of the document
• If the recipient is registered- Name, address and GSTIN/Unique ID number of the recipient
• If the recipient is unregistered- Name, address of recipient and address of delivery, with state name and code
• Serial number and date of the original tax invoice or bill of supply
• The taxable value of the goods or services, rate of tax and the amount of tax credited or debited to the recipient
• A signature or digital signature of the supplier or his authorized representative

Furnishing details of Debit and Credit Note in GST

Details of debit and credit note in GST, need to be furnished in the normal tax cycle.

Debit Note in GST

Details of debit notes issued should be furnished in Form GSTR-1 for the month in which the debit note is issued. These details will be made available to the recipient in Form GSTR-2A, post which the recipient has to accept the details and submit in Form GSTR-2.

Please note that a debit note can be raised by a recipient also when the goods received are returned, damaged in transit, the taxable value shown in the invoice is more than the actual or tax charged is more than the actual. However, under GST, debit note furnished by a supplier only will be considered for revision in the values of an invoice. The same has to be accepted by the recipient for the corresponding impact on input tax credit on the supply.

Credit Note in GST

The details of credit notes issued in a month should be furnished by suppliers in Form GSTR-1. The recipient of the supply will receive these details in Form GSTR-2A, post which the recipient has to accept the details and submit in Form GSTR-2. A point to note here is, that a supplier will be allowed to reduce his tax liability via a credit note only if the recipient of the supply accepts the credit note details in Form GSTR-2. Once this is done, the recipient’s input tax credit will be reversed to the extent of the credit note and the supplier’s tax liability will also be correspondingly reduced.

Please note that a credit note can also be issued by the recipient of a supply, in cases such as when the taxable value shown in an invoice for an inward supply is less than the actual, or, tax charged for an inward supply is less than the actual. However, in these cases, revision in the values of an invoice will only be considered when a supplier issues a corresponding debit note for the supply. The details of a debit note issued have to be furnished by the supplier and the same has to be accepted by the recipient. Subsequently, the tax liability of the supplier and input tax credit of the recipient will be modified accordingly.