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Debit note, Credit note under GST | Company Vakil

What are Debit Note and Credit Note?

When goods supplied are returned or when there is a amendment in the invoice value due to goods (or services) not being of satisfactory quality or extra goods being issued a Debit Note or Credit Note is issued by the supplier and the receiver of goods and services.

A debit note or a Credit Note can be issued in the following 2 situations –

  1. When the sum payable by buyer to the seller decreases –There can be a modification in the value of goods after the goods are delivered and the invoice is issued by the seller. This can be because of a return of goods or due to the bad quality or unsatisfactory quality of the goods delivered, etc. In such a case, the price of goods decreases due to which a Debit Note is issued by the purchaser and given to the seller. The Debit Note provides the details of the amount of money debited from the seller’s account and also provides for the reason of the same. The reason behind this – In the purchaser’s books of account the seller will be having a credit balance. When a debit note is being issued, the credit balance of the Sellers account decreases, as a result reducing the seller’s balance. It means that that, a lesser amount is required to be paid by the buyer to the seller to clear up his liability. Therefore a debit note reduces the liability for the buyer. The seller issues a Credit Note as a response or recognition to the Debit Note
  2. When the price payable by the buyer to the seller increases-When the price of invoice increases due to extra or excess goods being delivered or the goods already delivered have been charged at an mistaken value a Debit Note is essential to be issued. The Debit Note, in such a case, is issued by the seller to the buyer. And the buyer as an acceptance to the receipt of Debit Note issues a Credit Note. The main reason behind this – In the seller’s books of account the buyer will be having a debit balance. When a debit note has been issued, the debit balance of the buyer’s account increases. It means that additional amount is required to be paid by the buyer to the seller to clear up his liability. Hence, credit note increases liability for the buyer.

Debit Note under GST rules

Cases when the Debit note is to be issued by the supplier:

  Cases in which Debit note has to be issued by the Supplier
A. Original tax invoice has been already issued and taxable value in the invoice is lower than actual taxable value.
B. Original tax invoice has been issued and tax levied in the invoice is lower than actual tax to be paid.
Note Debit note will include in it a supplementary invoice.

Credit Note under GST rules

Cases when the Credit note is to be issued by the supplier:

  Cases in which Credit note has to be issued by the Supplier
A Original tax invoice has been issued and taxable value in the invoice is more than actual taxable value.
B  Original tax invoice has been issued and tax levied in the invoice is more than actual tax to be paid.
C  Recipient returns the goods to the supplier i.e. sales return
D   Services are found to be undersupplied
 Note: Credit note will include in it a supplementary invoice

Details to be enclosed in Debit Note and Credit Note

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

  1. The name, address, and GSTIN of the supplier,
  2. The nature of the document,
  3. A uninterrupted serial number containing only alphabets and/or numerals, exclusive for a financial year,
  4. The date of issue of the document,
  5. The name, address and GSTIN/ Unique ID Number, if registered, of the receiver,
  6. The name and address of the recipient and the address of delivery, along with the name of State and its respective code, if such receiver is unregistered,
  7. The serial number and date of the equivalent tax invoice or, as the case may be, The bill of supply,
  8. The assessable value of goods or services, rate of tax t be levied and the sum of the tax credited or, as the case may be, debited to the receiver, and
  9. Signature or a digital signature of the supplier or his sanctioned representative.

Debit Note or Credit Note can be issued at anytime i.e. there is no time limit for issuing a Debit Note. Also, Debit Notes and Credit Notes issue have to be declared in the GST returns that are filed in the following month, for the month in which such document is issued.

The details have to be stated on earlier of the following dates:

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

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