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Debit & Credit Notes under GST – Revising an Invoice


Debit & Credit Notes under GST-Revising an Invoice

A key reason why GST in India would help increase tax compliance and reduce black money circulation is the standardisation and matching of invoices. Under GST, all B2B invoices must be uploaded on the GST common portal during the filing of GST return. Based on the invoice details filed, the system auto-populates the data to the buyer or recipient side during the filing of return of inward supplies or GSTR-2. Therefore it eliminates any chances of foul play in B2B invoices. However, in some cases, businesses might have to make genuine changes to an issued invoice. For such instances, the supplier can issue a debit or credit note for revising an invoice. In this article, let us look at debit and credit notes in detail.

Debit Note

A debit note acts as a document sent to the seller, informing the seller that a debit has been made in the seller’s account. During or after a sale, if the consumer finds the goods unsatisfactory and wants to return the purchase to the seller, the consumer should produce the debit notes. It also represents a debit note sent to the seller to the buyer, informing the debit made to the buyer’s account. In other circumstances, the seller might send the debit note to a buyer, if the seller erroneously undercharged the buyer or the additional items supplied on the same invoice.

Under GST, the concerned individual shall issue a debit note upon meeting the following criteria:

  • Supply of goods and/or services made to the respective person
  • Issuing tax invoice for the supply made.
  • Taxable value and/or tax charged in the tax invoice is less than the taxable value or tax payable for the supply.
  • If the concerned individual requires to adjust the tax liability.

Credit Note

A credit note acts as a document, usually issued by a seller to a buyer, informing the buyer that a credit has been provided in the buyer’s account. For example, if a seller sells 10,000 units of a product and the buyer finds 1000 units to be defective, the seller can issue a credit note to the buyer, making the buyer liable for payment of only 9000 units.

Similarly, a buyer can also issue a credit note to the seller, if he/she determines that the buyer has undercharged them or sent them more items that billed.

Under GST, the concerned individual shall issue a credit note upon meeting the following criteria:

  • Supply of goods and/or services made to the respective person
  • Issuing tax invoice for the supply made.
  • Taxable value or tax charged in that tax invoice exceeds the taxable value or tax payment for such supply. Also for returning the supplied goods by the recipient under faulty or unsatisfactory conditions.

Revised Invoice-B2B Transaction

Issue of a debit or credit note shall impact the previously issued invoice by the business and would require revision. In case of a transaction between two parties, both having GSTIN or invoice value of more than Rs.2.5 lakhs, the revised invoice must contain the following details with the word “Revised Invoice” prominently displayed:

  • The word “Revised Invoice”, wherever applicable, indicated prominently;
  • Name, address and GSTIN of the supplier;
  • Nature of the document;
  • A consecutive serial number less than or equal to sixteen characters, in one or multiple series, containing alphabets or numerals or special characters -hyphen or dash and slash symbolised as “-” and “/”respectively, and any combination thereof, unique for a financial year;
  • Date of issue of the document;
  • Name, address and GSTIN or UIN, 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. It shall apply for un-registered recipients,
  • Serial number and date of the corresponding tax invoice or, as the case may be, bill of supply;
  • Value of taxable supply of goods or services, rate of tax and the amount of the tax credited or debited to the recipient and
  • A signature or digital signature of the supplier or the authorized representative.

Click here to read about Revised Tax Invoice under GST.

Revised Invoice-B2C Transactions

In case a debit or credit note pertains to a B2C transaction or the person transacts without GSTIN for a value of less than Rs.2.5 lakhs, then the consolidated revised tax invoice in respect of all taxable supplies made to a recipient can be provided. In case of inter-state supplies, where the value of a supply does not exceed Rs.5 lakhs, a consolidated revised invoice can be issued separately in respect of all recipients located in a State.

To file income tax, click here.