Credit Note and Debit Note under GST Regime

A Credit Note and Debit Note for the purpose of GST Law, can be Issued by the Registered Person who has issued the tax Invoice i.e. The Supplier.

Any Such Document, by whatever name called (Debit Note or credit Note) when issued by the recipient to the registered supplier, will not be considered any document under GST Law.

CREDIT NOTE: Sec 2 (37)

Credit note is issued when issuer owes money to someone (means issuer has to give money to someone)

Someone here means the person to whom the Tax Invoice has been issued.

Example:

When a cash discount is allowed at the time of collecting payment from a customer in terms of an agreement entered in to prior to the supply, then supplier will issue a credit note to the customer to the extent of such cash discount.

Now, (Original Amount Due – Credit Note) is the revised value of supply that the customer pays to the supplier.

Note: To this extent the GST would also stands reduced.

Note: In case of sales return also Credit Note can be issued by the supplier.

Time Limit for Issuing Credit Note

1. The supplier can issue the credit note in respect of a tax invoice which has been issued by him earlier.

Credit Note should be issued by earlier of the following dates:

1. Date of filling of Annual return in which the Original Tax Invoice was issued; OR

2. 30^th September of the FY immediately succeeding the FY in which the original Tax Invoice was issued.

Note: The Credit Note so issued must be declared in the returns for the month in which they are issued, by the supplier and by the recipient both (Means by Buyer and Seller Both) as per the above mentioned date.

Note: The recipient must claim a reduction in ITC if he has claimed the same against the Original Tax Invoice. (In 3B)

Note: If goods or services supplied are founded deficient in that case also credit note can be issued.

Note: Credit Note can also be issued if Tax charged in the Original Tax Invoice is higher than that tax Applicable on the Actual Value Supply.

DEBIT NOTE: Sec 2(38)

Debit Note is issued when any money is OWED to the Issuer. (Means Issuer will receive some money from the Buyer/service Receiver).

Example:

If the supplier charges a penalty for the delayed payment of consideration , the supplier would issue a debit note for the amount of Penalty .

Note: Now the original amount due PLUS the debit note amount is the revised Value of Supply,that the customer pays the Supplier.

Note: To this Extent the GST thereon would also stand Increased.

Note: Debit Note will be issued when tax charged in the original tax Invoice is lower than that tax applicable on the Actual supply (Value of Original tax invoice + value of Debit Note).

Note: Actual Value of supply is higher than that value stated in the original tax Invoice in case of Debit Note.

TIME LIMIT FOR ISSUING DEBIT NOTE

NOTE: No time limit has been prescribed for issuing a Debit Note.

The reason behind that is if a debit note is issued it will increase the value of supply   and

If value of supply will increase it will also increase the value of tax (GST)

So, it will be beneficial for the Government due to which there is no time limit for Issuing the Debit Note.

NOTE:

1. If goods are returned after the due date for credit note, a credit note can be issued by the supplier for reduction in the amount payable by the recipient.

2. However he cannot claim a reduction in tax liability.

3. On the other hand recipient of tax may be imposed to reverse the input tax credit that had been availed thereon (vale of Credit Note).

CONCLUSION:

Debit Note will benefit the government in terms of Tax Collection but Credit Note will cause to reduce the tax liability So, Government has specified the time limit for issuing a Credit Note but has not specified the time limit for issuing a debit note.