Section 2(37)

‘credit note’ means a document issued by a registered person under sub-section (1) of section 34.

Section 2(38)

‘debit note’ means a document issued by a registered person under  sub-section (3) of section 34.

Definition of Credit Note as per CGST Act– Section 34(1)

Where a tax invoice has been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable in respect of such supply, or where the goods supplied are returned by the recipient, or where goods or services or both supplied are found to be deficient, the registered person, who has supplied such goods or services or both, may issue to the recipient a credit note containing such particulars as may be prescribed

Definition of Debit Note as per CGST Act – Section 34(3)

Where a tax invoice has been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to be less than the taxable value or tax payable in respect of such supply, the registered person, who has supplied such goods or services or both, shall issue to the recipient a debit note containing such particulars as may be prescribed

Journal Entries for Debit and Credit Notes under GST

Dr. Notes Cr. Notes
1. When Purchases is Made 1. When Sales is Made
Pur 100 Debtor 118
Input CGST 9 To Sales 100
Input SGST 9 To Output CGST 9
To Creditor 118 To Output SGST 9

Dr. Notes Cr. Notes
BUYER’S POINT OF VIEW BUYER’S POINT OF VIEW
Creditor 118 Pur 100
To Pur Return 100 Input CGST 9
To Input CGST 9 Input SGST 9
To Input SGST 9 To Creditor 118
SELLERS’S POINT OF VIEW SELLERS’S POINT OF VIEW
Debtor 118 Sales Return 100
To Sales 100 Output CGST 9
To Output CGST 9 Output SGST 9
To Output SGST 9 To Debtor 118

Reasons for Issue of Dr. Note Reasons for Issue of Cr. Note
BUYER’S POINT OF VIEW BUYER’S POINT OF VIEW
Purchase Return To Decrease Purchases

Ex- More Goods Recd,

More Tax Charged by the Supplier

To Increase Original Purchase

Ex- Less Goods Purchased,

Less Tax Charged by the us from the Buyer

SELLERS’S POINT OF VIEW SELLERS’S POINT OF VIEW
To Increase Original Sales Ex- Less Goods Sold,Less Tax Charged by the Us

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

Ex- Less Goods Sold,

Less Tax Charged by the Us

Sales Return

*Cash Discount

*If Goods on Sale are Found deficient by the buyer

Ex- More Goods Sold,

More Tax Charged by the Us

Note

1. 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.

2. 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.

3. 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. ⇒Not Valid as per GST 

VALUE OF SUPPLY

Value of supply

1. Date Of Filling Of Annual Return In Which The Original Tax Invoice Was Issued; Or

2. 30th 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.

Author Bio

Qualification: Student - CA/CS/CMA
Company: N/A
Location: Punjab, IN
Member Since: 15 Sep 2020 | Total Posts: 1

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