As per GST law, a registered taxable person is required to issue a tax invoice to the recipient for supply of goods or services or both. After issuing tax invoice under GST, there can be a situation where the taxable value has either exceeded the actual value or is found to be less. In such a situation, the taxpayer is required to either issue a credit or debit note under GST law, as the case may be to the recipient.
In this article we will be discussing when credit or debit note is issued and how to fill it up in your GST return.
When Credit note is issued under GST law
A credit note is to be issued by the registered person who has supplied goods or services or both to the recipient in the following situations;
- Taxable value or tax charged in a tax invoice is found to exceed the taxable value or tax payable in respect of such supply; or
- The quantity received by the recipient is less than what has been billed; or
- Goods supplied by the supplier are returned by the recipient; or
- Goods or services supplied are found to be deficient;
- For any other similar reasons.
After issuing credit note to the recipient, the tax liability of the supplier will reduce. Its a method to amend or revise the original invoice.
The registered person who issue credit note in relation to a supply of goods or services or both shall declare the details of such credit note in return for the month during which such credit note has been issued but not later than September following the end of the year in which such supply is made or the date of filing of the relevant annual return, whichever is earlier. The tax liability should be adjusted in the manner specified in the GST act.
Supplier can reduce output tax liability only when the incidence of tax and interest on such supply has been passed on to other person. This means, if credit note issued by the supplier has not been accepted by the recipient and equivalent input tax credit has not been reversed, then reduction is tax liability will not be allowed to supplier.
As per circular 92/11/2019 GST dated 07.03.2019, credit notes are not permitted to be issued in case secondary discounts are allowed by the supplier since the tax liability of the supplier does not get reduced in such case. However, supplier can issue financial / commercial credit note(s) to reduce the value of supply payable by the recipient to the supplier.
What debit note is issued under GST law
After issuing tax invoice for supply of goods or services or both, taxable value in the tax invoice can be less than the actual taxable value of such supply, or tax as per invoice can be less than the actual tax payable in respect of the supply. In such cases, the registered taxpayer as a supplier can issue debit note to the recipient of goods or services or both.
Here are certain cases where a supplier can issue a debit note;
- If the taxable value of the original tax invoice that has been issued for supply of any goods or services or both, is found to be less than the actual taxable value in respect of such supply; or
- If the supplier has charged less tax than what is applicable to the goods or services or both; or
- If quantity in the tax invoice is less than what is actually received by the recipient; or
- For any other similar reasons.
After issuing debit note to the recipient, the tax liability of the supplier will enhance. Details of such debit note has to be declared in the return for the month during which its issued. Tax liability on such debit note has to be adjusted accordingly in the return.
In such cases, the debit note should also include a supplementary invoice.
In GST law, format of credit and debit note has not been prescribed. However certain mandatory details are prescribed to be mentioned in the debit and credit note.