What is a Credit Note under GST?

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Sakshi Shah

Credit Note
Debit Note
GST
GST Invoice

A Credit Note is a document issued when there is a reduction in the amount of payment to be received by the seller from the buyer. Under GST, the seller should issue a credit note in the following cases:

1) Value of the invoice reduces

In some cases, a seller might have made a mistake while issuing an invoice to the buyer. But, there’s nothing to worry about, as an error while entering the price, quantity, or tax amount in the original invoice, correction can be done by issuing a credit note. Thus, the seller should issue a credit note when the value of the invoice reduces after correction of the error.

Example:

Tax Invoice No.1 was issued for Rs.1000 (10 units * Rs.100). Hence, if the revised price is Rs.90, a credit note of Rs.100 (10 units * Rs.10) would be issued. Thus, the buyer is liable to pay Rs.900 (10 units * Rs.90) to the seller

2) Sales Return or deficiency in services provided

A credit note can be issued by the seller to the buyer if the buyer returns goods to the seller or when the buyer is not satisfied with the services provided by the seller

Example:

Mr.A sells goods to Mr.B for Rs.10,000 (50 units * Rs.200). Mr.B returns 20 units due to poor quality. Mr.A will issue a Credit Note of Rs.4000 (20 units * Rs.200) to Mr.B. Thus, Mr.B is liable to pay Rs.6,000 (30 units * Rs.200) to Mr.A.

The following details of the Credit Note once issued must be declared at the earliest:

  1. GST Return for the month in which Credit Note is issued
  2. September following the end of the year in which such supply was made
  3. Date of filing Annual Return
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Sample Credit Note

GST Credit Note Sample
What is a Debit Note under GST?
A Debit Note is a document which a seller issued when the amount of payment to be received by the seller from the buyer increases
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A Debit Note is a document which a seller issued when the amount of payment to be received by the seller from the buyer increases
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FAQs

Can credit note be issued without GST?

It is important to note that Credit Notes are only issued to adjust the taxable value and not issued for adjusting tax in the books of accounts. However, the Tax liability of the supplier cannot be adjusted if the credit note is issued after the due date.

Is there a time limit for credit note under GST?

Yes there is a time limit. Section 34(2) of the CGST Act dictates that a Credit note for exchange of goods and services can be issued for any registered dealer up to a period of Six Months.

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