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Debit Notes & Credit Notes

A credit note or debit note is a legal method by which the original tax invoice can be amended or revised. The issue of the credit/ debit note allows the supplier to adjust the decreased/ increased tax liability in a convenient manner.

Debit Notes:

What is a Debit Note?

A debit note is a document issued by a seller to the buyer in case of an increase in the invoice amount. The increase in invoice amount may be due to increase in quantity, price per quantity or tax rate declared in the invoice. The buyer in response to the debit note issues a credit note. The issue of debit note increases the liability of buyer.

How debit note increases the liability of buyer?

In the supplier’s books of accounts, a buyer shall have debit balance. As described above, a debit note increases the invoice value. When the invoice value increases, the debit balance of buyer in the supplier’s book also increases. i.e., the buyer is liable to pay more to the supplier.

Debit Notes and GST returns:

A debit note increases the output tax liability of the supplier. A registered person issuing debit note shall provide the details of such debit notes in the GST return for the month for which the same has been issued.

A debit note shall include a supplementary invoice.

Credit Notes:

What is a Credit Note?

A Credit note is a document issued by a seller to the buyer in case of a decrease in the invoice amount. The decrease in invoice amount may be due to decrease in quantity, price per quantity or tax rate declared in the invoice. The buyer in response to the credit note issues a debit note. Issue of credit note decreases the liability of buyer.

How Credit note decreases the liability of buyer?

In the supplier’s books of accounts, a buyer shall have debit balance. A credit note decreases the invoice value. When the invoice value decreases, the debit balance of buyer in the supplier’s book also decreases. i.e., the supplier is liable to pay back the excess amount, if received.

Debit Notes and GST returns:

A credit note decreases the output tax liability (GST on outward supply) of supplier. A registered person issuing credit note shall provide the details of such credit notes in the GST return for the month for which the same has been issued but not later than:

  • September following the end of the financial year in which supply was made,

or

  • the date of furnishing of annual return of the relevant financial year, whichever is earlier.
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