Credit & Debit Notes | Taxation for CA Intermediate PDF Download

Debit Note and Credit Note under GST

When goods supplied are returned or when there is a revision in the invoice value due to goods (or services) not being up to the mark or extra goods being supplied, a Debit Note or Credit Note is issued by the supplier and receiver of goods and services. A debit note or a Credit Note can be issued in 2 situations –

• When the amount payable by buyer to seller decreases –There can be a change in the value of goods after the goods are delivered and invoice is issued by the seller. This can be due to a return of goods or due to the bad quality of the goods delivered, etc. In this case, the value of goods decreases due to which a Debit Note is issued by the purchaser to the seller. The Debit Note provides details of the amount of money debited from the sellers’ account and also states the reason for the same. 
• The reason behind this – In the purchaser’s books of account the seller will have a credit balance. When a debit note is issued, the credit balance of the Sellers account decreases; thus reducing the seller’s balance. It means that lesser amount is required to be paid by the buyer to the seller to settle his liability. Thus debit note reduces the liability for the buyer. The seller issues a Credit Note as a response or acknowledgment to the Debit Note. 
• When the amount payable by buyer to seller increases - when the value of invoice increases due to extra goods being delivered or the goods already delivered have been charged at an incorrect value a Debit Note is required to be issued. The Debit Note, in this case, is issued by the seller to the buyer. 
• And the buyer as an acknowledgment to the receipt of Debit Note issues a Credit Note. The reason behind this – In the seller’s books of account the buyer will have a debit balance. When a debit note is issued then the debit balance of the Buyers account increases. It means that more amounts are required to be paid by the buyer to the seller to settle his liability. Thus, credit note increases the liability for the buyer. 

The debit note/ credit note shall contain the following particulars:

• Name, address, and GSTIN of the supplier, nature of the document, a consecutive serial number containing only alphabets and/or numerals, unique for a financial year, date of issue of the document, name, address and GSTIN/ Unique ID Number, if registered, of the recipient, name and address of the recipient and the address of delivery, along with the name of State and its code, if such recipient is unregistered, serial number and date of the corresponding tax invoice or, as the case may be, bill of supply, the taxable value of goods or services, rate of tax and the amount of the tax credited or, as the case may be, debited to the recipient, and signature or digital signature of the supplier or his authorized representative. 
• Debit Note or Credit Note can be issued anytime i.e. there is no time limit for issuing the Debit Note. Also, Debit Notes and Credit Notes issue have to be declared in the GST returns filed in the following month for the month in which document is issued. The tax liability will be adjusted but no reduction in output tax liability of the supplier will be permitted if the incidence of tax and interest on such supply has been passed on to any other person.