Debit & Credit Notes under GST – Revising an Invoice

A key reasons why GST in India would help increase tax compliance and reduce black money circulation is the standardisation and matching of invoices. Under GST, all B2B invoices must be uploaded on the GST common portal during the filing of GST return. Based on the invoice details filed, the data is auto-populated on the buyer or recipient side during the filing of return of inward supplies or GSTR-2, thereby eliminating any chances of foul play in B2B invoices. However, in some cases, businesses might have to make genuine changes to an issued invoice. For such instances, a debit or credit note can be issued for revising an invoice. In this article, we look at debit and credit notes in detail.

What is a Debit Note?

A debit note is a document sent to the seller, informing the seller that a debit has been made in the sellers account. Debit notes are usually sent by a purchase to the seller, if good are to be returned or found unsatisfactory.

A debit note can also be sent by the seller to the buyer, informing the buyer that a debit has been made in the buyers account. Debit note can be issued to a buyer, if the seller had erroneously undercharged the buyer or additional items are supplied on the same invoice.

Under GST, a debit note can be issued if the following conditions are satisfied:

• There has been a supply of goods and/or services.
• Tax invoice has been issued for the supply.
• Taxable value and/or tax charged in the tax invoice is less than the taxable value or tax payable  for the supply.
• Tax liability is required to be adjusted.

What is a Credit Note?

A credit note is a document, usually issued by a seller to a buyer, informing the buyer that a credit has been provided in the buyers account. For example, if a seller sells 10,000 units of a product and the buyer finds 1000 units to be defective, the seller can issue a credit note to the buyer, making the buyer liable for payment of only 9000 units.

Similarly, a buyer can also issue a credit note to the seller, if he/she determines that the buyer has undercharged them or sent them more items that billed.

Under GST, a credit note can be issued if the following conditions are satisfied:

• There has been a supply of goods and/or services.
• Tax invoice has been issued for such a supply.
• Taxable value or tax charged in that tax invoice exceeds the taxable value or tax payment for such supply OR the goods supplied are returned by the recipient or the services provided were found to be deficient.

Revised Invoice – B2B Transaction

Issue of a debit or credit note would impact an invoice that was already issued by the business and would require revision. In case of a transaction between two parties, both having GSTIN or invoice value of more than Rs.2.5 lakhs, the revised invoice must contain the following details with the word “Revised Invoice” prominently displayed:

• The word “Revised Invoice”, wherever applicable, indicated prominently;
• Name, address and GSTIN of the supplier;
• Nature of the document;
• A consecutive serial number not exceeding sixteen characters, in one or multiple series, containing alphabets or numerals or special characters -hyphen or dash and slash symbolised as “-” and “/”respectively,, and any combination thereof, unique for a financial year;
• Date of issue of the document;
• Name, address and GSTIN or UIN, 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 un-registered;
• Serial number and date of the corresponding tax invoice or, as the case may be, bill of supply;
• Value of taxable supply 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:

Revised Invoice – B2C Transactions

In case a debit or credit note pertains to a B2C transaction or transaction with a person not having GSTIN and value of less than Rs.2.5 lakhs, then a consolidated revised tax invoice in respect of all taxable supplies made to a recipient can be provided. In case of inter-state supplies, where the value of a supply does not exceed Rs.5 lakhs, a consolidated revised invoice can be issued separately in respect of all recipients located in a State.

For more information, read the IndiaFilings Guide on Issuing a Tax Invoice or revising a tax invoice.

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