Differences Between The Debit Note and Credit Note in GST

Differences Between The Debit Note and Credit Note in GST

What is Debit note under GST ?

‘Debit note’ as defined under section 2(38) of the Central Goods and Services Tax Act, 2017 means a document issued by a registered person under section 34(3).

In simple terms, a ‘debit note’ comes into the picture when the taxable value/ tax charged in the tax invoice is less as compared to the actual taxable value/ tax payable in respect of the supply.

‘Debit note’ is also popularly known as supplementary invoice as the issuance of a debit note creates additional tax liability. Hence, the treatment of debit note is the same as that of any tax invoice.

Accordingly, a ‘debit note’ issued by the supplier under section 34(3) is one of the documents on the basis of which input tax credit is available to the buyer/ recipient.

Issuance of Debit Note:

The person who supplies the goods shall issue a debit note in the following cases:

When the value of invoice is less than the actual value of goods or services.
When the taxable amount or GST charged is at a lower rate than what is applicable for such goods or services.

What is Credit note under GST ?

Credit note in GST :

‘Credit note’ as defined under section 2(37) of the Central Goods and Services Tax Act, 2017 means a document issued by a registered person under section 34(1).

Putting up simply, ‘credit note’ comes into picture when taxable value/ tax charged in the tax invoice is more as compared to actual taxable value/ tax payable in respect of the supply.

When we issued credit note

Issuance of Credit Note

Supplier who has supplied goods or services or both, shall issue a Credit Note to the recipient in following cases:

When the value declared in the invoice is more than the value of the actual goods or service
The tax amount or GST is charged at a higher rate than the applicable rate for the kind of goods or services.
The recipient received less quantity than mentioned in the tax invoice.
The recipient returned the goods supplied to him or her.
Services are found to be deficient by the recipient.

What is the time limit of issuance of credit note

GST law doesn’t prescribe any time limit for issuance of credit note. However, as per provisions of section 34(2) of the Central Goods and Services Tax Act, 2017, the registered person is required to reflect the details of credit note in the return within earlier of the following dates

· 30th November following the end of the respective Financial Year; or

· The date of furnishing of the relevant annual return.

Hence, it can be concluded that credit note for any relevant Financial Year should be issued and reflected within the above mentioned dates.

Reflection of credit note in GST return

As and when the credit note is issued, the same is to be reflected while filing return in Form GSTR-1. Accordingly, once the details are furnished in Form GSTR-1, corresponding effect of the same will be auto-populated in Form GSTR-2B of the recipient.

Debit Note and Credit Note Details :

As per the prescribed debit note format and credit note format, the following are the details which need to be captured:

Nature of the document must be indicated prominently, such as ‘revised invoice’ or ‘supplementary invoice’
Name, address, and GSTIN of the supplier
A consecutive serial number containing only alphabets and/or numerals or special characters hyphen “-“ or slash “/”, unique for a financial year
Date of issue of the document
If the recipient is registered- Name, address and GSTIN/Unique ID number of the recipient
If the recipient is unregistered- Name, address of recipient and address of delivery, with state name and code
Serial number and date of the original tax invoice or bill of supply
The taxable value of the goods or services, rate of tax and the amount of tax credited or debited to the recipient
A signature or digital signature of the supplier or his authorized representative

Difference between debit note and credit note in GST :

Below is a comparative table of debit notes vs credit notes:

Particulars	Debit note	Credit note
Who issues it?	The buyer of goods issues it.	The seller of goods issues it.
Meaning	The buyer of goods issues a debit note to the seller to return the goods received due to quality issues or other reasons. A debit note contains the reason for the return of goods.	The seller of goods issues a credit note to confirm that the purchase return is accepted.
Can be issued	It can be issued only in the event of credit purchases from the buyer's perspective.	It can be issued only in the event of credit sales.
Impact	It reduces account receivables in the books of sellers.	It reduces account payables in the books of the buyer.
Reflects	A debit note reflects a positive amount.	A credit note reflects a negative amount.
Form	It is another form of purchase return.	It is another form of sales return.
Accounting	It leads to updating purchase return books.	It leads to updating of sales return books.
Entry	Supplier Account Dr. Purchase return Cr.	Sales return account Dr. Customer Account Cr.
Issued in exchange of	A debit note is issued in exchange for a credit note.	A credit note is issued in exchange for a debit note.
Issued by a seller to the buyer	The seller issues debit notes to the buyer if the buyer is undercharged or the seller has sent additional goods.	The buyer issues a credit note as an acknowledgement of a debit note received.

Reference: https://old.cbic.gov.in/resources//htdocs-cbec/gst/Credit%20Note%20under%20GST.pdf

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(The views expressed in this article are strictly personal.)

By GST Info Tamil

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