Each financial situation is different, the advice provided is intended to be general. declared in the tax invoice. If the credit note raised is in respect of B2B supply then it will be shown in table 9 of FORM GSTR-1 and if it is against B2C supply it should be shown in table 7 of FORM GSTR-1. A seller can combine a credit or debit note with a tax invoice. unregistered; g) serial number and date of the corresponding tax invoice This section deals with instances where discrepancies occur either on the part of supplier or recipient. documents are maintained digitally. the recipient in his valid returnfor the same tax period or any It is a document issued by the supplier of goods or services to the recipient where – a tax invoice has been issued for any supply of goods or services or both and: The person who issues a credit note in relation to a supply of goods or Try QuickBooks Invoicing & Accounting Software –  30 Days Free Trial, Credit note in GST is defined under section 34(1) of the CGST act 2017. © 2021 Copyright © Intuit India Software Solutions Pvt. exceeds the corresponding reduction in the claim for input tax credit or invoice has been issued there could be situations like: The supplier has erroneously declared a value which is more than the The reduction in the output tax liability of the supplier in case of credit note must get matched. Credit note includes the supplementary invoice. This document is a proof that M/s Sharma Traders should reduce the amount it owes to Kapoor Pvt Ltd Rs. of business mentioned in the certificate of registration and shall be In addition to the above select the gst tax ledger, CGST & SGST as it is a local sale return. discrepancy iscommunicated shall be added to the output tax liabilityof the field, enter the credit note number or refund voucher number. Upon issuing the tax invoice, however, a registered supplier is required to issue a credit note to the recipient. Where such accounts and If credit note is issued it should be furnished in GSTR 1 … This article explains in detail what is credit note under GST, when is it issued and what is the credit note format with the help of an... https://quickbooks.intuit.com/in/resources/in_qrc/uploads/2019/07/Businesswoman-trying-to-understand-what-is-credit-note-in-GST.jpg, What is Credit Note in GST? The reduction in output for input tax credit by the recipient shall be finally accepted Someone here means the person to whom the Tax Invoice has been issued. the corresponding creditnote is not declared by the recipient in his valid These reasons may include: So, let’s try to understand what is a credit note in GST and how does it impact your output tax liability. Format of Credit Note. issue what is called as credit note to the recipient. the duplication of claims for reduction in output tax liability shall be A credit note in GST is a document issued by the supplier to: Supplies are returned or found to be deficient by the recipient – When goods/services supplied are returned/found to be deficient by the recipient, the supplier will issue a Credit Note. And this would showcase in the return for the month following the one in which discrepancy is communicated. A supplementary invoice is issued whenever there are errors in the original tax invoice. You need to issue a credit note, if the tax invoice has been issued earlier against material returned back by the customer. incidence of tax and interest on such supply has been passed which such supply was made, or the date of furnishing of the relevant annual return, whichever is earlier. has been issued, the tax liability of the supplier will reduce. What is Credit Note? to decrease his tax liability in his returns without requiring him to The purpose of the credit note is to reduce the value of original supply, Credit note is issued in following cases – - When supplies are returned or found to be deficient by the recipient reduced in cases where credit note has been issued after September. of the recipient; f) name and address of the recipient and the address of Goods worth Rs. There is no prescribed format but credit note issued by a supplier must contain the following particulars, namely: (a) Name, address and GST no. And the same has not been corrected by the supplier by reducing his outward tax liability. 114, Bhuvanagiri Main Road whichever is earlier. The customer reverses the input tax credit of ₹ 1/- which is attributable to the discount and refunds ₹ 99/- to the supplier after considering the discount of ₹ 5/-. The same should be displayed in his return for the month in which such a discrepancy is communicated. in respect to an agreement existing on the date of supply – shall be disclosed while filing an annual return Up to 31.01.2019, one credit note was allowed to be issued for one invoice. Both the supplier as well as recipient need to maintain the records of credit notes for up to a period of 72 months. discrepancy is communicated. In such case, the discrepancy amount shall be added to the output tax liability of the supplier. Click here to Download GST Credit Note Format In Excel Under GST … However, there might be the case where incidence of tax and interest on a supply has been passed to any other person. The credit note is therefore a convenient and legal method by which the when the reduction of output tax liability with respect to outward supplies is more than the corresponding contraction in the input tax credit claim or, credit note pertaining to supply made in a particular month has not been declared by the recipient in the return for the same month. – Meaning and Example, Intuit launches QuickBooks Online Accountant in India For CA's, GST Exemption List For Services: A Detailed Guide, GST Invoice Guide: Components, Formats and Time to Issue, 8 Tips of Marketing For Accountants in India, 5 Ways For Accountants In Dealing With Difficult Customers, HSN Code: Understand HSN Code with GST Rate | HSN Full form, Partnership Firm Registration: All You Need To Know, Shops and Establishments Act – What the Law Says, sales return or certain goods or services rejected by the recipient, goods damaged in transit or in some other way, error in the price of goods or services in the original invoice, Over payment by the recipient on the original invoice. In such a case, the discrepancy would be added to the outward tax liability of the supplier. It reduces the value of the original supply. is issued and it is matched. The person who issues a credit note in relation to a supply of goods or services or both must declare the details of such credit note in the return for the month during which such credit note has been issued but not later than September following the end of the financial year in which such supply was made, or the date of furnishing of the relevant annual return, whichever is earlier. Such a period begins from the due date of furnishing of annual return for the year that pertains to issuance of such documents. and the amount of the tax credited to the recipient; and. That means taxpayers can now report consolidated CDNs in GSTR-1/GSTR-6 or while filing refund applications without declaring the original invoice number and its date. There might be situations where an error is made in issuing the invoice or certain other errors might crop up with the quantity or quality of goods or services delivered. supplied such goods or servicesor both, may issue to the recipient what is Credit note application templates are therefore a means of ensuring customers understand what details are required of them, so they can qualify for credit notes. Furthermore, it will also explain the impact of issuance of credit note on output tax liability. Credit note is issued when issuer owes money to someone (means issuer has to give money to someone) Someone here means the person to whom the Tax Invoice has been issued. Before a consolidated/single credit debit note against one or more tax invoices option available on GST portal. In net impact the customer refunds ₹ 99/- in cash to the supplier. The supplier has erroneously declared a higher tax rate than what is This article, however, seeks to explain in detail credit note under GST. In order to regularize these kinds of situations the supplier is allowed to communicated to the supplier. The records of the credit notes have to be retained until the expiry of In GST preferably the supplier should raise the credit note or debit note as the case may be. tax invoice. What is a credit note under GST? outward supply furnished by the supplier for a tax period shall, be In case of Interstate return, select the IGST ledger, ... Credit Notes Under GST. The underlying issue here is that the manner used in approaching a customer, with regards to errors or damage claims, will determine whether or not the customer remains loyal to you or switches to a competitor. The quality of the goods or services or both supplied is not to the And such discrepancies are communicated to either one or both the parties in various circumstances. However, there might be a possibility that the amount in respect of which the discrepancy is communicated to the recipient is not rectified by him. Once the credit note has been issued, the tax liability of the supplier will decrease. representative. The details of the credit note relating to Please contact your financial or legal advisors for information specific to your situation. In the Credit Note No. quality of goods or services supplied to the recipient is not up to the mark. actual value of the goods or services provided. satisfaction of the recipient thereby necessitating a partial or total But the invoice must be for different goods or services than the credit or debit note. However, M/s Sharma later realized that certain goods were of poor quality and hence decided to return the goods. A tax invoice of an equivalent amount was issued to M/s Sharma Traders on the same day. Such a credit is on account of an error in the original invoice or various other reasons. 1. And, if the credit note has been amended for. a tax invoice has been issued for any supply of goods or services or both and: Taxable value or tax charged in the invoice exceeds the taxable value or tax payable in respect of such supply, Goods supplied are returned by the recipient, Goods or services supplied are found to be deficient, the supplier charges value of goods or services in the invoice that is more than the actual value of such goods or services, the quantity of goods or services received by the recipient is less than what has been declared in the original tax invoice. Thus, the supplier issues a credit note in the event of any of the following cases: There is no prescribed format to prepare a credit note. A credit note in GST is a document issued by the supplier in the following cases: Supplies are returned or found to be deficient by the recipient - When goods supplied are returned by the recipient of goods/services supplied are found to be deficient by the recipient, the supplier should issue a Credit Note. the goodssupplied are returned by the recipient, or where goods orservices When a registered person supplies goods or services, he needs to necessarily issue a tax invoice. M/s Sharma traders made payment against the invoice. 1.) Adjustment permitted under section 15 i.e. supplier in his return for the month succeeding themonth in which the The discrepancies are communicated to both the supplier and recipient: Whereas, the same shall be communicated to the supplier only. It is a document issued by the supplier of goods or services to the recipient where –. Banaswadi, Bengaluru - 560043. such duplication iscommunicated. (b) Nature of the document. Credit note is issued when issuer owes money to someone (means issuer has to give money to someone). Declaring Credit Note in GST Returns Adjustments should be made to the value of standard-rated supplies (Box 1) and output tax (Box 6) in the GST return for … In accordance with the current GST law, section 2(35) read with section 24(1), credit note can be issued only if there is an original tax invoice issued for goods and services sold and in case if the tax mentioned in the invoice is more than the tax that is supposed to be paid on the respective supply. In the event any of the above cases, the registered supplier of goods or services may issue a credit note to the recipient. The details of credit note with regards to the outward supply made by the supplier for a given tax period needs to be matched with: Once this is matched, it is accepted and communicated to the supplier. numerals or special characters hyphen or dash and slash symbolised as “-” However, where these documents are maintained manually, a record should be maintained at every related place of business mentioned in the certificate of registration. was made, or the date of furnishing of the relevant annual return, A Tax Invoice shall meet the requirements of Section 31(1) of CGST Act/State GST Act for the supply of goods and under Section 31(2) for the supply of services subject to Rule 1 of Invoice Rules. subsequent tax period; and. Where a tax invoice has been issued for supply of any goods or services or Provided the discrepancy pertains to the duplication of claims for contraction in outward tax liability. The credit note will increase the liability in the books of the customer, as he has pay an extra amount to settle the liability. accessible at every related place of business where such accounts and This method is not only easy but also legally sound to revise the taxable value in the original tax invoice. A seller issues a credit note when a buyer: cancels an order Understanding Credit Note. matched––, a) with the corresponding reduction in the claim forinput tax credit by reimbursement on the invoice value. In the first table, credit note is issued by the supplier with GST. A credit note in accounting means a document that a supplier of goods or services issues to the recipient. Examples. GST (GOODS AND SERVICES TAX) Credit Note in GST. 20,000 were returned to Kapoor Pvt Ltd on April 20, 2017. Credit Note is a document raised by a registered person to reduce the taxable and the tax amount of a Tax invoice which was raised with a higher value. seventy-two months from the due date offurnishing of annual return for the and communicated to the supplier. The claim for reduction in output tax liability by the supplier output tax liability of the supplier in his return for the month in which delivery, along with the name of State and its code, if such recipient is and “/” respectively, and any combination thereof, unique for a financial or both supplied are found to be deficient, theregistered person, who has The output tax liability of the supplier gets reduced once value of the goods or services in the original tax invoice can be amended Terms and conditions, features, support, pricing, and service options subject to change without notice. for the month during which such credit note has been issued but not later Our expert consultants in Mumbai, Indore, Bangalore, Chennai, and Coimbatore offer end-to-end back office support for GST compliance. b) for duplication of claims for reduction in output tax liability. A supplier of goods or services or both is mandatorily required to issue a called as a creditnote containing the prescribed particulars. Credit note cannot be issued with GST in respect of B2C supply as the tax invoice does not have the GSTIN of the buyer. The output tax liability of the supplier gets reduced once the credit note https://quickbooks.intuit.com/in/resources/gst-center/what-is-credit-note/. The issuance of the credit note will easily allow the supplier GST Credit Notes in GSTR 1 Return The Credit Notes (Registered) – Add Note page is displayed. i) signature or digital signature of the supplier or his authorised a) name, address and Goods and Services Tax Identification Number of the supplier; c) a consecutive serial number not exceeding sixteen characters, in one or A credit note shall be considered as matched while Matching of Input tax credit where output liability discharged by the supplier on the original invoice, after setting off GST reversal on credit notes, is more than or equal to net ITC claimed by the recipient on such invoice in his GSTR-2. However, a credit note issued by a supplier to the recipient must have the following particulars: Say a supplier issues a credit note with regards to goods or services supplied to the recipient. By issuing a credit note, a supplier can easily reduce is outward tax liability in his returns without undertaking the strenuous process of tax refunds. Under GST, as per Section 34 (1) of the CGST Act 2017, a credit note is issued by a supplier when; Issuing of a tax invoice for the supply of services and goods In such a case, the contraction in the output tax liability of the supplier shall not be allowed. Furthermore, there might be a case in which the amount of discrepancy is on account of duplication of claims by the supplier. This document notifies that the recipient’s account needs to be credited with certain amount. GST takes care of credit notes as well, just like debit notes. multiple series, containing alphabets or Information may be abridged and therefore incomplete. Credit note under GST is issued as per provisions of section 34 of the CGST/SGST Act. In accounting, a credit note is a document that a supplier issue notifying the recipient account must be credited with a certain amount. Once the credit note The quantity received by the recipient is less than what has been In other words, the output tax liability cannot be reduced in cases where credit note has been issued after September. Where the reduction of output tax liability in respect ofoutward supplies a consecutive serial number that is unique and should : contain alphabets, numerals or special characters such as hyphen, dash etc, name, address and GSTIN of the recipient, if registered, in case the recipient is unregistered, then name, address of the recipient and address of delivery along with name of state and its code needs to be given, serial number and date of the corresponding tax invoice or bill of supply as the case may be, value of taxable supply of goods or services, rate of tax and the amount of tax credited to the recipient, should not be later than the month of September following the end of the financial year during which such a supply is made or, for duplication of claims for reduction in outward tax liability, reduction in the input tax credit claim made by the recipient needs to match with. Place of Supply (POS) can be sealed against each credit note or debit note, to identify the supply type i.e., Intra-State or Inter-State(State-wise POS Debit note or Credit notes to be reported) Debit /Credit Notes can be declared with tax amount, but without any taxable value also i.e. Ltd. All rights reserved. tax liability of the supplier shall not be permitted, if the Such a credit note would notify M/s Sharma traders that a credit needs to be made in their account of an amount equal to the goods returned by them. However, during the course of trade or commerce, after the It is useful for all dealers, distributors, traders, wholesalers, accounts assistant, accountants etc. CREDIT NOTE UNDER GST. Based on the rules prescribed by the Government, here is what a sample credit note will contain under the GST regime: on to any other person. not rectified by the recipientin his valid return for the month in which Under the relaxation given through the amendment in Section 34, a taxpayer can now issue a consolidated credit debit note against one or more tax invoices raised in a financial year. The credit note is therefore a convenient and legal method by which the value of the goods or services in the original tax invoice can be amended or revised. Different kinds of documents are issued under various circumstances whenever a transaction involves supply of goods or services. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Furthermore, where such documents are maintained digitally, it shall be accessible to every related place of business. In other words, the output tax liability cannot be Such a rectification must be made in the same month in which discrepancy is communicated. Note-: Input tax credit to the recipient in respect of invoices or debit notes that are not reflected in his Form GSTR-2A shall be restricted to 10 percent of the eligible credit available in respect of invoices or debit notes reflected in his Form GSTR-2A as per the press release of the 38 th meeting of the GST Council’s decisions regarding Law and Procedure related changes. There is no prescribed format but credit note issued by a supplier must On 17 September 2020, the GST portal enabled the delinking of Credit Notes/Debit Notes (CDNs) from their original invoices. Credit Note in GST Introduction A supplier of goods or services or both is mandatorily required to issue a tax invoice.However, during the course of trade or commerce, after the invoice has been issued there could be situations like: The supplier has erroneously declared a value which is … Address : Work'n'Space exceed the taxable value ortax payable in respect of such supply, or where It is helpful to issue the credit note to your clients against discrepancies in the invoices issued earlier with relevant CGST, SGST, and IGST Computations. With GoGSTBill billing software, you can easily create a GST Credit Note & Debit Note with just a … You May Also ReadTax Invoice Vs Bill of Supply. In the Credit Note … Credit note in GST is defined under section 34 (1) of the CGST act 2017. 1.2 Debit Note – Section 2(38) means a document issued by a registered person under sub section (3) ofSection 34 of CGST Act, 2017. or, as the case may be, bill of supply; h) value of taxable supply of goods or services, rate of tax Such documents include tax invoice, debit note, credit note and bill of supply. Balaji Layout, Subaiya Reddy Layout 1,00,000 to M/s Sharma Traders on April 1,2017. A credit note is a document issued by the supplier in case the value of taxable supply is more than the actual supply. year pertaining to suchaccounts and records. nature of the document (credit note or debit note). Format of a credit note in GST. returns, thediscrepancy shall be communicated to both such persons.Whereas, 20,000 under the terms of original invoice. To enter sales return transaction with gst in credit note In the credit note voucher select the party name, original sale bill, sale bill date as explained above. However, such a declaration: This means where credit note is issued after the month of September, the output tax liability in such a case shall not be reduced. year; e) name, address and Goods and Services Tax Identification Number or undertake any tedious process of refunds. Credit note for bad debts cannot be issued with GST. or revised. Credit Note under GST. The issuance of the credit note will easily allow the supplier to decrease his tax liability in his returns without requiring him to … The amount in respect of any reduction in output tax liability that is You May Also Read:Types of GST InvoicesTry Invoicing Software – 3O Days(Trial)Generate GST Invoice Format in Word & ExcelExport Invoice Under GSTAdvantages of GSTGST Audit ChecklistDepreciation MethodsCheck GST – HSN Code  GST Exemption ListPartnership Firm Registration, Generate GST Invoice Format in Word & Excel, Starting a BusinessGeneralLegalCash FlowExpenses ManageMoney & FinanceAccounting & TaxesGST CenterQuickBooks BlogsMarketingSocial MediaCustomer Service. Thus, necessitating the supplier to reimburse partial or total amount of the invoice. that matches with the corresponding reduction in the claim 1.1 Credit Note – Section 2(37) means a document issued by a registered person under sub section (1) of Section 34 of CGST Act, 2017. services or both must declare the details of such credit note in the return Intuit and QuickBooks are registered trademarks of Intuit Inc. In such a case, he must declare the details of such a credit note in the return for the month in which such a credit note is issued. contain the following particulars, namely: –. When the amount needed to pay is reduced due to the cancellation of goods, then a credit note is issued while when the amount required to pay is extended due to adding up of products, then a debit note is issued. than September following the end of the financial year in which such supply The seller must include the credit or debit note in the GST return that covers the period the credit or debit note was issued. documentsare maintained manually, it should be kept at every related place both and the taxable value or tax charged in that tax invoice is found to The amount in respect of which any discrepancy iscommunicated and which is Supplier who is issuing credit note/Debit Note will declare the details of credit note/Debit Note issued under GSTR-1 of that month or later but not later than September following the end of the financial year in which such supply was made, or the date of furnishing of the relevant annual return, whichever is earlier. the claim made by the supplier for reduction in outward tax liability. Debit Note and Credit Note in GST It is mandatory for a supplier of goods or services or both to issue a tax invoice. Since, goods were returned, Kapoor Pvt Ltd needs to raise a credit note in favor of M/s Sharma Ltd. applicable for the kind of the goods or services or both supplied. of the supplier. GSTZen is based out of Bangalore. Kapoor Pvt Ltd supplied goods worth Rs. Unique Identity Number, if registered, Thus, we can conclude that credit note is a document that is issued to amend the value of goods or services in the original tax invoice. found to be on account of duplication of claims shall be added to the Note: When a credit note is issued, it must be accompanied by a supplementary invoice.