With the business growing larger at a fast pace, the two terms Debit Note & Credit Note has become common as the credit sale & purchase has become more with the expansion of the business. In instances where the goods are returned by the purchaser to the seller, the Debit Note & Credit Note are issued by the buyer and the seller. Such instances can be a supply of extra goods, a supply of bad quality and so on.
Debit note is sent as an intimation by the buyer of goods when he returns goods to the seller, stating the amount & quantity of goods being returned and requesting the money return.
A credit note is also sent as an intimation by the seller who receives the goods returned by the buyer, stating the amount & quantity of goods being returned.
The situation when a debit note or a Credit Note is issued
There are two situations when a debit note or a Credit Note can be issued. One is when the amount payable to the seller by the buyer goes down and another situation is when it goes up. The former situation happens when there is any variation in the value of goods after the goods are delivered and the sellers have issued the invoice. This may happen when the goods are returned or when goods are damaged and so on. Latter situation may happen when there is an increase in the value of the invoice because of the delivery of additional goods or when the goods already handed over have been charged at a wrong value.
In the former situation, when the amount payable by the buyer to seller decreases. Issuance of debit note lowers down the credit balance of the seller’s account and so lowers down the balance of the seller. This implies that the buyer needs to pay a lesser amount to the seller to settle his liability. Thus, in such situations, a debit note lessens the buyer’s liability. In the latter situation, when the amount payable by the buyer to seller increases.
The issuance of the debit note increases the debit balance of the buyer’s account. This implies that the buyer needs to pay a higher amount to the seller to settle his liability. Thus, in such situations, a credit note increases the buyer’s liability.
Debit and Credit Note under GST
Cases when the supplier issues a Debit Note
When the supplier has issued an original tax invoice and
- Taxable value in the invoice < actual taxable amount.
- Tax charged in the invoice < actual taxable amount.
Cases when the supplier issues a Credit Note
When the supplier has issued an original tax invoice and
- Taxable value in the invoice > actual taxable amount.
- Tax charged in the invoice > actual taxable amount.
- When the buyer returns the goods to the supplier.
- When the services are found to be imperfect or lacking.
- Supplier’s name, address, and GSTIN
- Recipient’s name, address, and GSTIN (if the recipient is registered)
- Nature and Date of issue of the document,
- A consecutive serial number containing only letters and/or numbers (unique for an FY)
- Serial no. & date of the corresponding tax invoice or bill of supply in some cases
- Recipient’s name & address and delivery address including the State’s name and its code (if the recipient is unregistered)
- Signature / digital signature of the supplier/his authorized representative.
Due date to issued Debit Note or Credit Note
Both the notes can be issued at any time of the year. However, it is important to declare the issue of Debit Notes and Credit Notes in the GST returns filed in the consecutive month of the month in which the document was issued. The date on which the details should be declared is :
- September following the completion of the year in which goods were supplied
- Or Date of filing the suitable annual return whichever is earlier.
How a Debit or Credit Note is generated?
A Debit or Credit Note can be easily generated with the GST software available today like Gen GST Billing Software for small business, etc. Once a Debit Note or a Credit Note is created through software, the amount gets auto-adjusted against the original invoice.
Revised and Supplementary Invoice under GST
Revised invoice is an invoice that has to issued by the dealer against the invoice which was already issued between the date on which GST was implemented and the Date on which Registration certificate was issued.
Under GST, all the taxable dealers apply for the provisional registration and execute all the required formalities for attaining the permanent registration certificate. So, the issuance of invoices between the period of Date of implementation of GST and Date of issue of Registration certificate, have to follow by the issuance of a revised invoice against them by the taxable dealers. The revised invoice will have to be issued within one month from the date of issue of the registration certificate.
Supplementary tax invoice is an invoice that taxpayer issues when there is any insufficiency in tax as per the tax invoice already issued by him. A supplementary tax invoice can be in the debit or credit note form.
Difference between a revised invoice and a supplementary invoice
The main difference between a revised invoice and a supplementary invoice is that the former is issued by a taxpayer against any invoice which he has already issued whereas a supplementary invoice is issued by a taxpayer when there is any deficiency in a tax invoice that he has already issued.
Period coverage is another point of differentiation between the two. Revised invoice is issued for the period from the effective date of registration till the date when registration certificates are attained. Supplementary invoice has nothing to do with the time period, its issuance depends on the invoice specific.
Another difference between the two is worth noting. Revised Invoice can be issued only to a registered person whereas Supplementary Invoice can be issued to registered taxpayers and unregistered individuals as well.