In any given business, financial instruments such as a debit note, credit note, and invoice play a vital role both for the business that supplies goods or services to customers and recipients (customers) of the goods or services to whom the goods or services are supplied by the respective business entity. As such, both debit and credit notes cannot be avoided, rather, should be issued by the business in relation to the system of returns. It is also crucial for businesses to account for these financial instruments under GST.

As soon as you file your returns, it will become a little complex to make modifications to the transactions of that unique month, mainly invoices. GST has fundamentally changed a lot of methods around the taxation system. It has a focal point to have a free float of input tax credit to the recipient, with monthly reporting of each and every invoice issued for a transaction. The state of affairs is such that any inadvertent omission of an invoice from the monthly go back shall lead to truncation of credit score.

Hence, invoices are a critical part of the GST regime and cover a range of essential aspects like date, HSN/SAC codes, IGST, CGST, SGST rates, the taxable price of the products or services, etc. All these facts ought to be fed into the returns on a month-to-month foundation to determine the quantity of tax payable or credit to be availed.

In this post, we are going to learn about these financial instruments – debit note, credit note and invoice and also show you how to furnish an invoice that is issued under GST by the supplier to his/her recipient.

What is a Debit Note under GST?

In GST, a debit note basically refers to a document or instrument that is issued by the supplier of goods or services when the need for the following arises:

(i) Increase in Taxable Value

The supplier of goods or services must issue a debit note to his/her recipient if there is a need to increase the taxable value of the supply.

(ii) Increase in GST Rate Charged in Invoice:

The supplier of goods or services must issue a debit note to his/her recipient in case there is a need for increasing the rate of GST charged for the goods or services and the same is to be mentioned in the invoice.

What is a Credit Note under GST?

In GST, a credit note refers to a document or instrument that is issued by the supplier of goods or services when the need for the following arises:

(i) Supplies are Returned or Found Deficient by Recipient

The supplier of goods or services must issue a credit note to his/her recipient in the situation when the recipient returns the goods or services to the supplier or that the recipient discovers a deficient in the goods or services that was supplied to him/her. Issuing credit note to the recipient helps in serving the purpose of reducing the value of the original supply of the goods or services by the supplier.

(ii) Decrease in Taxable Value

The supplier of goods or services must issue a credit note to the recipient(s) in the case when the supplier decides to decrease the taxable value of the goods or services.

(iii) Decrease in GST Rate Charged in Invoice

The supplier of goods or services must issue a credit note to the recipient(s) in the case when the supplier has the need to decrease the value or rate of GST charged for the goods or services in the invoice.

What is a Revised Invoice in GST?

Taxable dealers are mandated to apply for the provisional registration under GST and perform all the necessary formalities, after which they will be given the permanent registration certificate.

For all the invoices issued between the period:

• Date of implementation of GST
• Date of issue of Registration certificate

The dealers ought to issue a revised bill in opposition to the invoice already issued between the said period. The revised bill must be issued within one month from the date of issue of the registration certificate.

What Details are Included in Debit and Credit Notes?

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

• Nature of the document must be indicated prominently, such as ‘revised invoice’ or ‘supplementary invoice’.

• Name, address and GSTIN (Goods and Services Tax Identification Number) 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 recipient is registered, then name, address and GSTIN/Unique ID number of the recipient is required.

• If recipient is unregistered, then name, address of recipient and address of delivery, with state name and code is required.

• Serial number and date of the original tax invoice or bill of supply.

• Taxable value of the goods or services, rate of tax and the amount of tax credited or debited to the recipient.

• Signature or digital signature of the supplier or his authorized representative.

A debit or credit note can be issued when it is required, meaning there may be no time restriction for issuing a debit note to the recipient. Also, the issuing of debit notes and credit notes ought to be declared in the GST returns filed within the following month for the month in which the report is issued.

The details should be declared on earlier of the following dates:

• September following the end of the year in which such supply was made.
• The date of submitting of the applicable annual return.

How To Revise An Already Issued Invoice Under GST?

Details of debit and credit note in GST needs to be furnished in the normal tax cycle.

Debit Note in GST

Details of debit notes issued should be furnished in Form GSTR-1 for the month in which the debit note is issued. These details will be made available to the recipient in Form GSTR-2A, post which the recipient has to accept the details and submit in Form GSTR-2.

Please note that a debit note can be raised by a recipient also, when the goods received are returned, damaged in transit, taxable value shown in the invoice is more than the actual or tax charged is more than the actual. However, under GST, debit note furnished by a supplier will only be considered for revision in the value of an invoice. The same has to be accepted by the recipient for corresponding impact on input tax credit on the supply.

Credit Note in GST

The details of credit note issued in a month should be furnished by suppliers in Form GSTR-1. The recipient of the supply will receive these details in Form GSTR-2A, post which the recipient has to accept the details and submit in Form GSTR-2. A point to note here is, that a supplier will be allowed to reduce his tax liability via a credit note only if the recipient of the supply accepts the credit note details in Form GSTR-2. Once this is done, the recipient’s input tax credit will be reversed to the extent of the credit note and the supplier’s tax liability will also be correspondingly reduced.

Please note that a credit note can also be issued by the recipient of a supply, in cases such as when the taxable value shown in an invoice for an inward supply is less than the actual, or, tax charged for an inward supply is less than the actual. However, in these cases, revision in the values of an invoice will only be considered when a supplier issues a corresponding debit note for the supply. The details of debit note issued have to be furnished by the supplier and the same has to be accepted by the recipient. Subsequently, the tax liability of the supplier and input tax credit of the recipient will be modified accordingly.

There can be a state of affairs where an invoice has been wrongly issued, or there are sure changes which might be required in an already issued bill. Such situations name for a rectification of invoices. All such rectification must be said accordingly within the monthly returns.

Revision of tax invoices can take area in a number of ways. There can be a downward or an upward revision in charges of products or services being supplied, or there can be a alternate the inside the charge of tax of GST or many other cases. These instances render a change in the issued invoice. An upward revision may be catered to with a supplementary bill. Similarly, a downward revision can be catered to the usage of a credit notice to that effect. In some cases, there may be a whole revision inside the bill; hence, a revised bill must be issued.

However, revised invoices have no longer been defined separately in the GST regulation as of now. Currently, all registered taxable individual have been granted a provisional GSTIN. After having completed necessary formalities, he/she shall be provided with a proper registration number under GST. All invoices raised between the date from which GST is relevant and the date on which they get the formal GSTIN, such taxable registered person shall be required to issue a revised invoice/bill. This revised invoice will be in adherence to the terms of the GST law and needs to be issued within 1 month from the receipt of unique registration certificate.

It is apparent from the above that a registered taxable individual can not issue a revised invoice after receipt of the registration certificate.