Once an invoice is issued you cannot just edit it. If goods come back or the price changes, you correct the books with a credit note or a debit note, linked to the original invoice.
Credit note: when is it issued?
Under Section 34 of the CGST Act, a supplier issues a credit note when:
- The taxable value or tax charged in the invoice is more than what was actually due.
- Goods supplied are returned by the recipient.
- Services are found to be deficient.
Debit note: when is it issued?
A supplier issues a debit note when the taxable value or tax charged in the invoice is less than what was due, for example a price revision upwards. It increases the supplier's tax liability.
In the GST law, credit and debit notes are issued by the supplier. In day-to-day bookkeeping, businesses also use a debit note to record goods returned to a vendor. Rashtra Bill supports debit notes against vendors for that purpose.
Details a credit or debit note must carry (Rule 53)
- Name, address and GSTIN of the supplier.
- The words "credit note" or "debit note".
- A consecutive serial number (up to 16 characters) and the date of issue.
- Name, address and GSTIN of the recipient, or name, address and state for an unregistered recipient.
- Serial number and date of the original tax invoice.
- Taxable value, rate of tax and the amount of tax credited or debited.
- Signature of the supplier or authorised representative.
Time limit and reporting
A credit note relating to an invoice of a financial year can generally be issued up to 30 November following the end of that year, or the date of filing the annual return, whichever is earlier. Credit and debit notes are reported in the return for the month in which they are issued: in GSTR-1 for registered buyers (CDNR) and unregistered buyers (CDNUR).
Conditions around input tax credit reversal by the recipient have been introduced in recent years. Ask your CA before adjusting tax liability for a credit note.
Credit notes in Rashtra Bill
Pick the original invoice, choose the items and quantities being returned or corrected, and the credit note is created with the tax already worked out. Credit notes and debit notes have their own registers and appear in the GSTR-1 note reports, so your accountant sees them in the right place.
Frequently asked questions
Can I edit an invoice instead of issuing a credit note?
Once an invoice has been issued and reported, the correct way to adjust it is a credit or debit note (or an amendment where the law allows), not silently editing the invoice.
Does a credit note reduce my GST liability?
It can, subject to the conditions in Section 34. The rules have changed over time, so confirm with your CA.
This guide is general information for small businesses, not legal or tax advice. GST rules, rates and thresholds are changed by notification, so check the current position on the GST portal or with your chartered accountant before acting.