GST SUB p4.7

What is Debit Note and Credit Note?

20 May 202

About:

When goods supplied are returned or revised in the invoice value due to goods or services not being up to the value or extra goods being issued, a Debit Note or Credit Note is published by the supplier and receiver of goods and services.

A debit note or a Credit Note can be issued in 2 conditions

When the amount paid by the buyer to seller is less –

A change in the value of goods after the goods are delivered and the invoice is issued by the seller. Due to a return of goods or return of bad quality of the goods delivered, etc. the value of goods reduces due to which a Debit Note is issued by the purchaser to the seller. The Debit Note conveys the details of the amount of money debited from the sellers’ account and also states the reason for the same. 

The reason behind this – In the buyer’s books of account the seller will have a credit balance. When a debit note is issued the credit balance of the Sellers account reduces. It means that a lesser amount is required to be paid by the buyer to the seller to settle his liability.

When the amount paid by the buyer to seller is more –

The value of invoice increases due to more goods being delivered or the goods already delivered have been charged at a wrong value. A Debit Note is required to be issued. The Debit Note is issued by the seller to the buyer. And the buyer as an acceptance of the receipt of Debit Note issues a Credit Note. The reason for this – In the seller’s books of account the buyer will have a debit balance. When a debit note is issued the debit balance of the buyer’s account increases. It means that more amount is paid by the buyer to the seller to settle his liability.

Debit Note under GST

A debit note has to be issued by the Supplier

• The difference between the tax invoice has been issued and taxable value in the invoice is less than the actual taxable value.

• The difference between the tax invoice has been issued and the tax charged in the invoice is less than the actual tax to be paid.

Credit Note under GST

Cases Where Credit note has to be issued by the Supplier

• The difference between the tax invoice has been issued and taxable value in the invoice exceeds the actual taxable value.

• The difference between the tax invoice has been issued and tax charged in the invoice exceeds actual tax to be paid.

• The recipient returns the goods to the supplier

• Services are found to be deficient.

Details to be covered in Debit Note and Credit Note

The name, address, and GST number of the supplier,

• nature of the document,

• date of issue of the document,

• name, address, and GST number or Unique ID Number, if registered, of the recipient,

• name and address of the recipient and the address of delivery, with the name of State and its code,

• the correct amount of the taxable value of goods or services, rate of tax and the amount of the tax credited or, as the case may be, debited to the recipient, and

• the signature or digital signature of the supplier or his recognized representative.