Credit note

Credit Note Under GST

What are Credit Notes?

Similar to the debit notes, credit notes are issued there will be a negative impact on your accounting balance of goods or services supplied.

There are situations when you issued an invoice but your client is not happy with the received products or services there is a discordance in your invoice. In such cases, there will be a negative impact on your accounting balance so you will have to issue a credit note.

 Sometimes, the purchaser is unhappy with the quality of product shipped to him. In that case, he returns goods to the supplier, and in that return, the supplier will have to issue the credit note to the extent of the value of the goods being returned. There is no predefined format in which the credit note has to be issued; rather it is an allusion to the purchaser about such credit being offered.

 Credit Notes Under GST

 Credit notes have to be issued by a taxable person, where there is a lack of products supplied and for which there is no payment to be made by the purchaser.

 The credit note has to be issued based on an original invoice already issued. The original invoice will get reduced to the extent of such credit notes. In some cases, the original invoice value can become zero.

 Credit notes can be issued in the following cases:

 When the goods supplied are returned by the customer

  1. When the supplier has charged excess value and/or excess tax charged than required,

  2. When the quantity received by the client is less than what appears on the tax invoice issued;

  3. When the supplier has declared a value more than the actual value of the goods or services provided;

 Such credit notes must be mentioned in the returns of the following month about which the credit note has been raised. Unlike debit notes where there is no time limit for issuance, credit notes have to be declared in earlier of the following dates: 

  1. Annual return filing date or,
  2. By the 30th of September, following the year to which credit notes relate to.

From the above we can analyze that the due date of filing of annual return is 31st December and where the annual return is filed after 30th September, then the credit notes have to be declared on 30th September.

 

What is the credit note format?

Based on the government regulations, a credit note under GST must contain the following:

  1. Name, address and GSTIN of the supplier;
  2. Nature of the document – i.e. Credit Note;
  3. Unique Identification number for the financial year(UID);
  4. Date of issue;
  5. In the case of registered recipient: Name, address, GSTIN of recipient;
  6. In the case of unregistered recipient: Name, address of recipient, address of delivery along with State Name and State Code;
  7. Serial number and date of the corresponding tax invoice (or bill of supply);
  8. The taxable amount of goods or services, the rate and amount of tax credited to the recipient;
  9. Signature or digital signature of the supplier, or an authorized representative;


Credit notes can be issued in the following cases:

When the goods are returned by the recipient

When the supplier has charged excessive tax, where a lower rate should have been charged.

When the goods supplied are of inferior quality, and the same is returned to the supplier

Credit notes must also mention the details as noted above in case of debit notes. The particulars are the same in this case as well. Such credit notes must be mentioned in the returns of the following month about which the credit note has been raised. Unlike debit notes where there is no time limit for issuance, credit notes have to be declared in earlier of the following dates:

 

Annual return filing date or,

By the 30th of September, following the year to which credit notes relate to.

From the above we can analyze that the due date of filing of annual return is 31st December and where the annual return is filed after 30th September, then the credit notes have to be declared on 30th September.

 Where the input tax credit and interest on such invoice are already passed on to another registered person, then such credit note shall have no effect on reduction of output tax liability.

 A credit note can be issued after a tax invoice when the taxable value and tax charged in the invoice is more than the taxable value or tax chargeable for the supply. Hence, the following are instances when a taxpayer can issue a credit note to the customer:

 

When tax invoice is found to exceed the value of supply

When goods are returned by the customer

When goods are found to be deficient

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