Benefits of Debit Notes delinked from Sale Invoices under GST

CA. Heet Shah | Last updated: 12 September 2022

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Quick Summary

Since January 1, 2021, a key amendment to the CGST Act, 2017, has delinked the issuance date of debit notes from their original sale invoices for Input Tax Credit (ITC) purposes. This means debit notes issued after this date are no longer tied to the invoice date for claiming ITC. Consequently, the time limit for claiming ITC on debit notes is now linked to the debit note's issuance date, not the original invoice date, offering greater flexibility.

With effect from 01.01.2021, section 16(4) of the CGST Act, 2017 was amended vide the Finance Act, 2020, so as to delink the date of issuance of debit note from the date of issuance of the underlying invoice for purposes of availing input tax credit.

The amendment made is shown as: "A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier." As can be seen, the words "invoice relating to such" were omitted w.e.f. 01.01.2021.

Therefore, Debit Notes (hereafter as "DN") issued prior to 01.01.2021 will be linked to the invoice for considering the last date of availing ITC, whereas same would not be linked to the debit notes issued after 01.01.2021

GST Debit Notes: Benefits of Delinking from Sale Invoices

Therefore, even if invoice is issued in 2020-21 but if debit note is raised in Apr-21 then the credit for the same could be availed until Sep-22. One should take the note of the same and clam the credit accordingly.

It is important to understand that the section 34 of CGST which provides time limits for issue of Credit notes (hereafter as "CN") and but it does not provide any time limit for DN Further to this section 16(4) provides the time limit for a claim of ITC for such DN is not linked to the Invoice for such supply and same shall be construed as a "supplementary invoice". Therefore DN can be issued at any time and the ITC thereof would be linked to such debit notes and not invoices for such supply.

The time limits for CN is restricted to return of September following the end of the FY in which such supply is made or date of furnishing the relevant annual return, which ever is earlier.

Inv Date	DN Date	Last date to claim ITC	Remarks
01-03-2020	05-04-2020	20-10-2020	Sep following the end of FY to which such invoice pertains
01-03-2021	05-04-2021	20-10-2022	Sep following the end of FY to which such DN pertains
01-03-2022	05-04-2022	20-10-2023	Sep following the end of FY to which such DN pertains

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Attached File : 2089259_47724_benifits_of_delinkng_debit_notes.pdf

FAQ :

The change came into effect from January 1, 2021, through an amendment to section 16(4) of the CGST Act, 2017.

Debit notes issued after January 1, 2021, are no longer linked to the original invoice date for claiming ITC. The ITC claim period is now determined by the debit note's issuance date.

The ITC for a debit note issued after January 1, 2021, can be availed until the due date of furnishing the return for September following the end of the financial year to which the debit note pertains, or the furnishing of the relevant annual return, whichever is earlier.

The article states that section 34 of the CGST Act provides time limits for issuing credit notes, but not for debit notes. Therefore, debit notes can be issued at any time.

Debit notes issued before January 1, 2021, are linked to the invoice date for ITC claim deadlines. Debit notes issued after January 1, 2021, are not linked to the invoice date; their ITC claim is linked to the debit note's issuance date.