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Purpose and Importance of Credit note and Debit note in GST

CA Somil Bhansali  
on 12 June 2017

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A. Credit Note

1. Purpose of Credit note (Section 34)

The credit note will be issued by the registered person (i.e. Supplier) to the recipient for the following purposes:

a. Where a tax invoice has been issued for supply of any goods or services or both and the taxable value in that tax invoice is found to exceed the taxable value in respect of such supply.

b. Where a tax invoice has been issued for supply of any goods or services or both and tax charged in that tax invoice is found to exceed tax payable in respect of such supply.

c. Where goods or services or both supplied are found to be deficient.

2. Time Limit to issue Credit note

The supplier shall declare the details of such credit note in the return for the month during which such credit note has been issued.

Maximum Time Limit
The credit can be issued at the earliest of the following:

September following the end of the financial year in which such supply was made. or
The date of furnishing of the relevant annual return (the annual return has to be filed not later than 31st December from end of the financial year)

However no reduction in output tax liability of the supplier shall be permitted, if the incidence of tax and interest on such supply has been passed on to any other person.

3.  Importance of Credit Note

Any amendment in original invoices for the reasons mentioned above has to be made only by way of issuing credit note and such credit note has to be shown while filing GSTR-1 by the supplier after which such reduction in value or tax will get reflected on the government portal and the same will be communicated to the recipient in GSTR-2A. After acceptance by the recipient such information will be taken to GSTR-2 of the recipient and the details of the original invoices will stand amended.

B. Debit Note (Section 34)

1. Purpose of Debit note

The debit note will be issued by the registered person (i.e. supplier) to the recipient for the following purposes:

  1. Where a tax invoice has been issued for supply of any goods or services or both and the taxable value in that tax invoice is found to be less than the taxable value in respect of such supply.
  2. Where a tax invoice has been issued for supply of any goods or services or both and tax charged in that tax invoice is found to be less than tax payable in respect of such supply.

2. Time limit to issue Debit note

The supplier who issues a debit note in relation to a supply of goods or services or both shall declare the details of such debit note in the return for the month during which such debit note has been issued. However there is no maximum time limit to issue debit note as provided in case of credit note.

3. Importance of Debit note

The importance of debit note is same as that of credit note as mentioned above.

For video presentation please see this video as attached below.


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