Bad debt Recovery

Credit note is issued if the amount of liability we have to pay is decreased.Your case is reverse, so you can't issue Credit Note.

Pls correct me if I am wrong.

You can issue one if you are interested in waiving off the debt to your debtor.

A credit note under Section 34 of the CGST Act is valid only for: goods returned, deficiency in services, or agreed post-supply discounts. Non-payment by the customer is not a recognized ground for issuing a credit note under GST.

Unlike the old VAT system, GST has no bad debt relief mechanism. If you have already paid GST on this invoice in GSTR-3B, that amount is not recoverable from the government because the buyer has defaulted.

For recovery of the outstanding amount, the options that remain:

- Legal demand notice followed by a civil suit in civil court

- MSME Samadhan portal if you are an MSME supplier (free and faster than courts)

- Reference to buyer's lenders if they are under a structured credit facility

On the buyer's side: if they have claimed ITC on your invoice and have not paid you within 180 days, their ITC on that bill gets reversed under Rule 37 of CGST Rules. That is their liability, not a direct relief for you, but it can be useful leverage in negotiations.

This [ITC reversal and Rule 37 guide](https://taxgarden.in/blog/itc-reversal-rule-42-43-common-credit-capital-goods-gst-india-2026) has the complete breakdown on how 180-day payment tracking works.