Credit note

In simple words If you are issuing credit note means you are just crediting the customer / opposite party with some amount instead of giving cash.

Then such credit note issued to such party will be adjusted for payment in the subsequent purchase.

Under GST the credit note may be issued in case there is variation in invoice value after issue of such invoice i.e. Its is issued when there is downward revision of prices.

Circumstances -

1) Taxable value in the invoice is more than actual taxable amt.
2) Tax charged is more than actual tax.
3) When there is sales retuns happens.
4) Goods sold found to be defective or not of good quality.

Example : If A sold goods woth Rs. 100 to B. B paid Rs. 100 and afterwards returned goods woth Rs. 20 because of some defects. A will issue credit note for Rs. 20 which can be adjusted in the subsequent purchase by B.