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Credit Note with GST from Supplier

Bhavesh (Accounts) (172 Points)

11 March 2025

Hello Freinds, we have purchased a computer from computer system from a vendor of 2 qty. but any how we dont like the monitor and we have returned the 2 qty. the supplier has raised the credit note with gst, so how to accounts the invoice raised with gst in our books of account.

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Rama chary Rachakonda (Master in Accounts & high court Advocate email ID:ramachary64@gmail.com voice no:9989324294) (8171 Points)
Replied 11 March 2025

A common scenario involving a purchase return and credit note with GST. Accounting Treatment: 1. *Initial Purchase*: When you purchased the computers, you would have recorded the transaction as a purchase, including the GST input credit. 2. *Purchase Return*: When you returned the computers, you should reverse the initial purchase entry, including the GST input credit. Journal Entries: 1. *Initial Purchase*: Debit: Computer Account (Asset) = Purchase Value + GST Credit: Vendor's Account (Liability) = Purchase Value + GST Credit: GST Input Credit Account = GST Amount 2. *Purchase Return*: Debit: Vendor's Account (Liability) = Purchase Value + GST Credit: Computer Account (Asset) = Purchase Value + GST Debit: GST Input Credit Account = GST Amount Credit Note Accounting: 1. *Credit Note Receipt*: When you receive the credit note from the supplier, you should record it as a reduction in the vendor's liability. 2. *Journal Entry*: Debit: Vendor's Account (Liability) = Credit Note Value + GST Credit: GST Input Credit Account = GST Amount (if applicable) GST Input Credit: 1. *Reversal of GST Input Credit*: Since you returned the computers, you should reverse the GST input credit claimed initially. 2. *GST Input Credit Account*: Debit the GST Input Credit Account to reverse the input credit claimed. Ensure you maintain accurate records and follow the correct accounting treatment to reflect the purchase return and credit note in your books of account. Consult a tax professional or accountant if needed.

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Areeba Nishat (20 Points)
Replied 23 May 2025

A credit note with GST from a supplier is typically issued when there's a need to adjust a previously issued tax invoice—like in cases of returned goods, excess billing, or discounts post-sale. It should clearly mention the original invoice reference, the corrected amounts, and the GST adjustments.

Make sure:

The supplier includes their GSTIN and your GSTIN.
The credit note has the revised taxable value and GST amount.
It’s reported in their GSTR-1, and you reflect the adjustment in your GSTR-2A/2B or GSTR-3B accordingly.

Always verify the note aligns with GST compliance rules to avoid mismatches during reconciliation