Credit Note, Debit Note and Revised Invoice Under GST

| 1 year ago

 credit note

Often business transactions are adjusted or amended due to various reasons and this leads to change in previously issued invoices.

In this article, we will learn how to adjust previous invoices with credit note or debit note accordingly.

 

Credit Note [Section 34(1) CGST Act]

Issued by- The Registered Supplier

Issued To- The Recipient of Supply

Situations where Credit notes are issue-

  1. If the value of goods/services charged in previous invoice was excess; or
  2. If GST charged in previous invoice was excess; or
  3. Supplied goods or services were deficient from what mentioned in previous invoice; or
  4. Goods returned by the recipient

Supplier shall declare such credit note in the return for the month during which such credit note has been issued but not later than September following the end of the financial year in which such supply was made, or the date of furnishing of the relevant annual return, whichever is earlier, and the tax liability shall be adjusted in such manner as may be prescribed. [Section 34(2) CGST Act]

After the issue of credit note, GST liability of supplier will get reduced. 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.

 

Example: On 1st January 2018 Mr.Ram sells 5 Mobile of Rs.11,200 each (10000+12% GST) to Mrs.Neha. On 10th January 2018, Mrs.Neha returns 2 Mobile. Show journal entry in Mr.Ram books.

Solution:

                                           In the Books of Mr.Ram
01-01-2018 Mrs.Neha A/c……………… Dr 56000
To Sales 50000
To Output CGST 3000
To Output SGST 3000
(Being 5 Mobile sold)
01-01-2018 Bank A/c……………… Dr 56000
To Mrs.Neha A/c 56000
(Being money received from sale of 5 Mobiles)
10-01-2018 Sales Return A/c……………… Dr 20000
Output CGST…………………… Dr 1200
Output SGST…………………… Dr 1200
To Mrs.Neha A/c 22400
(Being 2 mobile returned and CREDIT NOTE ISSUED)
10-01-2018 Mrs.Neha A/c…..……………… Dr 22400
To Bank A/c 22400
(Being money paid due to sales return of 2
Mobiles)

 

 

Debit Note or Supplementary Invoice  [Section 34(3) CGST Act]

Issued by- The Registered Supplier

Issued To- The Recipient of Supply

Situations where debit notes are issue-

  1. If the value of goods/services charged in previous invoice was less; or
  2. If GST charged in previous invoice was less

Registered person (issuer) shall declare the details of such debit note in the return for the month during which such debit note has been issued and the tax liability shall be adjusted in such manner as may be prescribed.

Under GST, Debit note is also known as Supplementary Invoice

 

Example: On 1st January 2018 Mr.Ram sells 4 Mobile of Rs.11,200 each (10000+12% GST) and 1 extra mobile valued at Rs.6,720/- (6000+12 GST) as a SAMPLE to Mrs.Neha. On 10th January 2018, Mrs.Neha confirms the purchase of Mobile which was previously taken as the SAMPLE. Show journal entry in Mr.Ram books.

Solution:

                                                 In the Books of Mr.Ram
01-01-2018 Mrs.Neha A/c……………… Dr 44800
To Sales 40000
To Output CGST 2400
To Output SGST 2400
(Being 4 Mobile sold and 1 taken as SAMPLE)
01-01-2018 Bank A/c……………… Dr 44800
To Mrs.Neha A/c 44800
(Being money received from sale of 4 Mobiles)
10-01-2018 Mrs.Neha A/c……………… Dr 6720
To Sales 6000
To Output CGST 360
To Output SGST 360
(Being sale of SAMPLE unit confirmed and a
DEBIT NOTE is ISSUED)
10-01-2018 Bank A/c……………… Dr 6720
To Mrs.Neha A/c 6720
(Being money received from sale of 4 Mobiles)

 

Revised Invoice [Section 31(3) CGST Act] 

GST registration certificate has 2 dates-

  1. Date of Issue of Certificate
  2. Effective date of Registration a.k.a. Date of liability

A person’s GST liability arises from the date of registration also known as the effective date of registration. However, registration is confirmed on the date of issue.

In a case where the effective date of registration is before the date of issue of the certificate, such registered person has to issue revised invoices or Bill of Supply for invoices issued between these 2 dates.

A revised invoice should be issued within 1 month from the date of issuance of the certificate of registration.

Such person may issue a consolidated revised tax invoice in respect of all taxable supplies made to an unregistered recipient.

However, in the case of inter-State supplies, where the value of such supply does not exceed Rs.2.5 lakh, a consolidated revised invoice may be issued for all the unregistered recipients located in a State.

 

Format of Revised tax invoice and credit or debit notes [Rule 53 of CGST Rule]

There is no prescribed format but it must contain the following particulars, namely:

  1. the word “Revised Invoice”, wherever applicable, indicated prominently;
  2. name, address and GSTIN of the supplier;
  3. nature of the document;
  4. a consecutive serial number not exceeding sixteen characters, in one or multiple series, containing alphabets or numerals or special characters hyphen or dash and slash symbolised as “-” and “/” respectively, and any combination thereof, unique for a financial year;
  5. date of issue of the document;
  6. name, address, and GSTIN, of the recipient, if registered;
  7. name and address of the recipient and the address of delivery, along with the name of State and its code, if such recipient is unregistered;
  8. serial number and date of the corresponding tax invoice or, as the case may be, bill of supply;
  9. value of taxable supply of goods or services, rate of tax and the amount of the tax credited or, as the case may be, debited to the recipient; and
  10. Signature or digital signature of the supplier or his authorised representative.

 

Relevant FAQs

Q 1: Does Credit note have GST?

Ans: Yes, credit note contains GST amount which is reversed in relation to original or previous invoice. Credit note causes a reduction in Output GST liability for the supplier.

Q 2: How to treat following transaction in GST (i) Delivered supply shortages in Transit. (ii) A customer gets less quantity and pays less.

Ans: The supplier may issue a credit note to the customers.  

 

 

Source: CGST Act, 2017 and CGST Rule

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