Supplier who is issuing credit note/Debit Note will declare the details of credit note/Debit Note issued under GSTR-1 of that month or later 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. Credit Note and Debit Note Information (GST/HST) Regulations s 2. Site Map || As per circular 92/11/2019 GST dated 07.03.2019, credit notes are not permitted to be issued in case secondary discounts are allowed by the supplier since the tax liability of the supplier does not get reduced in such case. Privacy |, ©Taxmanagementindia.com A unit of MS Knowledge Processing Pvt. What is the credit note / debit note format? Credit Notes in GST-Adjustment of tax liability. How to disclose Credit Note issued in the FY 2017-18 and disclosed in Form GSTR-1 of the FY 2017-18? If goods supplied are returned by the customer i.e. Required fields are marked *, Notice: It seems you have Javascript disabled in your Browser. only if both the conditions mentioned in i) and ii) under b) are fulfilled by the supplier then credit note can be raised with GST. Then, the original amount due PLUS the debit note is the revised value of supply, that the customer pays the supplier. A supplementary invoice is issued whenever there are errors in the original tax invoice. In net effect the customer (supplier) avoids paying GST on sales return to the supplier by converting the transaction into fresh sales. BOI Balance Enquiry. While point a) is clear, point b) is subjective i.e. (iii) It may also be noted that no time limit has been prescribed for issuing debit notes. Furthermore, it will also explain the impact of issuance of credit note on output tax liability. No acceptance of credit note from vendors post-September No GST credit note for any procurements in … Tax charged in the original tax invoice is higher than that applicable on the supply; 3. The effect of this discount is given by issuing credit note. GSTN Portal introduced a utility whereby delinking of Debit and Credit Notes with Individual Tax Invoices was provided. Discount is sometime given to induce customer for early payment or to recover a long pending dues. Patronage dividends para 3(e) 18. for which credit note with GST can be raised. Goods supplied are returned by the recipient; 4. (ii) A customer gets less quantity and pays less. Ltd. All rights reserved. The supplier may issue one or more credit notes for supplies made in a financial year through one or more tax invoices which have been issued by him earlier; b. Credit Note accounted in the Audited annual financial statement but not in GST Aggregate value of credit notes which have been taken in audited annual financial statement but not considered as credit note in CGST act (Section 34 of CGST Act) will be considered in this field Needless to mention that credit note with GST can be issued only up to six months from the end of the financial year to which the original invoice pertains to. This was a long-standing demand of the stakeholders who were facing issues of matching each Debit or Credit Note with each individual Tax Invoice raised by the supplier of the goods or services. 1. Contact us | It is important to recognize that credit notes (and even debit notes) are issued to record a bilateral agreement where treatment of credit note in issuersuppliers’ books (and GST records) must be mirrored in the recipient-customers’ books (and GST records). Section 34(2) is not talking about issue of credit note, but discussing adjustment of credit note issued. Sir, credit note without GST need not be furnished in the return. Thus, the customer prefers the credit note with GST at least till September month following the end of the financial year to which the original supply pertains to. The condition is that the supplier can reduce GST liability thru credit note only if the customer reverses the input tax credit. Now the GST portal doesn’t ask for “original date and number of the tax invoice” as credit debit note is delinked from original invoice on the common portal. However for the situations mentioned in point ii) and iii) of sec. In the past, taxpayers had to issue separate credit or debit notes for every relevant tax invoice raised in a financial year under GST. Person issuing credit note to declare details in the return for the month during which it has been issued. Delinking of Debit Notes w.r.t Original Tax Invoices for availing GST Credit. The term “intermediary” of a person means, in respect of a supply, a registrant who, acting as agent of the person or under an agreement with the person, causes or facilitates the making of the supply by the person. You May Also Read Tax Invoice Vs Bill of Supply Sec. Since it has a commercial impact, the same has to be informed or declared in GST returns in the month to which it prevails. Sri Alkesh Ji, thanks for your compliment and kind suggestion. Therefore, the discount given after the supply is pre-determined and satisfies the condition of the clause (b) of sec 15(3). Time limit for issuance of credit notes – As per GST Law, credit note pertaining to supplies made in F.Y 2019-20 can be issued not later than the due date of filing of GSTR-3B for September 2020, i.e. Typically, a debit note is raised for accounting purposes. This indicates that credit note can be raised without GST. They passed credit note with out GST saying it is commercial credit note as they can not link the products to the original invoice. And the buyer as an acknowledgment to the receipt of Debit Note issues a Credit Note.The reason behind this – In the seller’s books of account the buyer will have a debit balance. However, there are circumstances when an already issued invoice needs to be amended due to the rejection of a few products or add up a few products as the case may be. Keynote: Financial credit note can be issued. If taxable value or tax in the tax invoice was charged more. April 1, 2021, 13 Suggestion to FM for Simplification of GST (Hindi & English), Remittance Abroad – Form No. The customer (in fact, the supplier) will also be able to claim input tax credit based on fresh invoice. The word ‘may’ has been used in the said provision. It means that more amount is required to be paid by the buyer to the seller to settle his liability. On the other hand, the recipient of tax may be imposed to reverse the input tax credit that had been availed thereon. If such credit notes are issued by the supplier, both supplier and customer do not need to adjust the value … Based on the rules prescribed by the Government, here is … Every credit note must be linked to specific original tax invoice(s); 9. Even if one attempts to issue cr note without GST which is needless it will only add up to the already increased work load in GST. Here, since, condition of clause (b) of sec 15(3) is not satisfied the supplier cannot raise credit note with GST. Exemption from E-Invoicing under GST: Special Economic Zones, (SEZ) Insurer, Banking Co., any Financial Institution and Non-Banking Financial Institution. In case of financial / commercial credit notes recipient need not reverse ITC attributable to the tax already paid on such secondary discount received by him through this financial / commercial credit notes by the supplier, If he pays the value of the supply as reduced after adjusting this financial / … GST treatment will greatly vary based on the answers to these questions. • Whether Customer / Dealer is required to reverse ITC, if financial credit note is issued by supplier, in terms of second proviso to Sec 16(2) of CGST Act 2017 • Finally said issues has been examined by government and clarified vide Circular No 105/24/2019 GST dated 28th June 2019. Date of issue. It is further clarified that any credit notes issued after expiry of time limit specified under Section 34(2), there is no requirement to declare such credit note on the common portal by the supplier as tax liability cannot be adjusted in such case. We cannot ignore the credit note format which has GST inbuilt followed by filing mechanism which requires GST amount to be reported. (iv) Except in the circumstances specified, credit note or debit note is not permitted to be issued merely because a financial adjustment is required to be made in respect of the receivable or payable. Benefits. Invoicing is an important function of a business, through this only revenue reaches the stakeholders. Further, Section 15(3) allows the supplier to raise credit note with GST for discount. Ans: Yes, credit note contains GST amount which is reversed in relation to original or previous invoice. ||. 09 February 2018 Hi, I raise a credit note against an export invoice for the month Nov-17. Method of raising credit note is being given by CBIC vide Circular No. 1. Credit Notes in GST Introduction. Build efficiency within the tax administration by helping to identify fake invoices. However, such a debit note has no relevance under GST. Thereafter the supplier can issue a financial credit note i.e. 34(1), credit note to be issued with GST. The details of credit notes issued in a month should be furnished by suppliers in Form GSTR-1. Hence, they are not … The consecutive serial number which is a unique number for every financial year 5. However, under GST, debit note furnished by a supplier only will be considered for revision in the values of an invoice. Note: When a credit note is issued, it must be accompanied by a supplementary invoice. However, he cannot claim a reduction in tax liability. About us | There is no need for you to issue credit note ideally.. just avail the ITC of gst recorded in debit note issued by supplier. | Hence, if a credit note is issued after September 2020 for any supply made during FY 2019-20, then GST … How to report Financial Credit Note issued by the supplier in the Annual Return? Now, if the supplier charges a penalty for delayed payment of consideration, the supplier would issue a debit note for the amount of penalty, to the customer to declare that money is ‘OWED’ to the supplier. GST (GOODS AND SERVICES TAX) Credit Note in GST. You can issue credit notes for a financial year in any month but not after September following the end of the finance year in which supply was made or the date of furnishing annual return whichever is earlier. Financial credit note is issued only to adjust the taxable value and not the tax in the books of account. Above circular 72 along with circular 92/11/2019- GST dated 7 Mar 2019 make it clear that (a) financial credits notes are extant practices in trade and (b) if tax adjustment is NOT made, then such credit notes are NOT to be reported in GSTR 1. 10,000/- and GST charged @ 18% so GST liability for that month was Rs. Join our newsletter to stay updated on Taxation and Corporate Law. Format of a credit note in GST. Sec.34(2) restricts the supplier to issue credit note with GST on sales return also. Post that period only financial credit note can be issued by the supplier. Now the GST portal doesn’t ask for “original date and number of the tax invoice” as credit debit note is delinked from original invoice on the common portal. which such supply was made, or the date of furnishing of the relevant annual return, whichever is earlier. 20th October 2020 or due date of filing of annual return, whichever is earlier. Financial Credit Note could form part of reconciliation statement between audited annual accounts and GST Return and hence may be required to be disclosed in the reconciliation statement in form GSTR-9C. The same has to be accepted by the recipient for the corresponding impact on input tax credit on the supply. The discount so given is generally not determined at the time of supply or before the supply. 900/- if – Bulk purchase discount is commonly called as volume discount. The person issuing the credit note shall declare the details in the return for the month in which the said credit note was issued but not after September following the end of the financial year in which the supply was made, or the date of furnishing of the relevant annual return, whichever is earlier. In case of a credit note issued for a discount, the discount must be provided in terms of an agreement entered into before or at the time of supply, as provided in Section 15(2) of the Act. Financial credit note is issued only to adjust the taxable value and not the tax in the books of account. Financial Credit Note & GST credit Note: Where credit note is raised with GST the supplier reduces his GST liability and the customer reversed his input tax credit. The below table is given for ease of understanding: Assumption for understanding above table: the customer has received the goods but payment has not been made by him to the supplier.And, the payment from customer is happening after considering credit note. GST takes care of credit notes as well, just like debit notes. • Can Supplier issue financial Credit Note without any GST. Experts caution against taking this issue lightly particularly when post-supply transactions are riddled with different interpretations of contractual understanding and applied to GST. @askGST_GoI cbecindia. 1.2 Debit Note – Section 2(38) means a document issued by a registered person under sub section (3) ofSection 34 of CGST Act, 2017. It is helpful to issue the credit note to your clients against discrepancies in the invoices issued earlier with relevant CGST, SGST, and IGST Computations. Based on the GST rules and guidelines, a credit / debit note should contain: Name, address and GSTIN of supplier. The conditions applicable on an issue of credit note are listed below: a. 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. Otherwise, only financial credit note can be raised to settle the accounts. Credit Note in GST. thanks in advance. Section 34 of the CGST Act specifies the credit notes for which a disclosure is required in the annual return. Such documents include tax invoice, debit note, credit note and bill of supply. Though the condition of Sec. Example: On 1 st January 2018 Mr.Ram sells 5 Mobile of Rs.11,200 each (10000+12% GST) to Mrs.Neha. To this extent, the GST thereon would also stand reduced, subject to conditions which have been discussed in the subsequent paragraphs. Terms | To this extent the GST thereon would also stand increased. As the GSTR 1 now can not be rectified for F.Y. Credit note causes a reduction in Output GST liability for the supplier. Credit note is issued when the issuer ‘OWES’ money to someone, that is, it is issued by the person who owes money. CA Final Result. A registered person may issue a consolidated credit note for multiple invoices issued in throughout a financial year. After the issue of credit note, GST liability of supplier will get reduced. Differences in data can be caught by comparing input credit and output tax. Meaning, a debit note may be raised and uploaded subsequently, with no restriction as to the time period for doing so. It is a document issued by the supplier of goods or services to the recipient where – a tax invoice has been issued for any supply of goods or services or both and: The invoice becomes a basic document for recording the transaction in books of accounts. Thus, the customer proposes or rather chooses to raise a tax invoice with GST on the sales return considering it as a fresh supply from his side. In any given business, financial instruments such as a debit note, credit note, and invoice play a vital role both for the business that supplies goods or services to customers and recipients (customers) of the goods or services to whom the goods or services are supplied by the respective business entity. The GST Law mandates that a registered supplier may issue one or more debit notes for supplies made in a financial year through one or more tax invoices which has been issued by him earlier under the following circumstances: a. 5,000 (10,000-5,000) i.e. Note: When a credit note is issued, it must be accompanied by a supplementary invoice. In order to regularize these kinds of situations, the supplier is allowed to issue a document called as GST Credit note to the recipient. Sec.34(1) of CGST Act, “Where one or more tax invoices have been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable in respect of such supply, or where the goods supplied are returned by the recipient, or where goods or services or both supplied are found to be deficient, the registered person, who has supplied such goods or services or both, may issue to the recipient one or more credit notes for supplies made in a financial year containing such particulars as may be prescribed.”, Sec. Showing Replies 1 to 3 of 3 Records However, under GST, debit note furnished by a supplier only will be considered for revision in the values of an invoice. 11 June 2019 While filing GSTR 1 credit note of one of my client for particular month is not entered by mistakenly but while filing GSTR 3B credit note is considered while taking total turnover (total turnover - sales return) and the GST is paid on net amount. Above circular 72 along with circular 92/11/2019- GST dated 7 Mar 2019 make it clear that (a) financial credits notes are extant practices in trade and (b) if tax adjustment is NOT made, then such credit notes are NOT to be reported in GSTR 1. Annual return has been filed for the FY in which the original tax invoice was issued; or. The customer reverses the input tax credit of ₹ 1/- which is attributable to the discount and refunds ₹ 99/- to the supplier after considering the discount of ₹ 5/-. Credit Note under GST. Debit note is issued when any money is ‘OWED’ to the issuer, that is, it is again issued by the person who is the receiver of money. Then, the original amount due MINUS the credit note is the revised value of supply that the customer pays the supplier. More than one debit note may be issued for a single invoice and also one debit note may be issued for … Discount may be given by supplier for bulk purchases done by the customer. The principal in this case may be applied to another similar case. GST Credit Note & Debit Note Format In India In a business, suppliers issue GST invoices quite frequently. The recipient, on declaring the same, must claim a reduction in his input tax credit if the same had been availed against the original tax invoice; 7. sales return. As stated in above tables the customer end up paying GST attributable to credit note to the supplier after September month. The customer has pool of input tax credit and he reverses the GST part from the credit ledger balance and pay only the value of goods returned or discount amount to the supplier. Sir, Please Explain how we adjust debit note of march 2019 when we filled return up to march 2020 gstr 1 and 3b both. Actual value of supply is higher than that stated in the original tax invoice; b. Actual value of supply is lower than that stated in the original tax invoice; 2. Another circular 105/24/2019-GST dated 28 Jun 2019 laid down some interesting and fundamental Contract law principles but was withdrawn ab initio (by 37th GST Council decision) without stating whether those principles were not applicable to GST or the circular was erroneous due to certain reasons. The details of credit notes issued in a month should be furnished by suppliers in Form GSTR-1. A credit note cannot be issued if the incidence of tax and interest on such supply has been passed by him to any other person; 8. According to my understanding section 34(2) is talking about adjustment of credit already issued with GST not with respect to supply. The customer has pool of input tax credit and he reverses the GST part from the credit ledger balance and pay only the value of goods returned or discount amount to the supplier. You need to issue a credit note, if the tax invoice has been issued earlier against material returned back by the customer. In order to show the details of the Credit/debit note in GSTR 1, follow the below steps. Here. Credit note in GST is defined under section 34 (1) of the CGST act 2017. a consecutive serial number containing only alphabets and/or numerals, unique for a financial year. Debit/Credit Note as per GST. If you have issued a tax invoice for supply of goods or services or both, and if later on it is found out that the amount or tax charged was higher or goods are returned or goods or services are found to be deficient, you may issue a credit note. So, that he can pay GST on the fresh supply out of the credit ledger balance. When a cash discount is allowed at the time of collecting payment from a customer in terms of an agreement entered into prior to the supply, then the supplier would issue a credit note to the customer to the extent of such cash discount, to declare that he ‘OWES’ money. ----- Page 4 04.06.2017 Contents of Supplementary tax invoice and Credit or Debit notes As per Rule 6 of Revised Invoice Rules 2017, a revised tax invoice or Debit or Credit notes shall contain following particulars: Click here to Download GST Credit Note Format In Excel Under GST 2017. Download particulars of Invoices, Vouchers, Debit or credit note and delivery challan. However, supplier can issue financial / commercial credit note(s) to reduce the value of supply payable by the recipient to the supplier. … the input tax credit attributable to discount is reversed by the customer. However, now, one credit/debit note shall suffice. 17. 15(3)(b) is not specified for these two points it is implied that the condition of clause ii) i.e. Credit note where tax adjustment is not involved need not even be filed on the portal as per this circular. 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Government working on Atmanirbhar Niveshak Mitra portal to digitally f... 1st Meeting of the BRICS Contact Group on Economic and Trade Issues held, GSTN Webinar on e-invoicing for taxpayers. Q 2: How to treat following transaction in GST (i) Delivered supply shortages in Transit. A registered person may issue a consolidated credit note for multiple invoices issued in throughout a financial year. Though there is no impact as the customer has already claimed input tax credit of ₹ 1/-. 15(3) “The value of the supply shall not include any discount which is given––, (a) before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply; and, (b) after the supply has been effected, if–, (i) such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; and, (ii) input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply.”. Based on the credit note the customer will reverse the input tax credit taken on his original inward supply. Definitely, I am discussing credit note with GST. In the first table, credit note is issued by the supplier with GST. v @CBEC_India. Recent || The output tax liability of the supplier gets reduced once Also, Sec. In other words, the output tax liability cannot be reduced in cases where credit note has been issued after September. date of issue of … Analysis of GST Provision on Credit Note: As per section 34(1), a supplier can issue a credit note with GST on following grounds: While point ii) and iii) are clear in terms of the reason for raising credit note with GST, point i) is open to cover various reasons like rate revision, cash discount etc. 15CA & Form 15CB – Lucidly Explained 18 FAQs. (vii) Credit note are also issued for accounting any unilateral treatment such as write-off of bad debts, etc., Therefore, care must be taken to identify (a) whether the CN-DN are to reflect a bilateral arrangement or unilateral arrangement (b) whether such CN-DN is harmoniously reflected in both parties books (and GST records) or not (c) whether such CN-DN are a reflection of pre-supply understanding with a contingency or a post-supply understanding reached subsequently (d) whether such CN-DN is a traditional document issued when in fact a tax invoice (from the other party) ought to be issued and (e) whether CN-DN is ‘earned’ by any activity by the recipient or is an ‘entitlement’ that is admitted subsequently.