CREDIT NOTE UNDER GST

Credit Note under GST

Definition

“credit note” means a document issued by a registered person under sub-section (1) of section 34.

Section 34 of CGST Act:

  • (1) Where a tax invoice has 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 a credit note containing such particulars as may be prescribed.

  • (2) Any registered person who issues a credit note in relation to a supply of goods or services or both shall declare the details of 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: Provided that 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.

Instances where Credit Note is issued:

In the following instances, the Credit Note is issued by he supplier:

  • The supplier has erroneously declared a value which is more than the actual value of the goods or services provided.

  • The supplier has erroneously declared a higher tax rate than what is applicable for the kind of the goods or services or both supplied.

  • The quantity received by the recipient is less than what has been declared in the tax invoice.

  • The quality of the goods or services or both supplied is not to the satisfaction of the recipient thereby necessitating a partial or total reimbursement on the invoice value.

The credit note is therefore a convenient and legal method by which the value of the goods or services in the original tax invoice can be amended or revised. The issuance of the credit note will easily allow the supplier to decrease his tax liability in his returns without requiring him to undertake any tedious process of refunds.

Format of Credit Note:

There is no prescribed format but credit note issued by a supplier must contain the following particulars, namely:

  • name, address and Goods and Services Tax Identification Number of the supplier;

  • nature of the document;

  • 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;

  • date of issue;

  • name, address and Goods and Services Tax Identification Number or Unique Identity Number, if registered, of the recipient;

  • name and address of the recipient and the address of delivery, along with the name of State and its code, if such recipient is un-registered;

  • serial number and date of the corresponding tax invoice or, as the case may be, bill of supply;

  • value of taxable supply of goods or services, rate of tax and the amount of the tax credited to the recipient; and

  • signature or digital signature of the supplier or his authorised representative.

Specimen format of Credit Note:

Maintenance of Records:

The records of the credit notes have to be retained until the expiry of seventy-two months from the due date of furnishing of annual return for the year pertaining to such accounts and records. Where such accounts and documents are maintained manually, it should be kept at every related place of business mentioned in the certificate of registration and shall be accessible at every related place of business where such accounts and documents are maintained digitally.

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