Where credit note is raised without GST the supplier does not reduces his GST liability and therefore the customer need not reverse the input tax credit already taken on purchases. Disclaimer | 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: Since it has a commercial impact, the same has to be informed or declared in GST returns in the month to which it prevails. However, under GST, debit note furnished by a supplier only will be considered for revision in the values of an invoice. And for determining whether GST can be charged on the credit note the supplier has to check whether he fulfills the condition given in section 15(3)(b). A supplementary invoice is issued whenever there are errors in the original tax invoice. Credit/Debit Note Treatment in GST The taxpayer needs to show the entries of credit/debit note raised by him in GSTR1 & GSTR 3B Returns. (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. Further, on review of table 5E and 5J of GSTR 9C, it is evident that such credit notes will suffer tax without any relief to recipient by way of tax adjustment. 34(1), credit note to be issued with GST. Contact us | 900/-But, GST liability will reduce from Rs. 6. Name: credit note or debit note. 09 February 2018 Hi, I raise a credit note against an export invoice for the month Nov-17. The consecutive serial number which is a unique number for every financial year 5. This position of law is also clarified vide Circular 72/46/2018 dated 26.10.2018 wherein it is clarified for claiming the reduction in output tax liability in case of return of goods (whether the goods have been expired or otherwise), the credit note should have been issued within the time limit specified under Section 34(2). Format of a credit note in GST More than one debit note may be issued for a single invoice and also one debit note may be issued for … Required fields are marked *, Notice: It seems you have Javascript disabled in your Browser. 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.”. 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. Details regarding the credit note which have been considered in audited annual financial statement but have not been considered while filing of GST return will be covered under this point. Section 34(2) is not talking about issue of credit note, but discussing adjustment of credit note issued. • 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. Credit Notes in GST Introduction. || for which credit note with GST can be raised. 34(1) states that the supplier may issue a credit note with GST. In order to show the details of the Credit/debit note in GSTR 1, follow the below steps. but not later than September following the end of the financial year in . 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. For Example: If Sales was Rs. If goods supplied are returned by the customer i.e. Financial Credit Note not being part of the same does not attract any disclosure requirement nor GST provisions are applicable on them. 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. 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. 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. Then, the original amount due PLUS the debit note is the revised value of supply, that the customer pays the supplier. This clarifies that raising credit note with GST for discount is not compulsory as they are subject to fulfillment of conditions as stated above. However, supplier can issue financial / commercial credit note(s) to reduce the value of supply payable by the recipient to the supplier. Thanks for the article . Also, Sec. CREDIT NOTE: Sec 2 (37) Credit note is issued when issuer owes money to someone (means issuer has to give money to someone) Someone here means the person to … Download particulars of Invoices, Vouchers, Debit or credit note and delivery challan. 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. a consecutive serial number containing only alphabets and/or numerals, unique for a financial year. Based on the GST rules and guidelines, a credit / debit note should contain: Name, address and GSTIN of supplier. Here. • Can Supplier issue financial Credit Note without any GST. (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. In net effect the customer (supplier) avoids paying GST on sales return to the supplier by converting the transaction into fresh sales. favorite 1. You need to issue a credit note, if the tax invoice has been issued earlier against material returned back by the customer. 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. However for the situations mentioned in point ii) and iii) of sec. Note: When a credit note is issued, it must be accompanied by a supplementary invoice. Benefits. Where credit note is raised with GST the supplier reduces his GST liability and the customer reversed his input tax credit. 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. All Rights Reserved. As per circular 72/46/2018 dated 26.10.2018, there is no time limit to issue credit note but only for effecting ‘tax adjustment’. Based on the credit note the customer will reverse the input tax credit taken on his original inward supply. Click here to Download GST Credit Note Format In Excel Under GST 2017. Goods supplied are returned by the recipient; 4. Your article is really very helpful and full of information, Rule 53 (1A) need to be incorporated so as to make this article the best. GST takes care of credit notes as well, just like debit notes. Here, ₹ 1/- is mentioned as an example the actual amount may be considerable in actual situation for any taxpayer. Section 34 of the CGST Act specifies the credit notes for which a disclosure is required in the annual return. Financial Credit Note not being part of the same does not attract any disclosure requirement nor GST provisions are applicable on them. The customer need not reverse the input tax credit of ₹ 1/- which is attributable to the discount, but has to refund ₹ 100/- after considering the discount of ₹ 5/-. FINANCIAL CREDIT NOTE # GST MALAYALAM # DISCOUNT IS TAXABLE UNDER GST ? How to report Financial Credit Note issued by the supplier in the Annual Return? Note: When a credit note is issued, it must be accompanied by a supplementary invoice. CA Final Result. Site Map || 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. | Date of issue of ... Credit notes are defined in section 2(37) of the GST Law. 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. Experts caution against taking this issue lightly particularly when post-supply transactions are riddled with different interpretations of contractual understanding and applied to GST. The discount so given is generally not determined at the time of supply or before the 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. Only Supplier of goods or Services can issue a Credit or Debit Note under GST. Thanking you all in advance-- Bharath. By Issuing Credit note Supplier GST liability will reduce. Please note that any credit note / debit note\ not issued in terms of Section 34 would not be a valid document under the GST Law. 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. Copyright © TaxGuru. input tax credit reversal by the customer must be fulfilled to raise credit note with GST. The effect of this discount is given by issuing credit note. Keynote: Financial credit note can be issued. (iii) It may also be noted that no time limit has been prescribed for issuing debit notes. Credit notes have to be declared in the GST returns by the following dates: Till the annual return filing date or No later than the 30th of September, following the end of the financial year in … Otherwise, only financial credit note can be raised to settle the accounts. Based on the rules prescribed by the Government, here is … Credit note causes a reduction in Output GST liability for the supplier. The principal in this case may be applied to another similar case. Invoice, Debit or Credit note, Vouchers Under GST (Goods and services Tax) Pravin | 3 years ago. Meaning of terms Financial credit notes: A taxable person may issue a credit note reducing the value of original supply without tax attributable to the reduction claimed. 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. Now, please help me to understand the meaning of Commercial credit note and what is our liability being receiver. 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. 2. Credit Note in GST. 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. This makes the customer to pay ₹ 1/- more to the supplier by way of cash. Follow us on: GST (GOODS AND SERVICES TAX) Credit Note in GST. According to my understanding section 34(2) is talking about adjustment of credit already issued with GST not with respect to supply. However, now, one credit/debit note shall suffice. Hence, they are not … Click here to Download GST Credit Note Format In Excel Under GST 2017. Sec.34(2) restricts the supplier to issue credit note with GST on sales return also. Database || Post that period only financial credit note can be issued by the supplier. Terms | Financial credit note is issued only to adjust the taxable value and not the tax in the books of account. Your email address will not be published. thanks in advance. Registered person who supplied goods or services may issue one or more credit notes for supplies made in a financial year. date of issue of … The customer (in fact, the supplier) will also be able to claim input tax credit based on fresh invoice. credit note without GST to settle the accounts. 72/46/2018-GST dated 26.10.2018 for time expired drugs or medicines returned back by the customer. 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. There is no need for you to issue credit note ideally.. just avail the ITC of gst recorded in debit note issued by supplier. 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. Credit Note in GST. Date of issue. Rs. Recent || 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/-. If such credit notes are issued by the supplier, both supplier and customer do not need to adjust the value … In fact, the purpose of offering such discount is a solution or a way out which is conceived by the supplier after experiencing default in payment by the customer. How To Report Credit/Debit Note In GSTR-1? The word ‘may’ has been used in the said provision. 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. Thereafter the supplier can issue a financial credit note i.e. Differences in data can be caught by comparing input credit and output tax. 20th October 2020 or due date of filing of annual return, whichever is earlier. Furthermore, we shall also see what is the impact of issuance of debit note on output tax liability. 1.1 Credit Note – Section 2(37) means a document issued by a registered person under sub section (1) of Section 34 of CGST Act, 2017. 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. Goods Transport Agency Annual return has been filed for the FY in which the original tax invoice was issued; or. Invoicing is an important function of a business, through this only revenue reaches the stakeholders. A supplier of goods or services or both is mandatorily required to issue a tax invoice. Here, since, condition of clause (b) of sec 15(3) is not satisfied the supplier cannot raise credit note with GST. Members || Discount is sometime given to induce customer for early payment or to recover a long pending dues. Credit Notes in GST-Adjustment of tax liability. 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. However, under GST, debit note furnished by a supplier only will be considered for revision in the values of an invoice. 15(3)(b) imposes conditions to become eligible to raise credit note with GST on discount. Sri Alkesh Ji, thanks for your compliment and kind suggestion. Person issuing credit note to declare details in the return for the month during which it has been issued. While point a) is clear, point b) is subjective i.e. 1800/- to Rs. GST (GOODS AND SERVICES TAX) Credit Note in GST. After the issue of credit note, GST liability of supplier will get reduced. Generally, the scheme of volume discount given on completing the targeted purchase is determined and discussed with the customer before the supply takes place. Therefore, the supplier can raise credit note with GST. The credit note, which is issued without any adjustment to the original GST amount, should contain the statement "This is not a credit note for GST purposes." Credit note and debit note cause some hardship to quickly understand – who owes whom? Under GST law, the place of supply in respect of hotel/lodging services shall be the location of the hotel, that is, Uttarakhand. The condition is that the supplier can reduce GST liability thru credit note only if the customer reverses the input tax credit. 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. Thus, a supplier cannot declare the details of credit note with GST after September month’s return is filed. The details of credit notes issued in a month should be furnished by suppliers in Form GSTR-1. 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. Typically, a debit note is raised for accounting purposes. BOI Balance Enquiry. In case of goods return on Credit note without gst, do we have to show them in GSTR-1 , Since there is no tax component ? Debit/Credit Note as per GST. Section 34 of the CGST Act specifies the credit notes for which a disclosure is required in the annual return. It is useful for all dealers, distributors, traders, wholesalers, accounts assistant, accountants etc. 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. However, the customer has to refund the value of goods returned or discount along with GST component to the supplier to settle the accounts. 900/- if – On the other hand, the recipient of tax may be imposed to reverse the input tax credit that had been availed thereon. Financial credit note is issued only to adjust the taxable value and not the tax in the books of account. As per the provision, the supplier is allowed to furnish the details of credit note raised with GST till the filing of GST return for the month of September following the end of financial year to which the corresponding original invoice pertains to. 01-Sales Return: 02-Post Sale Discount: 03-Deficiency in services : 04-Correction in Invoice: 05-Change in POS: 06-Finalization of Provisional assessment: 07-Others: There is not specific format of debit note/credit note. @askGST_GoI cbecindia. the input tax credit attributable to discount is reversed by the customer. The conditions applicable on an issue of credit note are listed below: a. Credit Note and Debit Note Information (GST/HST) Regulations s 2. the discount was determined before or at the time of supply. Therefore, the discount given after the supply is pre-determined and satisfies the condition of the clause (b) of sec 15(3). 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. Detailed analysis of credit notes and debit notes under GST. For instance, if a credit note has been issued in respect of goods returned after the due date for credit note, a credit note may be issued by the supplier for reduction in the amount payable by the recipient. Such documents include tax invoice, debit note, credit note and bill of supply. 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. 17. Privacy |, ©Taxmanagementindia.com A unit of MS Knowledge Processing Pvt. 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. 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. When a debit note is issued the debit balance of the buyer’s account increases. Every credit note must be linked to specific original tax invoice(s); 9. 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. 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. In order to regularize these kinds of situations, the supplier is allowed to issue a document called as GST Credit note to the recipient. These documents include tax invoice, debit note, credit note and bill of supply. Such credit notes are referred as ‘financial credit notes’. The details of credit notes issued in a month should be furnished by suppliers in Form GSTR-1. 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. In net impact the customer refunds ₹ 99/- in cash to the supplier. (vi) Credit note (and to lesser extent, debit note) under section 34 must be contrasted with financial credit note issued in trade. 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. April 1, 2021, 13 Suggestion to FM for Simplification of GST (Hindi & English), Remittance Abroad – Form No. Credit note where tax adjustment is not involved need not even be filed on the portal as per this circular. … As the GSTR 1 now can not be rectified for F.Y. Example: On 1 st January 2018 Mr.Ram sells 5 Mobile of Rs.11,200 each (10000+12% GST) to Mrs.Neha. Though the condition of Sec. In other words, the output tax liability cannot be reduced in cases where credit note has been issued after September. 10. v @CBEC_India. To this extent, the GST thereon would also stand reduced, subject to conditions which have been discussed in the subsequent paragraphs. sales return. Actual value of supply is higher than that stated in the original tax invoice; b. It would be worrisome if issuer-supplier accounts the financial credit note as expenditure (in other words, an inward supply) but the recipient-customer accounts the same as reduction from cost of purchase. The debit and credit note in GST shall contain the following details : name, address, and GSTIN of the supplier nature of the document. 1800/- and later Credit note of Rs. However, he cannot claim a reduction in tax liability. They passed credit note with out GST saying it is commercial credit note as they can not link the products to the original invoice. GST treatment will greatly vary based on the answers to these questions. The same has to be accepted by the recipient for the corresponding impact on input tax credit on the supply. 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. If taxable value or tax in the tax invoice was charged more. After implemented the option to issue a consolidated/single credit note, against one or more tax invoices raised in a financial year, on GST portal. It is useful for all dealers, distributors, traders, wholesalers, accounts assistant, accountants etc. Exemption from E-Invoicing under GST: Special Economic Zones, (SEZ) Insurer, Banking Co., any Financial Institution and Non-Banking Financial Institution. Patronage dividends para 3(e) 18. A registered person may issue a consolidated credit note for multiple invoices issued in throughout a financial year. Goods or services supplied are deficient. ----- 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: 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 / … Sir, Please Explain how we adjust debit note of march 2019 when we filled return up to march 2020 gstr 1 and 3b both. A registered person may issue a consolidated credit note for multiple invoices issued in throughout a financial year. The credit note contains all the applicable particulars as specified in Rule 53(1A) of the CGST Rules, 2017. 1. 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Ans: Yes, credit note contains GST amount which is reversed in relation to original or previous invoice. Open the Tile “ 9B – Credit / Debit Notes (Registered) “. This facility will reduce the disclosure burden on the taxpayer and thus, simplify the GST compliance. 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. Credit note meaning and definition, how to make a credit note compliant with GST and all the necessary info in this article. What is the credit note / debit note format? 4. Q 2: How to treat following transaction in GST (i) Delivered supply shortages in Transit. Name, address, GSTIN (or … The GST Law provides an exhaustive list of situations under which the registered supplier is entitled to issue a credit note says, ‘I OWE’ and issues credit note: 1. Debit note issued when the amount payable by buyer to seller increases due to less taxable amount is charged in invoice or less tax amount is charged in invoice. We cannot ignore the credit note format which has GST inbuilt followed by filing mechanism which requires GST amount to be reported. 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. Credit note in GST is defined under section 34 (1) of the CGST act 2017. (v) Please review the circumstance for issuing credit note. Tax charged in the original tax invoice is higher than that applicable on the supply; 3. For the purpose of GST, both debit and credit note need to be issued by the supplier of goods or services. As stated in above tables the customer end up paying GST attributable to credit note to the supplier after September month. 1. Tax charged in the original tax invoice is lower than that applicable on the supply; c. The debit note needs to be linked to the original tax invoice(s); (i) The debit note contains all the applicable particulars as specified in Rule 53(1A) of the CGST Rules, 2017; (ii) A debit note issued under Section 74, 129 or 130 would not entitle the recipient to avail credit in respect thereof, and the supplier shall specify prominently, on such debit note the words “INPUT TAX CREDIT NOT ADMISSIBLE”; as provided in Rule 53(3). 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. About us | Further, Section 15(3) allows the supplier to raise credit note with GST for discount. 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.