a debit note may be issued: What is a debit note, and when will it be issued?


One of the essential features of the Vyapar App is „Bill wise payment“. It allows you to link your payments to your sales invoices easily. The free GST Mobile App enables multiple parties to manage each client separately easily.

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Discount and Incentives cannot be used as interchangeable terms in business transactions and shall depend on the facts and circumstances of each contract/ agreement under which they are paid. No general view can be taken that a discount given is commission or incentive received. Some companies use debit notes to bill for items that are not their primary business.

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It is requested that suitable trade notices may be issued to publicize the contents of this Circular. A retrospective meaning to a provision should only be made to correct some law to the benefit of the tax payer. As per the notification issued by the GST authorities in October… The supplier’s signature/ digital signature and a seal/stamp. The app has an encryption system that keeps the data accessible only to the owner. You can use the app to create data backups based on your needs and help ensure the security of your data by using multiple backup options.


In the event of any of the above cases, the registered supplier of goods or services may issue a debit note to the recipient. This article, however, seeks to explain in detail debit note under GST. Furthermore, we shall also see what is the impact of issuance of debit note on output tax liability.

Difference between Debit and Credit Note in GST

Business owners can customize the fields of invoices as per their unique requirements. You can generate invoices within 20 seconds and print and share them with your clients through WhatsApp or email. If you want to speed up your billing process, you can use the barcode scanner and shortcut keys. Earlier, citing the original invoice number was mandatory while reporting a debit note. It must be quoted on the GSTN portal in Form GSTR-1 and Form GSTR-6.

  • Once the verification is done, the recipient may approve of it and submit it as part of their GSTR-3B.
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  • Generally, a seller either considers it a standard business practice and uses it according to internal procedures or does not use it at all.
  • In response to the buyer’s debit note, the seller might initiate the refund by issuing a credit note against the existing purchase invoice.
  • Further coming to the part of interest applicability on Debit note, one could dispute on the basis of above discussion supra and take a stand not pay interest on liability declared through debit note.

However, the present AAR seems to be incorrect as it has completely overlooked the intent of the amendment and is therefore wrong in the eyes of the law and may not sustain the test of time in law. Similarly, it was held in the case of Grasim Industries Ltd v/s Commissioner of central excise, Indore [2011 S.T.R 691 (Tri – Delhi)] and Ad-Manum Packing Pvt Ltd versus Commissioner of C. Typically, a debit note is raised for accounting purposes. For the purpose of GST, both debit and credit note need to be issued by the supplier of goods or services.

Debit Note Video

A debit memo is another name for a debit note, a common payment method in business-to-business transactions. Typically, debit notes are sent because of incomplete, damaged, or inaccurate goods sent. In order to cover these kinds of situations the supplier is allowed to issue a Debit Note to the recipient . Credit SalesCredit Sales is a transaction type in which the customers/buyers are allowed to pay up for the bought item later on instead of paying at the exact time of purchase. It gives them the required time to collect money & make the payment.

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When Debit Note is Issued?

PARTICULARSEARLIER PROVISIONSAMENDED PROVISIONSSection 34 of the CGST Act, 2017 relates to the ‘credit note’‘Where a tax invoicehas been issued ………………. A credit notecontaining such particulars as may be prescribed.‘Where one or more tax invoiceshave been issued …………. One or more credit notes for the supplies made in a financial yearcontaining such particulars as may be prescribed.Section 34 of the CGST Act, 2017 relates to the ‘debit note’‘Where a tax invoicehas been issued ………………. A debit notecontaining such particulars as may be prescribed.‘Where one or more tax invoiceshave been issued …………. The earlier provisions of issuance of a debit note or credit noteagainst single invoice and linking the same have been removed. The expression “debit note” would include a supplementary invoice.

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In the authors view, it has limited persuasive value for other assesses. It needs to be considered if it is in line with the GST law. While this being a ruling of the AAR and this matter may be canvassed before the appellate forums in future.

The Law Committee examined the matter and felt that credit may be allowed for debit notes irrespective of the date of issuance of the underlying invoice as anyway interest is being paid when tax liability is discharged in case of debit note. Accordingly, the Law Committee recommended amending the provisions of section 16 to allow ITC on debit notes by linking it to the date of issuance of the debit note by omitting the words “invoice relating to such”. Consequently, the said amendment was proposed in clause 120 of Finance Act, 2020. The wordings employed in Section 34 are ‘the registered person, who has supplied such goods or services or both, shall issue to the recipient a debit note’.

For example, if a seller sells 10,000 units of a product and the buyer discovers 1000 units are faulty, the seller may send a credit note to the buyer, requiring payment for just 9000 units. Based on the above discussion, authors view is that the said amendment would be made applicable retrospectively i.e., from the effect of GST law w.e.f. 1st July 2017. Further coming to the part of interest applicability on Debit note, one could dispute on the basis of above discussion supra and take a stand not pay interest on liability declared through debit note. Debit Note Format is issued to make changes in the previously issued invoices.

This situation could arise due to an incorrect value in the invoice, or the purchaser buying more products at a later date etc. In such a situation, the seller then creates a debit note and issues it to the buyer. The purchaser now has an accounting liability to pay more than what is mentioned on the invoice. Credit NoteA credit note is a financial document that sellers provide to buyers as a token of confirmation against registered returns. It acknowledges the cancellation and lets the sellers make a credit entry to the buyers’ account for the required amount. A debit note is a commercial document, common in business to business transactions, that either buyers or sellers may use regarding the amount due for a sale of goods or services.

First, a debit note may be sent simply to serve as a reminder of an amount due for a previously invoiced sale. In such a case, the debit note is just a “bill payment due” reminder. Failure to issue the debit note within the above stipulated time will increase tax liability, interest levy, and penalties.

The omission of the ‘invoice relating to such’ does not mean that the relation of the debit note with the invoice has been cut off. According to the Budget 2021, the non-filers of income tax for the… Credit notes may reflect badly on the accounting history of the seller. The Vyapar app is completely secure, and you can accurately store your data. To keep your data safe, you can create local, external, or online Google Drive backups with our free app. Also, it is easy to recover the data using the software.

For example, on June 01, the a debit note may be issued ABC issues a debit note to its supplier to return the $1,000 goods that it purchased on credit previously. The company ABC uses the perpetual inventory system to account for all inventory-related transactions. When a debit or credit note is issued solely for the difference in tax rates, the note’s value can be shown as zero. In the case of services, the tax invoice can be issued before or after the provision of the service. Here, it is important to note that if the invoice is to be issued after the service is provided, then it must be done within 30 days from the date of supply of service.

It should either be declared in the month of September of the following of the year from when the shipment was received along with the original invoice. A supplementary invoice should be raised within the first 30 days since the original invoice is sent to the buyer. That tax applicable on the Actual supply (Value of Original tax invoice + value of Debit Note). Issued by the recipient to the registered supplier, will not be considered any document under GST Law. Journal EntryA journal entry example would be the country’s purchase of machinery, where the machinery account would be debited and the cash account would be credited. Adjusting EntryAdjusting Entries in Journal is a journal entry made by a company at the end of any accounting period on the basis of the accrual concept of accounting.