A. When to issue Credit Note:

(i) To decrease value of Supply: The supplier has erroneously declared a value which is more than the actual value of the goods or services provided.

(ii) To decrease GST: The supplier has erroneously declared a higher tax rate than what is applicable for the kind of the goods or services or both supplied.

(iii) Less quantity receive: The quantity received by the recipient is less than what has been declared in the tax invoice.

(iv) Goods Return: 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.

There may be other reasons also for issue credit note.

B. Time Limit for issuance of GST Credit Note

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:-

a) September following the end of the financial year in which such supply was made, or

b) Date of filing of the relevant annual return {i.e. GSTR-9}, 

whichever is earlier.

C. When to issue Debit Note:

(i) To increase the value of Supply: The supplier has erroneously declared a value which is less than the actual value of the goods or services or both provided.

(ii) To increase Tax: The supplier has erroneously declared a lower tax rate than what is applicable for the kind of the goods or services or both supplied.

(iii) If receive Excess Quantity: The quantity received by the recipient is more than what has been declared in the tax invoice.

There may be other reasons also for issue debit note.

D. Other Important points to issue Credit or Debit Note

• Any registered person who issues a debit note in relation to a supply of goods or services or both shall declare the details of such debit note in the return for the month during which such debit note has been issued.
• Original Invoice number should be mentioned on GST Credit or Debit Notes.
• Recipient should reverse ITC in case of Credit Note.
• Supplier liability to pay tax will Increase in case of Debit Note.
• Credit note(s) 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.

E. Financial Credit Note:-

In case secondary discounts supplier can issue financial/ commercial credit note(s) to reduce the value of supply payable by the recipient to the supplier [Circular 92/11/2019 GST dated 07.03.2019].

On issuance of Financial Credit Note, Supplier liability will not decrease and Recipient need not reverse ITC/Pay Tax {Circular No.105/24/2019 & Circular No.112/31/2019}.

F. Financial Debit Note:-

Concept of Financial Debit Note does not exist in GST.