What is Credit note in GST ?
1. INTRODUCTION TO CHAPTER CREDIT NOTE IN GST
To begin with, one must fully unlearn the practices under the erstwhile law in order to clearly understand the concepts of debit note and credit note in GST. A debit note and credit note in GST, for the purpose of the GST Law, can be issued by the registered person who has issued a tax invoice, i.e., the supplier.
Any such document, by whatever name called, when issued by the recipient to the registered supplier, is not a document recognized under the GST Law.
2. WHEN IS A CREDIT NOTE IN GST IS ISSUED
Debit and Credit note in GST cause some hardship to quickly understand – who owes whom. Credit note is issued when the issuer ‘OWES’ money to someone, that is, it is issued by the person who owes money.
For example, when 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.
Then, the original amount due MINUS the credit note is the revised value of supply that the customer pays the supplier. To this extent the GST thereon would also stand reduced, subject to conditions.
3. CONDITIONS WHICH MUST SATISFIED FOR ISSUANCE OF CREDIT NOTE IN GST
The conditions applicable on an issue of credit note in GST are listed below:
- The supplier issues the credit note in respect of a tax invoice which has been issued by him earlier;
- The credit note cannot be issued any time after either of the following 2 events (“due date for credit note”):
Event 1 Annual return has been filed for the FY in which the original tax invoice was issued; or Event 2
September of the financial year immediately succeeding the financial year in which the original tax invoice was issued.
(i.e., for a tax invoice issued in April 2018, as well as a tax invoice issued in March 2019, the relevant credit notes cannot be issued after September 2019);
- The credit note so issued must be declared in the returns for the month in which they are issued, by the supplier and also the recipient, and latest by the due date for credit note as specified above.
- 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;
- 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;
- Every credit note must be linked to specific original tax invoice;
- 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 under the Act.
- 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:
- Actual value of supply is lower than that stated in the original tax invoice;
- Tax charged in the original tax invoice is higher than that applicable on the supply;
- Goods supplied are returned by the recipient;
- Goods or services supplied are deficient.
- The credit note contains all the applicable particulars as specified in CGST Rules, 2017.
4. DEBIT NOTE AND CREDIT NOTE FORMAT IN GST
The debit and credit note in GST shall contain the following details :
- name, address, and GSTIN of the supplier,
- nature of the document,
- a consecutive serial number containing only alphabets and/or numerals, unique for a financial year,
- date of issue of the document,
- name, address and GSTIN/ Unique ID 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 unregistered,
- serial number and date of the corresponding tax invoice or, as the case may be, bill of supply,
- the taxable value of goods or services, rate of tax and the amount of the tax credited or, as the case may be, debited to the recipient, and
- signature or digital signature of the supplier or his authorized representative.
5. IMPACT OF CREDIT NOTE IN GSTR - 3B AND OTHER MONTHLY RETURNS
A person who intends to act as GST Practitioner, he has to apply in Form GST PCT – 01 electronically through the common portal.
The officer authorized in this behalf shall, after making such enquiry as he considers necessary either enroll the applicant as GST Practitioner and issue a certificate in Form GST PCT – 02 or reject the application where it is found that the applicant is not qualified to be enrolled as a GST Practitioner.
Any GST practitioner enrolled in any other State or Union territory shall be treated as enrolled in the State or Union territory.
No person shall be eligible to attend before any authority as a goods and services tax practitioner in connection with any proceedings under the Act on behalf of any registered or un-registered person unless he has been enrolled.
6. GST PRACTITIONER EXAM AND VALIDITY OF GST PRACTITIONER CERTIFICATE
- Credit note in GST and GSTR 1 return :
- The supplier shall mention the details of debit and credit note in GST in form GSTR-1.
- On filing the details it will get auto-populated in form GSTR-2A for the recipient.
- The recipient can either modify or accept or reject these details and file form GSTR2.
- Debit Note and Credit Note in GST must contain invoice number:
- i) The debit note/credit note must contain the invoice number of the original supplies made.
- ii) The details of the debit and credit note in GST to be declared in form GSTR-1 shall be given along with details of original invoice number, date and GSTIN.
- The time limit is only for issuing debit note and credit note in GST
- Credit note in GSTR 3b: The details of debit note and credit note in GST is required to be mentioned in the return GSTR 3b. Which If not shown, it is not considered for adjustment of tax liability.
In GSTR 3B we don’t have a separate tile for disclosing the details of credit note issued. Instead it is dealt as a tax adjustment by way of deduction from Total taxable value and tax liability and only the net tax receipts are recorded in the tile ‘Details of outward supplies and inward supplies liable to reverse charge'.