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Recent Amendment under GST in Debit Note and Credit Note

Narendra Kumar

| Updated: Mar 07, 2019 | Category: GST, GST Advisory

Amendment under GST

A supplier or receiver of goods and services issue a Debit note or a credit note, when there is a revision in the invoice because of the change in the value of goods and services supplied or received. Let’s start this blog by understanding the requirement of issuance a debit note or a credit note and then we will slowly move on to the recent amendment under GST in Debit Note and Credit Note. This article describes the Recent Amendment under GST in Debit Note and Credit Note.

Key Highlights of Amendment under GST in Debit Note and Credit Note

GST council of India has released a notification no. 02/2019- Central Tax dated 29th January in which the amendment of Central Goods and Service Tax Act, 2018 are mentioned. Following are the areas of the amendments under GST-

  • Debit Note and Credit Note under section 34 (1) and section 34 (3) of the CGST.
  • The insertion of the Sub-Rule (1A) into rules 5 of the CGST rules.

First we will try to understand the basics of the Debit Note and Credit Note under the GST.

What is the Debit Note and Credit Note in GST?

Below is the basic understanding of Debit Note and Credit Note.

  • If there is a decrease in the amount payable by buyer to seller-

After supplying the goods and services, there may be a change in the invoice generated by the seller. This may happen due to the return of goods or goods being of bad quality etc. This leads to the decrease in the prices of goods for which the purchaser issues a debit note. The amount of money debited from the sellers account and its reason for debit must be mentioned in the debit note.

The seller will have a credit balance in the purchasers’ books of account. When a purchaser issues a debit note, the balance of the sellers account decreases, hence there will be a decrement in the sellers’ balance. This means that buyer has to pay the lesser amount to the seller to settle the liability. Henceforth, reduces the buyers’’ liability. In a response to buyer or an acknowledgment to this a credit note is issued by the seller.

debit note and credit note
  • If there is an increment in the amount payable by buyer to seller-

A seller issues a debit note to the buyer, when the value of the invoice increases because of the additional goods sent or the goods already sent were charged at incorrect rates. A credit note is issued by the buyer to the seller, in a response or acknowledgement to the receipt of debit note. The buyer will have a debit balance in the sellers’ book of account. Issuing of a debit note increases the balance of buyers’ account. Hence increasing the buyers’ liability and the buyer needs to pay more amounts to the seller to settle the liability.

debit note and credit note

Debit and Credit note under the GST Amendment

First we will try to understand the issuance of debit note and credit note under the CGST Act, 2017. Then we will explain the amendments released by the GST council in detail, which have been effective from 1st of February, 2019-

When a supplier issues a Debit Note?

  • If the taxable amount mentioned in the original invoice is lesser than the actual taxable amount.
  • If the amount of tax charged in the invoice is lesser than the actual tax paid

Hence, in such cases the debit note will include a suppplementary invoice.

When a supplier issues a Credit Note?

  • If the taxable value in the original invoice isssued is more than the actual taxable value.
  • If the tax charged in the original tax invoice is more than the actual tax paid
  • If there is a deficiency in the services provided
  • If the goods are returned to the supplier

Hence a supplementary invoice will be included in the Credit Note.

Section 34 of the CGST Act, 2017 provides the provision in relation to the debit note or credit note under GST. As per the notification featured on 29th january, 2019, Government of India has amended the provisions under section 34 of the CGST Act, which has been effective from 1st february, 2019.

We will try to understand the provisions with the help of the comparison between the earlier provisions and the amended provisions.

Provisions under Section 34 of the CGST Act

Below is the comparison between the earlier and amended provisions-

  • Earlier Credit Note provision under the section 34 (1) of th CGST Act, 2017

As the per the sections 34(1) of the CGST Act, Where tax invoice[1] 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.

  • Credit Note Provision after amendment

Where one or more 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 one or more credit nots for the supplies made in a financial year containing such particulars as may be prescribed.

  • Earlier Debit Note provision under the section 34 (3) of th CGST Act, 2017

As the per the sections 34(3) of the CGST Act, 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 be less than the taxable value or tax payable in respect of such supply, the registered person, who has supplied such goods or services or both, shall issue to the recipient a debit note containing such particulars as may be prescribed.

  • Debit Note provisions after amendment

As the per the sections 34(3) of the CGST Act, where one or more 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 be less than the taxable value or tax payable in respect of such supply, the registered person, who has supplied such goods or services or both, shall issue to the recipient one or more debit note for the supplies made in a financial year containing such particulars as may be prescribed.

Now we will further update you regarding the insertion of new sub-rule (1A) into the rule 53 of the CGST Rules, 2017.

Insertion of new sub-rule (1A) into rule 53 of the CGST Rules, 2017

Government has inserted a new sub-rule (1A) into rule 53 of the CGST Rules, 2017. Below are the following particulars that must be mentioned ina debit or credit note-

  • Name, address, and GSTIN of the supplier
  • Nature of the document
  • A consecutive serial number
  • date of issue of the document
  • Name, address and GSTIN / UIN, in case the recipient is registered
  • Name and address of recipient and the address of the delivery, along with the name of the state and its code, in case the recipient is unregistered
  • The serial number and the date of the corresponding tax invoice (tax invoices) or bill of supply
  • Value of the taxable supply of goods / services, the rate of the tax and amount of the tax credited or debited to the recipient
  • The signature / digital signature of the supplier / authorized representative

Conclusion

Hope you have a clear picture of the recently introduced amendment under GST in the Debit and Credit note in India. In India, Goods and Services Tax (GST) is seen as one of the most influential transformations in the field of taxes. If we look at the earlier process relating to Debit and Credit Note, India was not following the ideal policy. After various such amendments, the chances of fraud and error seem to have decreased.

Moreover, It is always advisable to obtain the GST registration certificate before you start a business. For any other queries related to the above amendment, contact Enterslice now.

Read our article:Recent Updates of New Functionalities on GST Portal

Narendra Kumar

Experienced Finance and Legal Professional with 12+ Years of Experience in Legal, Finance, Fintech, Blockchain, and Revenue Management.

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