Debit note: How & when to issue under GST

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What is a debit note?

When 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, would issue a debit note to the recipient indicating the same.

The issuance of debit note is a convenient and legal method by which the value of the goods or services in the original tax invoice can be enhanced. The issuance of the debit note will easily allow the supplier to pay his enhanced tax liability in his returns without requiring him to undertake any other tedious process.

What are the situations under which Debit note is issued?

A debit note could be issued under the following illustrative situations:

  1. The supplier has erroneously declared a value which is less than the actual value of the goods or services provided.
  2. The supplier has erroneously declared a lower tax rate than what is applicable for the kind of goods or services supplied.
  3. The quantity received by the recipient is more than what has been declared in the tax invoice.
  4. Any other similar reasons.

In order to regularize these kinds of situations, the supplier is required to issue what is called a debit note to the recipient. The debit note also includes a supplementary invoice.

Format of a Debit note

There is no prescribed format but debit note issued by a supplier must contain the following particulars:

  1. Name, address, and GSTIN of the supplier.
  2. Nature of the document
  3. A consecutive serial number not exceeding sixteen characters, just like an invoice.
  4. Date of issue
  5. Name, address, and GSTIN of the recipient.
  6. 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.
  7. serial number and date of the corresponding tax invoice or, as the case may be, bill of supply.
  8. value of taxable supply of goods or services, rate of tax and the amount of the tax debited to the recipient.
  9. signature or digital signature of the supplier or his authorized representative.

Impact on tax liability on issuance of Debit note

The issuance of a debit note or a supplementary invoice creates additional tax liability. The treatment of a debit
note or a supplementary invoice would be identical to the treatment of a tax invoice as far as returns and payment are concerned.

Maintenance of records

The records of the debit note have to be retained for at least 6 years from the due date of furnishing of annual return for the year pertaining to such accounts and records.

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