Credit and debit notes :
Debit Note or Credit Notes can be issued only in specified situations.
Credit Note means a document issued by a registered person under section 34(1) – section 2(17) of CGST Act.
Debit Note means a document issued by a registered person under section 34(1) – section 2(18) of CGST Act.
Credit Note cannot be issued on account of renegotiation of prices after supply. In such cases, credit note or debit note should be issued without showing GST. This would be more so when recipient is in position to avail input tax credit.
Such debit note or credit note is not required to be uploaded in monthly return.
Credit Note cannot be issued for bad debts.
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 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 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 – section 34(3) of CGST Act.
Declaration in return of details of credit notes issued – 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 September following the end of the year in which such supply was made, or the date of filing of the relevant annual return, whichever is earlier, and the tax liability shall be adjusted in the manner specified in this Act – section 34(2) of CGST Act.
Reduction in tax liability subject to unjust enrichment – Reduction in output tax liability of the supplier shall be permitted if the incidence of tax and interest on such supply has been passed on to any other person – proviso to section 34(2) of CGST Act.
Thus, if the credit note is not accepted by recipient and if he does not reverse equivalent input tax credit, reduction in tax liability will not be allowed to supplier.