Credit Note and Debit Note :

There are various situations in which the taxpayers may need to issue credit and debit notes. Credit and debit notes may be issued in case of price and quantity variations, sale/purchase returns or post sale discounts. Section 24 of the draft model bill recognises credit and debit note issued for an outward supply by the supplier and the recipient of the supply shall show it as a receipt of the credit or debit note. It has been made mandatory that every credit or debit note shall have to relate to an invoice issued by the supplier earlier.

Following information relating to credit or debit note will have to be submitted as part of the return.

(i) Debit / Credit Note Number

(ii) Original Invoice Number and Date

(iii) Taxable Value, Tax Rate and Tax Amount (CGST & SGST or IGST) ( that is being modified )

Section 24 of the draft model bill requires that Credit or Debit note for any tax invoice should be issued before 30th September of the financial year succeeding financial year in which the invoice has been submitted and the credit/debit note will be reflected in the monthly return in which such notes have been issued. This will ensure that matching and auto-reversal pertaining to credit or debit note can happen before last date of filing the annual return of the financial year in which the invoice was issued. In case of supplier issuing credit note, since the tax liability stands reduced, it is essential that only the reduced tax amount has been passed on to the recipient.