Credit Notes in a GST Scenario

INTRODUCTION

In any commercial transaction, an invoice represents a document staking a claim towards supplies made by an entity to another. Subsequent adjustments to the value of such supplies already accounted for through the issuance of an invoice are typically made by either debit notes or credit notes. In many cases, a debit note by one entity is also mirrored by a credit note by another entity and vice versa. It is also a common business practice to issue a debit note instead of a tax invoice in certain specific types of transactions like reimbursements, etc.

Since GST imposes a tax on supplies of goods or services or both, extensive provisions have been made to prescribe for the issuance of a tax invoice, contents of the said invoice and timelines for the issuance thereof. Thus, the issuance of a tax invoice for a taxable supply triggers a liability to pay GST. In fact, by mandating the requirement to issue a tax invoice in all cases of taxable supplies, the GST Law has reduced the extent and flexibility available to commercial enterprises to issue debit notes, and therefore, tax invoice and debit notes cannot be issued interchangeably.

The GST Law also considers situations wherein the supplier is required to issue a debit note or credit note. As mandated by Section 34(3) of the CGST Act, any upward adjustment to