goods and service tax

Published on 4 April 2025

Understanding Debit Notes in GST: Key Features and Guidelines

Understanding Debit Notes under GST

A debit note under the Goods and Services Tax (GST) framework is issued when the invoice value is less than the actual value of goods or services supplied. This situation arises under various conditions, including when the actual supply value exceeds the invoiced amount, when a lower GST rate is applied, or when the quantity supplied is greater than that indicated on the invoice.

Key Features of Debit Notes

  1. Issuer of Debit Note:

    • Only registered suppliers under GST can issue a debit note. Recipients are not permitted to issue one.

  2. Timeframe for Issuance:

    • There is no statutory time limit for issuing a debit note; suppliers can issue it whenever necessary.

  3. Applicability:

    • Debit notes can be issued for:
      • Taxable supplies
      • Exempt supplies
      • Nil-rated supplies

  4. Financial Implications:

    • Upon issuance, the supplier's output tax liability increases, while the recipient can claim Input Tax Credit (ITC) on the amount reflected in the debit note.

Circumstances for Issuing a Debit Note

A debit note may be issued under the following conditions:

  1. Excess Actual Value of Supply:

    • If the actual value of the goods or services supplied is greater than the value reported in the invoice.
    • Example: Actual supply value is Rs 1,00,000 with a GST rate of 18%, while the invoice states a taxable value of Rs 90,000 and GST charged accordingly. A debit note of Rs 10,000 plus GST of Rs 1,800 would then be raised.

  2. Insufficient GST Charged:

    • If the tax charged on the invoice is less than the actual tax liability.
    • Example: If the actual value is Rs 1,00,000 at a GST rate of 28%, but the invoice shows a charge based on an 18% GST, a debit note for Rs 10,000 may be issued to recover the difference or the original invoice can be amended.

  3. Higher Quantity Supplied:

    • If the quantity delivered exceeds the quantity recorded in the invoice.

  4. Other Reasons:

    • Any other similar situations justifying the necessity of a debit note.

Treatment of Debit Notes in Supplier and Recipient Returns

  • For Suppliers:

    • The output liability increases upon issuance of a debit note.

  • For Recipients:

    • Recipients can claim ITC based on the debit note, following the adjustments to their tax liabilities.

Time Limit for Claiming ITC

According to Section 16(4), the recipient can claim ITC up to the earlier of the following dates:

  • November 30 of the following financial year
  • The date of filing GSTR-9 (annual return)

Reporting Requirements

If the deadline for claiming ITC has passed, the recipient cannot claim ITC, and this must be reported in Table 4D(2) of GSTR-3B.

Linking with the Original Invoice

  • The ITC claim period for a debit note is reliant on its issuance date, not the date of the original invoice.
  • For instance, if an invoice was issued in the financial year 2022-23 and a debit note was issued in 2024-25, the ITC must be claimed by November 30, 2025, or by the date of filing GSTR-9, whichever comes first. Thus, the debit note is not linked to the original invoice in the context of ITC claims.

In summary, a debit note serves as a critical instrument under GST for addressing discrepancies between invoiced and actual supply values, ensuring correct tax liabilities and enabling recipients to claim appropriate credits.

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