CBEC Explains about Format/ Procedure/ Tax Treatment for ‘Debit Notes’ under GST

CBEC Explains about Format/ Procedure for Issuance of Debit Notes/ Supplementary Invoice; Treatment of Tax Liability and Maintenance of related Records under GST

The CBEC has released an e-flier which explains about Format and Procedure for Issuance of Debit Notes/ Supplementary Invoice along with summary of provisions relating to treatment of Tax Liability thereof and maintenance of relevant records under GST.

Meaning of Debit Note under GST

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, shall issue to the recipient a debit note containing the prescribed particulars.

Situations demanding issue of Debit Notes under GST

A supplier of goods or services or both is mandatorily required to issue a tax invoice. However, during the course of trade or commerce, after the invoice has been issued there could be situations like:

i) The supplier has erroneously declared a value which is less than the actual value of the goods or services or both provided.

ii) The supplier has erroneously declared a lower tax rate than what is applicable for the kind of the goods or services or both supplied.

iii) The quantity received by the recipient is more than what has been declared in the tax invoice.

iv) Any other similar reasons.

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

Prescribed Format for Debit Notes under GST

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

(a) name, address and Goods and Services Tax Identification Number of the supplier;

(b) nature of the document;

(c) a consecutive serial number not exceeding sixteen characters, in one or multiple series, containing alphabets or numerals or special characters hyphen or dash and slash symbolised as “-” and “/” respectively, and any combination
thereof, unique for a financial year;

(d) date of issue;

(e) name, address and Goods and Services Tax Identification Number or Unique Identity Number, if registered, of the recipient;

(f) name and address of the recipient and the address of delivery, along with the name of State and its code, if such recipient is un-registered;

(g) serial number and date of the corresponding tax invoice or, as the case may be, bill of supply;

(h) value of taxable supply of goods or services, rate of tax and the amount of the tax debited to the recipient; and

(i) signature or digital signature of the supplier or his authorized representative.

Treatment of Tax liability arising out of Debit Notes

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 for Debit Notes issued

The records of the debit note or a supplementary invoice have to be retained until the expiry of seventy two months from the due date of furnishing of annual return for the year pertaining to such accounts and records. Where such accounts and documents are maintained manually, it should be kept at every related place of business mentioned in the certificate of registration and shall be accessible at every related place of business where such accounts and documents are maintained digitally.

In view of, it can be concluded that the debit note or a supplementary invoice 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.

CBEC’s e-Flier on Debit Notes/ Supplementary Invoice under GST

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