Credit Note
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 or both supplied are found to be deficient, the registered person, who has supplied such goods or services or both, may issue to the recipient what is called as a credit note containing the prescribed particulars.
Adjustment of tax liability
The person who issues a credit note in relation to a supply of goods or services or both must 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 financial year in which such supply was made, or the date of furnishing of the relevant annual return, whichever is earlier. In other words, the output tax liability cannot be reduced in cases where credit note has been issued after September.
The output tax liability of the supplier gets reduced once the credit note is issued and it is matched. The details of the credit note relating to outward supply furnished by the supplier for a tax period shall, be matched:
(a) with the corresponding reduction in the claim for input tax credit by the recipient in his valid return for the same tax period or any subsequent tax period; and
(b) For duplication of claims for reduction in output tax liability.
Records
The records of the credit 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
Debit Note
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.
Tax liability
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.
Records
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.
- If movement of goods is involved, then the tax invoice has to be issued before or at the time of removal of the goods for supply to the recipient.
- If movement of goods is not involved, then the tax invoice has to be issued before or at the time of the goods are delivered to the recipient or when the goods are made available to the recipient.
In cases where the ownership, or the risks and rewards are transferred without requiring the movement of goods, the goods would be treated as supplied although no movement is involved in effecting such supply.
E.g. when an Agent who is in possession of certain goods decides to buy the goods from the principal, on-site installation of machinery, sale and lease back transactions, etc.
Removal is defined u/s 2(96) of the CGST Act, 2017. Removal in relation to goods means:
(a) Dispatch of the goods for delivery by the supplier thereof or by any other person acting on behalf of such supplier; or
(b) Collection of the goods by the recipient thereof or by any other person acting on behalf of such recipient
It can be seen that removal is complete as soon as the goods are dispatched. However, where the supply is such that the recipient collects the goods from the supplier, the point at which the good are collected would be the time of removal of the goods The dispatch (or collection, as the case may be) would trigger the liability to raise the invoice, and the supplier should not wait until the goods reach the destination.
Goods can be removed by way of:
- Dispatch by the supplier himself,
- Dispatch by any person acting on behalf of the supplier,
- Collection by the recipient himself,
- Collection by any person acting on behalf of the recipient.
Where the tax liability is cast on the recipient, either:
- In case of specified categories of supply of goods or services or both notified by the Government OR
- Where the supplier of goods or services or both is unregistered, the recipient shall issue:
- An invoice in respect of goods or services or both received by him from the supplier who is not registered on the date of receipt of goods or services or both;
- A payment voucher at the time of making payment to the supplier.
As per Rule 47 of the CGST Rules, 2017 (Chapter VI- Tax Invoice, Credit and Debit Notes), Invoice has to be raised within 30 days of supply of service.
Given that the contract is for a period exceeding 3 months, to provide services on a continuous/ recurrent basis, the supply will be treated as a continuous supply of services. As the due date of payment is ascertainable from the contract, the invoice has to be raised on or before the due date of payment. (Section 31(5)(a) of the CGST Act).
The above instance is a case of continuous supply of services. Here, since the payment is linked to completion of an event (i.e., milestones set in the contract), an invoice should be raised on or before the due date of completion of event as per section 31(5)(c) of the CGST Act, 2017. Therefore, an invoice be raised on or before completion of the 1st floor and the second time on or before the completion of 2nd floor.
In case of banking companies, financial institutions including NBFCs, the time limit for issuing an invoice is extended to 45 days (as against 30 days in respect of other supplier) from the date of supply of service.
In terms of Rule 53(2) of the CGST Rules, every registered person who has been granted registration with effect from a date earlier than the date of issuance of certificate of registration to him, may issue revised tax invoices in respect of taxable supplies effected during the period starting from the effective date of registration till the date of the issuance of the certificate of registration However, rate wise consolidated invoice can be issued to an unregistered recipient during such period except separate invoice be issued in case of inter-state supply exceeding value ` 2.5 lacs.
A bill of supply should be issued instead of a tax invoice in case of the following supplies:
- Supply of exempted goods or services; or
- Supplies made by a supplier opting composition scheme.
A separate ‘Bill of Supply’ is not necessary if the value of the goods or services supplied is less than ` 200 unless the recipient demands for such a bill. In such a case, a consolidated ‘Bill of Supply’ should be prepared at the close of each day in respect of all such supplies to each recipient, separately.
As per section 34(1) of the CGST Act, for issuing a Credit Note, a tax invoice for a supply should have been issued earlier. A credit note may be issued in the following cases:
- The taxable value on which the tax is collected is more than the actual taxable value;
- The tax charged is more than what should have been charged;
- The recipient has returned the goods or
- The recipient has found that the goods or services or both supplied are deficient.
A debit note may be raised for accounting purposes. However, for the purpose of GST, such a debit note will be of no relevance. Under the scheme of things, both debit note and credit note are to be issued by the supplier. Where the supplier fails to declare the details of such documents, the recipient can declare the details of the same (i.e., those issued by the supplier) and require the supplier to accept the same, in order to effect amendments in his return of outward supplies (GSTR
1). (Section 34(3) of the CGST Act, 2017).
The tax invoice issued by an ISD shall contain the following details:
Name, address, GSTIN of the ISD
(b) Consecutive Serial Number unique for a financial year having alphabets/ numerals and special characters being “-“ or “ / “ only
(c) Date of Issue
(d) Name, address, GSTIN of the recipient to whom credit is being distributed
(e) Amount of Credit Distributed
(f) Signature/Digital Signature of the ISD or his authorised representative.
Ans. In case of such suppliers, a tax invoice will include a ‘ticket’. The invoice would be treated as complete if it contains other information in terms of Rule 46 of the CGST Rules except in the following cases:
- The invoice is not serially numbered;
- The invoice does not contain the address of the recipient of taxable supply
The consigner can issue a delivery challan instead of an invoice at the time of removal of goods for transportation in the following cases:
(a) supply of liquid gas where the quantity at the time of removal from the place of business of the supplier is not known,
(b) Transportation of goods for job work,
(c) Transportation of goods for reasons other than by way of supply, or
(d) Such other supplies as may be notified by the Board.
For supply of Services, only two copies of the invoice is sufficient. The original is for the recipient and the duplicate for the supplier.
The invoice should be prepared in triplicate. The original is for the recipient, the duplicate for the transporter and the triplicate for the supplier. The copies should be marked as ‘ORIGINAL FOR RECIPIENT’, ‘DUPLICATE FOR TRANSPORTER’ and ‘TRIPLICATE FOR SUPPLIER’, as the case may be.