The applicant pays compensation in the form of credit note and linked to the sale invoice issued in a particular month. Section 34 of the CGST Act, 2017 provides the provision in relation to the debit note or credit note under GST. to flood affected people under CSR expenses on free basis without collecting any money. 15CA & Form 15CB – Lucidly Explained 18 FAQs. 122/3/2010 dated 30.4.2010 in the context of Rule 4(7) of the CENVAT Credit Rules has also clarified that ‘In the cases where the receiver of service reduces the amount mentioned in the invoice/ bill/ challan and makes discounted payment, then it should be taken as final payment towards the provision of service.’. – Section 2(37) of CGST Act,unless the context otherwise requires, – “credit note” means a document issued by a registered person under Sub-Section (1) of Section 34; – Section 2(38) of CGST Act,unless the context otherwise requires, – “debit note” means a document issued by a registered person under Sub-Section (3) of Section 34; ♦ Issuance of Credit Note under Section 34(1). ♦ Method of Issuing Credit Note in case of Expired Drugs/ Medicines as per Circular No. which such supply was made, or the date of furnishing of the relevant annual return, whichever is earlier. 61/2020 introduced the “Schema for E-Invoice” for imposing the e-invoicing. ♦ AAR in respect of tax GST payable on reimbursement of discount / rebate from principal company, Case Name: In re M/s. Conclusion: The AAR ruled that MRF can avail the input tax credit only to the extent of the invoice value raised by the suppliers reduced by the discounts provided by the C2FO software. In other words, credit note(s) can be issued as a commercial transaction between the two contracting parties. a) before or at the time of the supply, provided such discount has been duly recorded in the invoice issued in respect of such supply; b) after the supply has been effected, provided that: i) such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; and. Such credit note shall be stated in the GSTR – 1 in order to adjust the tax liability and adjusted tax shall be reversed by the customer from his input tax and on the other hand, if the credit note is issued after the specified time limits, then the credit note without tax shall be issued and no tax shall be adjusted and there is no requirement to declare such credit note on the common portal by the supplier. As per the notification featured on 29 th january, 2019, Government of India has amended the provisions under section 34 of the CGST Act, which has been effective from 1 st february, 2019. Once the credit note has been issued, the tax liability of the supplier will reduce. 112/31/2019-GST dated 3rd October, 2019 (by 37th GST Council decision) without specifying whether those principles were not applicable to GST or the circular was erroneous due to certain reasons. It would be concern if supplier treats the financial credit note as inward supply in his books of accounts whereas the dealer/ customer treats the same as reduction from cost of purchase. 15/- per packet and afterwards M/s ABC revalue it at Rs. When a financial credit note issued is without GST break up, can we take the consolidated amount of credit note, or, should we reverse the GST and take into account the GST deducted credit note amount? As invoice is important to avail GST credit (ITC), incorrect invoice might obstruct GST credit availment. As per the notification featured on 29 th january, 2019, Government of India has amended the provisions under section 34 of the CGST Act, … For Example – M/s ABC supplies 15,000 packets of chips to M/s XYZ at Rs. Ultra tech Cement Limited (AAR Maharashtra) According to Rule 86B under GST, if the value of taxable supply exceeds 50 lakhs in a month, then the registered taxpayer cannot use the available credit amount to discharge his output tax if it exceeds 99% of tax liability. As per Section 2(31), subsidies given by any person other than government  shall be taxable as consideration but here discount means amount deducted from the price offered by the supplier and it is cleared that a reimbursement or discount can not result in consideration as what is reimbursed is equal to amount parted as a Discount. In case the discrepancies are not rectified in the month of communication than such amount would be added to the output tax liability of the succeeding month. Supplier has wrongly declared a higher rate of tax than what is applicable on that supply of goods or services. For these transactions input tax credit will not be available as per Section 17(5)(h) of the KSGST and CGST Act, 2017. without tax. Credit taken w.r.t debit note – Financial year of original invoice relating to which debit note has been raised. In other words, the output tax liability cannot be reduced in cases where credit note has been issued after September or filing of annual return whichever is earlier. 72/46/2018-GST dated 26th October, 2018, Circular No. ♦ Issuance of Debit Note under Section 34(3), – 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 be less than the taxable value or tax payable in respect of such supply (Where Declared Value less than Actual Value) / (Rate of tax charged lesser than rate applicable) or, – where the goods supplied are received by the recipient, or where goods or services or both supplied are found to be in excess (Quantity received more than Declared Quantity). Such documents include tax invoice, debit note, credit note and bill of supply.This article, however, seeks to explain in detail credit note under GST. 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. which such supply was made, or the date of furnishing of the relevant annual return, whichever is earlier. – Credit note also can be issued for accounting any unilateral treatment such as write-off of bad debts. – The amendment in Section 34 vide CGST (Amendment) Act, 2018 comes effective from 01.02.2019, now one or more credit note can be issued in respect of an invoice. All Rights Reserved. The AAR held that in case, there is no pre fixed criteria, basis or rationale for arriving at the quantum of discounts then it will not consider and allowed as discount. Sir, 5/AAR/2019 Time Limit is earlier of actual date of furnishing of annual return (since furnishing of annual return is not preceded by due date) and due date of GSTR 3B for the month of September. Date of Judgement/Order: 16/09/2019. The claim for reduction in output tax liability by the supplier that has been matched would be accepted and communicated and where the reduction in the output tax liability exceeds the corresponding reduction in the claim for input tax credit or credit note is not declared by the recipient then the discrepancies would also be communicated. By Issuing Credit note Supplier GST liability will reduce. Reduction on account of Credit note: If recipient declares the details of such credit note in his valid return of any subsequent period (As per GST Law provisions) then supplier will be entitled to claim reduction from his output tax liability on account of such credit note. ... Bill of Supply, Debit Notes, Credit Notes etc under GST. 72/46/2018-GST dated 26th October, 2018 along with Circular 92/11/2019- GST dated 7th Mar 2019 make it clear that, (a) financial/ commercial credit note exists in common trade practices and. In other words, the output tax liability cannot be reduced in cases where credit note has been issued after September. It reduces the value of the original supply. In this case, the credit note shall not be possible to be issued in relation to one by one invoice in respect of which discount is given. Mr. XYZ has to apply for the refund of taxes paid by him on such advance by filing ‘Form GST RFD – 01’ under the category “Excess Payment of Tax”. 877/15/2008 dated 17.11.2008– Central Board of Indirect Taxes and Customs regarding reversal of CENVAT Credit in case of trade discount or reduction in the price, it was observed that such discounts were given only in respect of value of inputs and not in respect of duty. Such discounts are established in terms of an agreement entered into at or before the time of supply though not shown on the invoice as the actual quantum of such discounts gets determined after the supply has been affected and generally at the year end. Situation – 1 Mr. XYZ an architect, received an advance in respect of contract of service entered by him with Mr. ABC. Hello friends, greetings for the day in the current article we will discuss about credit note under GST. No. the registered person, who has supplied such goods or services or both, may issue to the recipient a credit note containing such particulars as may be prescribed. However it should be kept in mind that “the output tax liability cannot be reduced in cases where credit note has been issued after September”. Debit Note in GST. On 30th July 2020, the Central Board of Indirect Taxes and Customs (CBIC) vide Notification No. As per Sec 43 the details of credit note relating to outward supply furnished by a registered person shall be matched:-. The output tax liability of the supplier gets reduced once the credit note is issued and it is matched. 1.) ♦ We shall discuss here two situations in order to determine whether the credit note shall be issued or not? No place to show the CNote in 3B?? Above mentioned Circular No. Can we request to Issue the credit note with GST one to one invoice wise. As per 34(2) any registered person who issues a credit note in relation to a supply of goods or services or both shall 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 … These materials are supplied by the distributors at free of cost being CSR Activity for reinstating connectivity in flood ridden areas. Jeyachandran, wonderful .Painstaking article.Covered most of the situations, Your email address will not be published. Hence, the taxes paid ... of validity of registration period. 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 case of any doubt related to this topic or any provisions of GST then you may contact us at [email protected]. If yes, under which HSN/ SAC? The petitioner is paying the tax due as per the invoice value issued by the applicant and availing the input credit of tax shown in the inward invoice received by the applicant from the Principal Company. In case of downward price revision, should a seller issue a credit note on their own or should wait for the buyer to issue a debit note? It is a document issued by the supplier of goods or services to the recipient where – a tax invoice has been issued for any supply of goods or services or both and: and here it is decided by the applicant every time as it is unknown. 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. Explanation – For the purposes of this Act, the expression “debit note” shall include a supplementary invoice. 1800/- and later Credit note of Rs. Income Tax Filing. Even the customer can inform the supplier about the quantity as well as value of the returned goods and on the basis of that the supplier shall issue credit note and send it to the customer. 72/46/2018 – GST Dated 26th October, 2018. The e-way bill can be raised either by the customer returning the goods or the supplier. The business keepers and the customers need to keep the records safe so that it could be used whenever they are required to do so. 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. Therefore, the gross payment by the applicant to its vendors would be the discounted net amount plus the GST on the undiscounted net amount. Credit note/debit note issued to registered persons (B2B supplies): This must be reported in, Original Invoice Number (in relation of which Credit/ Debit Note is being issued), Type (whether Debit/ Credit Note or Refund Voucher). However, above ruling had been withdrawn and AAAR dated 24.06.2019 ruled that M/s MRF Ltd. can avail the input tax credit of the full tax charged on the undiscounted supply invoice of goods/ services by their suppliers. Make sure to issue credit note on time to get GST refund. Rs. Value and also whether the supply is eligible to be taxed at a different rate of tax, as notified by the government. In order to submit a comment to this post, please write this code along with your comment: bbcc501f0cee2a74e6570eacb6371e27. A proportionate reversal of the credit is not required to be done by them if post purchase discount provided by the suppliers to them through the software as mentioned above. – The supplier can issue credit note with tax if it is issued within the specified time limits as per provisions of the section 34(2) of the CGST Act. For the purpose of GST, both debit and credit note need to be issued by the supplier of goods or services. Find the various time limits here. Also, held that the tax shall be levied and payable at the applicable rate by the applicant on the amount of reimbursement of discount/ rebate from the principal company as per Section 15 of the CGST Act, 2017. KSEB had requested from the distributors of the Polycab Wires to supply electrical goods for the restoration of power supply at flood ridden areas. ♦ AAR in respect of tax not payable on volume discount where no tax adjustment is made, Case Name: In re Kwality Mobikes (P) Ltd. (GST AAR Karnataka) However, the reduction in output tax liability of the supplier shall not be admitted, if the incidence of tax and interest on such supply has been passed on to any other person. It was clarified that in such cases, the entire amount of duty paid would be available as ITC. Any Such Document, by whatever name called (Debit Note or credit Note) when issued by the recipient to the registered supplier, will not be considered any document under GST Law. No. Because in pt. How the tax liability for the Credit Note Issued to a registered person in a particular month shall be adjusted in which, there is no registered supply available but supply to interstate unregistered persons is made? However, in case the customer registered as a composition taxpayer shall issue bill of supply and charge tax at the rate applicable to a composition taxpayer and the supplier shall not be eligible to claim input tax credit. If this company now offers the customer a 5% discount in order to encourage the customer to clear all his debts, but the discount wasn’t agreed before or at the time of supply, and can’t be linked to a particular invoice, this discount will be added in the value of the taxable supply. – Cash Discount not agreed before or at the time of supply. Credit note in GST is defined under section 34 (1) of the CGST act 2017. April 1, 2021, 13 Suggestion to FM for Simplification of GST (Hindi & English), Remittance Abroad – Form No. ♦ Issuance of E-way Bill in case of Credit Note. In this article, we will understand two important concepts of GST compliance – Credit & debit note. The duplication in the claim for reduction in output tax liability shall be communicated. Conclusion: The AAR ruled that where the applicant make more purchases then it is eligible for the volume discount and a credit note is issued by the authorised supplier and no adjustment of price is made in respect of goods already sold nor any adjustments of taxes is made in the credit note. M/s Kwality Mobikes (P) Ltd. (“the Applicant”) is in the business of supplying motor vehicles. The discount is given as post-sale discount and the applicant submitted that this cash discount cannot be excluded from the value of supply as per the provisions of Section 15 of the CGST Act, 2017. April 1, 2021, 13 Suggestion to FM for Simplification of GST (Hindi & English), Remittance Abroad – Form No. In this ruling, the AAR is completely relied on the second provision of section 16(2) which states that if the recipient fails to make the payment towards the value of supply within 180 days from the date of invoice, the input tax credit availed in respect of such supply shall be required to reverse and added to output tax liability. For Example – Get additional discount of 1.5% if you purchase 1,00,000 pieces in a year, get additional discount of 1.75% if you purchase 1,50,000 pieces in a year. – Such goods returned by the customer by issuing sale invoice is actually not a supply for him and the supply who receives the goods and accounts it as a purchase is actually not a purchase for him. Any registered person who issues a debit note in relation to a supply of goods or services or both shall declare the details of such debit note in the return for the month during which such debit note has been issued and the tax liability shall be adjusted in such manner as may be prescribed. Declaring Credit Note in GST Returns Adjustments should be made to the value of standard-rated supplies (Box 1) and output tax (Box 6) in the GST return for the accounting period in … As per 2(37) of CGST Act credit note means an document issued by a registered person under 34(1). However, during the course of trade or commerce, after the invoice has been issued there could be situations may arise like: – 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 (Where Declared Value more than Actual Value) / (Rate of tax charged higher than rate applicable) or, – where the goods supplied are returned by the recipient, or where goods or services or both supplied are found to be deficient (Quantity received less than Declared Quantity) / (Quality is not as per specifications). The records of the credit have/ debit note or a supplementary invoice 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. – * Amendment Incorporated vide Notification No. The tax liability shall be adjusted in the return as per the conditions specified in Section 34 of the CGST Act, 2017. Provisions for issuing Credit Note under GST Posted by NEHA GOYAL Posted on April 16, 2018 April 17, 2018 0 Comments Categories All About GST, Tax Advisory Tags debit note section 34 of cgst act, Format of Credit Note, gst credit note, Period of Retention of Records, Section 34 of CGST Act Before a consolidated/single credit debit note against one or more tax invoices option available on GST portal. GST law has prescribed time limit to issue tax invoices, revised bills, debit note, credit note etc under GST. Quantity received by the recipient is less than what has been declared in tax invoice. – The common trade practice in the pharma sector is that of drugs/ medicines (considered here as goods) return back to the supplier on account of their expiry and in such case, the wholesaler/ retailer can follow either of the method for the return of such drugs/ medicines: a) Return of expired drugs/ medicines to be treated as fresh supply. Credit Note under GST. This being the case, the distributor would be entitled for input tax credit on the goods supplied to Kerala State Electricity Board on instructions from the applicant. As per 34(1) 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 a credit note containing such particulars as may be prescribed. a) Whether the amount paid to authorized dealers towards “rate difference” after effecting the supply of goods by the applicant to aforesaid dealers can be considered for the purpose of arriving at the ‘transaction value’ in terms of Section 15 of the CGST Act. (b) if tax adjustment is NOT made, then such credit notes are NOT required to be reported in GSTR 1. 3.2 Taxable Amount and Tax Amount will be shown but the amount in 3.1 is less than the amount to be shown in Pt. Conclusion: The AAR held that the distributors raised bills to KSEB, in relation to the materials supplied free of cost to Kerala State Electricity Board. Refunds under GST INTRODUCTION ... credit notes are issued, obviously it would call for reduction in output liability of the supplier. 1.1 Credit Note – Section 2(37) means a document issued by a registered person under sub section (1) of Section 34 of CGST Act, 2017. In such a situation the discount will not be added to the value of taxable supply as conditions are pre-determined.