Credit Notes Under GST

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Credit Note under GST

Definition:

Credit note may be a document issued by a registered person in accordance with subsection (1) of section 34.

Section 34 of CGST Act:

(1) For supply of any goods or services or both, a tax invoice has been issued and therefore the taxable value or tax charged in that tax invoice is found to exceed the tax payable or taxable value in respect of such supply, or where the products supplied are given back by the recipient, or where the products or services or both supplied are found to be deficient, the registered one that has supplied such goods or services or both may issue to the recipient a revised tax invoice.
(2) Any registered one that issues a credit note with regard to a supply of goods or services or both shall reveal the details of such credit note in the return for the month while such credit note is issued but not after September following the end of the financial year where such supply was made, or the date of furnishing the relevant annual return, whichever is earlier, and therefore the tax liability shall be adjusted in such manner as may be prescribed, and therefore the tax liability shall be adjusted in such manner as may be prescribed.

Situations during which Credit Notes are issued:

In the following instances, the supplier issues a Credit Note:

The supplier has incorrectly declared a worth that is greater than the actual value of the provided goods or services.
The supplier has incorrectly declared a better tax rate than is appropriate for the type of goods, services, or both supplied.
The recipient received but the quantity declared on the tax invoice.
The recipient is dissatisfied with the standard of the supplied goods, services, or both, necessitating a partial or complete refund of the invoice amount.

The credit note is therefore a suitable and legal method for modifying or revising the worth of the goods or services listed on the original tax invoice. The issuance of the credit note will allow the supplier to scale back his tax liability in his tax returns without requiring him to undergo a cumbersome refund process.

Format of Credit Note:

There’s no prescribed format, but a supplier’s credit note must contain the subsequent information:

Supplier's name, address, and Goods and Services Tax Identification Number;
Nature of the record;
A consecutive serial number not more than of sixteen characters, in one or multiple series, containing alphabets or numerals or special characters dash and slash symbolised or hyphen "-" and "/" respectively, and any combination;
Date of release;
The recipient's name, address, and Goods and Services Tax number or Unique Identifier Number, if registered;
If the recipient isn't registered, the name and address of the recipient and therefore the address of delivery, also as the name of the State and its code;
Serial number and date of the relevant tax invoice or, if applicable, supply invoice;
Value of taxable supply of products or services, tax rate, and decrease amount;
Signature or electronic signature of the supplier or his authorized agent.

Maintenance of Records:

The records of credit notes must be kept until the expiration of seventy-two months from the maturity of the annual return for the year pertaining to such accounts and records. Where such accounts and documents are handled manually, they need to be kept at each location listed in the certificate of registration, and that they must be accessible at each location where such accounts and documents are maintained digitally.

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