Credit note

The credit note is an invoice monetary document circulate by a retailer to a customer. Credit notes function as a reference record for the Sales return journal. Basically, the credit note is proof of the decline in sales. A credit note also names as credit memorandum or memo. In layman’s language, a note was given by a shopkeeper to a consumer who has returned goods. The credit note balances upon future purchases.

The use of credit note

The seller on regular basis issues a credit memo to the buyer for the equal or lower amount than the invoice. Then compensates the money to the buyer or places it upon a balance outstanding from transactions. Let’s discuss the uses of credit notes in a day to day life.

  • The prime use of the credit notes is that it permits a buyer to buy a good or service from the retailer on a future date in a form of credit. A credit note is basically a gesture of proof and evidence to a buyer who requires to return earlier purchase the product rather of cash repayment.
  • Selling and purchasing activities, whether it is a cash or credit transactions, the credit note use is to transform the invoice previously issue. The changes are significant due to these purposes.
  1. Cancellation of order as in there is no buying or purchasing transaction took place.
  2. Return of goods due to damage of goods or they get expires, order quantity is less or more and order is not according to the specification mentions at the time of ordering.
  3. Errors in receipts in the form of Arithmetic error, incorrect discount rate or sales tax requirements and many more.
  • In the matter of returned goods for accounting objectives, the credit notes play an important part.
credit note

A cycle chain for the credit and debit note

When and who issues a credit note under GST?

The credit notes can issue at any time. There is no deadline for issuing the credit note. Plus, credit notes document also states in the GST return filling. The information needs to mention at the beginning of the coming dates. September following the end of the year in which such supply delivers and the date of filing of the applicable annual return.A credit note issues following a GST invoice. While the taxable charged and tax value in the invoice is higher than the tax chargeable or tax value for the supply.

So, the cases when a taxpayer can originate a credit note to the consumer.

  • In case the taxpayer observes and see that goods are defective.
  • When goods and services returned by the consumer.
  • When a tax invoice determines to beat the amount of supply.

credit note

The reason for issuing a credit note

The credit note is a useful and legitimate way in which the amount of the goods and services in the original tax invoice can alter or updates. The reason for issuing the credit note.

  • In the case of the returning of products due to the damages, expiry, the quantity is not up to the mark or the product is different from what was ordered.
  • The amount invoice contains errors like the wrong statement that can be a wrong calculation of tax, discounts or cost.
  • Even the credit note issues in case of the cancellation of the purchases.

The format of credit the note under GST

Credit notes are a type of company or business record allot by a retailer normally when goods are returned by a consumer. Under GST Registration, precise rules implement for the issue of credit note along with the return. The GST government site also provides. the format of a credit note.

credit note

The credit note/memo format for the retailers to circulate to the buyers

The details to be included in Credit notes under GST

The formatting is explained in the above table GST but the details which are important to fill are :

  • The name, address and Goods and Services Tax Identification of the supplier.
  • The nature of credit note document. Keep in mind not to fill a debit note.
  • A constant serial number including only characters, digits and it should be unique for a financial year.
  • The document must include the date of issue of the credit note.
  • Address, name and unique identification number or GSTIN of the consumer needs to mention in case they are registered
  • The name and address of the receiver. The delivery address should be mentioned along with pin code and name of the state in case such receiver is unregistered.
  • The serial number and date of the equal tax invoice. Also in another case may be a bill of supply.
  • The taxable amount of goods or services is necessary to mention. The rate of tax and the amount of the tax credited as also key fills in the details of a credit note. In another case may be debited to the beneficiary.
  • The signature of the supplier. Even now a supplier or his/her authorized representative can do the digital signature.

Follow up all the details mentioned above as the credit notes a record that defines the money owed by a company to its consumer and covers aspects like credit amount and the purpose of issuing.

The issuing of the credit note enable the supplier to reduce his tax liability in his returns without demanding to undertake any slow method of refunds.

GST registration and GST return filling are necessary for the companies concerned in the purchasing, marketing any goods and services in India. Legal Raasta can assist you with GST Registration and GST linked complaints. We are an advanced platform to render different enterprise services across India.

Call us at +91 8750008585 or mail us your queries at  [email protected].

Related articles

GST Online verification

GST Rules

GST tracking