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TREATMENT OF DEBIT NOTE AND CREDIT NOTE IN GST
Please read following guidelines carefully and apply it on case to case basis:-
The Debit Note/Credit Note issued by the customer has no relevancy in GST. These Debit Note/ Credit Note will be for the purpose of accounting only. The GST is concern with the Debit Note/Credit note issued by the supplier. Therefore issue a Debit note against the credit note of the customer or vice-versa issue credit note against the debit note of the customer.
There is different type of transaction prevailing in industry. You have to follow transaction in GST according to the treatment done by the customer.
Case 1:- You raised invoice of Rs 100 with GST Rs 10. Now credit note of Rs 10 issued by the customer.
Treatment
For Post GST Regime Invoice: - You have to raise Debit note of Rs 10 with GST if the Original invoice issued with GST.
For Pre GST Regime Invoice: - Instead of Debit Note you will raise Supplementary invoice with GST. The Supplementary invoice issued to be treated as fresh invoice in GST.
Case 2 :- You raised invoice of Rs 100 with GST. The customer issued Debit note for Rs 10 with following two possibilities:-
2(a) Customer raised Debit Note for Rs 11 (Rs 10 value + Rs 1 tax).
2(b) Customer raised Debit note for Rs 10 without charging GST.
Treatment
2(a) Since the GST is reversed by the customer therefore you will issue a credit note with GST for Rs 11.
2(b) Issue Credit Note without impact of GST. In this case you will not reduce your GST liability because the customer is not reversing credit and taking full credit. So the impact is you are getting Rs 90 from the customer for value plus Rs 10 for GST (10% of Rs 100) and the customer is getting ITC of Rs 10 because he is not paying tax on Rs 90 but he is paying tax on Rs 100.
In this connection we have considered proviso of Section 34(2) which permit reduction of tax liabilities of the supplier only when the ITC availed by the customer against the corresponding invoice is reduced. The same is reproduced below:-
Section 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 is earlier, and the tax liability shall be adjusted in such manner as may be prescribed:
“Provided that no reduction in output tax liability of the supplier shall be permitted, if the incidence of tax and interest on such supply has been passed on to any other person.”
Case 3:- You have send material of Rs 100 on payment of tax Rs 10. Out of which material of Rs 10 is returned back. There can be two cases as follows:-
3(a) Customer issued invoice for Rs 10 with GST.
3(b) Customer returns material of Rs 10 on challan with Debit Note.
Treatment
3(a) Take the Invoice of Rs 10 issued by the customer as purchase in GST. It will be taken as sales return in accounting. You have to prepare reconciliation of financial accounts & GST return.
3(b) Issue a credit note to the customer for RS 11 (Rs 10 for value + Rs 1 for GST)
Treatment in GST Return
The details of Credit note or Debit note issued by the supplier shall be declare in Tile 9B of GSTR-1 return for the month during which such credit note or Debit Note has been issued.
But you can declare Credit note till the September month return 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. |
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