Credit Note and Debit Note in GST – Ultimate Guide for SMEs

Credit Note and Debit Note in GST – Ultimate Guide for SMEs

From small trading businesses to large corporations when operating their concerns. These two different sizes of organizations regularly may face a problem that is common to both of them. And that problem is making errors in their invoices. To rectify this mistake, a document both these business verticals use is Credit Note and Debit Note.

With the implementation of GST, like tax invoices and other documents, the credit and debit notes also have GST rules. Accordingly, the companies have to show them in the monthly GST Returns.

So let’s understand more about Credit Notes and Debit Notes.

What is a Credit Note?

It is a document that the seller issues to the buyer due to an error in the invoice. Also, in the case of return of goods by the buyer to the seller results in Credit Invoice generation.

Further, if we talk in terms of GST, the supplier only, if registered issues, a Credit Note. Additionally, the reason to issue the document may be to decrease the GST rate or Taxable Value. And that is the reason to issue a Credit Note.

What is a Debit Note?

It is a document that the buyer issues to the seller when the return of goods by the customer takes place.

But the concept in terms of GST is a little different. The registered supplier only issues the Debit Note to the customer. Further, the reason to issue the note is to increase the Taxable Value or GST Rate.

Both the Credit Note and Debit Note are also called Supplementary Invoice in GST.

How to Report Credit Note and Debit Note under GST?

According to the existing GST Return system, Credit Note and Debit Note both reporting happens in GSTR-1. The supplier only has to show the details of both Credit Notes, Debit Notes in its GSTR-1.


So this is the way how the businesses use these supplementary invoices and report them in GST. The Governments allowing the use of these notes to provide relief to taxpayers in case of any error. But if SMEs and large corporations are not using a GST software tool for their invoicing needs. Then they are increasing more burden on themselves as they have to prepare invoices manually. Further, have to enter all these data in GST Returns also manually. Additionally, this situation may cause more mistakes to happen in the future. So to avoid all these things, the companies should use a software solution to ease out this process. And for Indian SMEs and Manufacturing concerns, #ChanakyaERP is a suitable tool to help them out in these specific needs.


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