Complete analysis of Supplementary (Debit note and Credit note) invoices and Input Tax Credit

[Sandeep Rawat]

SUPPLEMENTARY INVOICES AND THEIR USES

Supplementary tax invoice has not been defined under GST law. Supplementary tax invoice is a type of invoice that is issued by a taxable person in case where any deficiency is found in a tax invoice already issued by a taxable person. It can be in form of a debit note or a credit note.

ISSUANCE OF CREDIT NOTE

A supplier of services is mandatorily required to issue a tax invoice. However, during the course of trade or commerce, after the invoice has been issued there could be situations like:

• The supplier has erroneously declared a value which is more than the actual value of the services provided.
• The supplier has erroneously declared a higher tax rate than what is applicable for the kind of the services supplied.
• The quality services supplied is not to the satisfaction of the recipient thereby necessitating a partial or total reimbursement on the invoice value.
• Any other similar reasons.

In order to regularize these kinds of situations, the supplier is allowed to issue what is called as credit note to the recipient.

A registered person who issues such a credit note has to declare 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.

The tax liability of the registered person will be adjusted in accordance with the credit note issued, however 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

ISSUANCE OF DEBIT NOTE

Sometimes, during the course of trade or commerce, after the invoice has been issued there could be situations like:

• The supplier has erroneously declared a value which is less than the actual value of the goods or services or both provided.
• The supplier has erroneously declared a lower tax rate than what is applicable for the kind of the goods or services or both supplied.
• The quantity received by the recipient is more than what has been declared in the tax invoice.
• Any other similar reasons.

In order to regularize these kinds of situations the supplier is  allowed  to issue what is called as debit note to the recipient.

Any registered person who issues a debit note in relation to a supply of services, 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

DETAILS REQUIRED TO BE SHOWN

There is no prescribed format for credit/debit note issued by a supplier. However, it must contain certain prescribed particulars. A supplementary tax invoice / or credit note under section 34 (1) or debit note under section 34 (3) read with Rule 6 of Revised Invoice Rules 2017, shall contain the following particulars:

1. The word “Revised Invoice”, wherever applicable, indicated prominently
2. name, address and GSTIN of the supplier,
3. nature of the document,
4. a consecutive serial number containing only alphabets and/or numerals, unique for a financial year,
5. date of issue of the document,
6. name, address and GSTIN/ Unique ID Number, if registered, of the recipient,
7. name and address of the recipient and the address of delivery, along with the name of State and its code, if such recipient is unregistered,
8. serial number and date of the corresponding tax invoice or, as the case may be, bill of supply,
9. taxable value of goods or services, rate of tax and the amount of the tax credited or, as the case may be, debited to the recipient, and
10. Signature or digital signature of the supplier or his authorized representative.

OTHER PROVISION

As per Section 33 of CGST Act 2017, every person who is liable to pay tax shall indicate in all documents relating to assessment, tax invoice or other like documents, the amount of tax.

 INPUT TAX CREDIT

As per section 16(1) of GST law, no registered taxable person shall be entitled to the credit of any input tax in respect of any supply of goods and/or services to him unless he is in possession of tax invoice, debit note, supplementary invoice or such other taxpaying document as may be prescribed, issued by a supplier registered under the CGST/SGST or the IGST Act.

As per section 16(1) & 16(2) of GST law, The registered person will be entitled to the credit of any input tax in respect of any supply of goods and/or services to him only if ALL the following five conditions are fulfilled:

(a)Possession of tax paying document [Section 16(2)(a) read with rule 36 of the CGST Rules]ITC can be availed on the basis of any of the following documents:

1. Invoice issued by a supplier of goods and/or services
2. Invoice issued by recipient (receiving goods and/or services from unregistered supplier) along with proof of payment of tax (in case of reverse charge)
3. A debit note issued by supplier
4. Revised invoice

All these documents are to furnished at the time of filing form GSTR-2

The documents basis which ITC is being taken should have all the relevant particulars as prescribed in rule 46 of the CGST Rules at least the following details:

• Amount of tax charged
• Description of goods or services
• Total value of supply of goods and/or services
• GSTIN of the supplier and recipient
• Place of supply in case of inter-State supply

(b)The registered person taking the ITC must have  received  the services.

(c)Tax is actually paid by the supplier to Government [Section 16(2)(c)].

(d)The registered person taking the ITC must have filed his return under section 39 [Section 16(2)(d)]

(e)He should pay the supplier, the value of the goods or services along with the tax within 180 days from the date of issue of invoice.

However, No ITC beyond September of the following FY to which invoice pertains or date of filing of annual return, whichever is earlier

For further clarification and professional assistance, feel free to contact at [email protected]

(Mr. Sandeep Rawat has vast experience & knowledge in dealing with Direct and Indirect Taxation. He is providing his expertise service as Managing Partner at SRT Consultancy & Service. He can be reached at  [email protected])