Know About Credit Notes in 2022

Time Of Info By TOI Team   April 24, 2022   Update on : April 24, 2022

Credit Note

What is a credit note?

A credit note is a note or a document issued by one party to another in which the sender mentions that the sender credits the other party’s account in his books. If the taxable value of the products supplied decreases after the supplier issues the tax invoice, he might issue a credit note containing the necessary particulars.

It is not a refund in the traditional sense, but it serves as a substitute in that the buyer can purchase the things later without having to pay for them. A debit note reduces the buyer’s liabilities, while the seller sends the credit note to acknowledge the buyer’s debit note.

Reasons for issuing a credit note

As per Section 34(1) of the CGST Act, when a tax invoice is produced and needs to be changed to minimize the tax burden, the supplier may issue a credit note.

  • Due to buyer returns due to quality concerns, service refusal, or received damaged goods.
  • Higher costs were incorrectly collected from the buyer, or the buyer paid more than the reported value.
  • Give the buyer a post-sale discount.
  • The amount received by the customer is less than the amount shown on the tax invoice.
  • Canceling any outstanding payments on invoices.
  • Any other comparable purpose.

All credit note details issued throughout the month must be filed in GSTR-1 for that month. The previously created credit note can be changed, and the changes should be recorded in the monthly GSTR-1. Corresponding information will be automatically reflected in the recipient’s GSTR-2B and GSTR-2A. It is convenient for a supplier to alter his previously issued tax invoice. He can quickly minimize his tax liability without going through the time-consuming process of obtaining rebates. In addition, all debit and credit notes issued under Section 34 of the CGST Act must be reported to the IRP for e-invoicing. Read more about the carpet cleaning company.

A credit note’s contents

  • Supplier’s business name, address, and GSTIN
  • The type of document is a debit note or a credit note.
  • A unique serial number of no more than 16 characters. It might be numeric, alphabetic, alphanumeric, or contain special characters.
  • Document issuance date
  • Supplier’s business name, address, and GSTIN
  • The taxable value of the supply, the rate, the tax, and the amount of the buyer’s tax credit.
  • The supplier’s or his authorized representative’s signature is required.

How to Make a Credit Note

A credit note can be written in Excel, Word, or any other software the firm uses to create invoices. The steps for creating a credit note are as follows:

  • Select the credit note template that will be used.
  • Revise the company logo.
  • Input the credit note’s issuing date and unique credit note number.
  • Include the invoice reference number for which the credit note is being issued.
  • Include the GSTINs of the supplier and customer and the location of supply.
  • Keep the credit card receipt. Click here to know how to cancel a cheque.


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