GST and invoicing
What is a debit note in GST? Meaning, format, example
Definition
Debit note: A debit note is a document that raises the amount on an earlier invoice, issued by a seller who undercharged, or by a buyer sending goods back to a supplier.
Also called: GST debit note, Purchase return debit note, Debit note meaning, Debit note format
Two documents with one name
Under section 34(3) of the CGST Act, a registered seller issues a debit note when the taxable value or tax on an invoice turns out to be lower than what is payable, for example when a price is revised upwards or GST was charged at the wrong rate. It increases what the buyer owes and the seller's GST, and is declared in the return for the month it is issued. A supplementary invoice counts as a debit note for this purpose.
In everyday trade the name is also used for the buyer's side of a purchase return. When you send goods back to a supplier, you send a debit note with them: it records the amount you are debiting to the supplier's account and asks them for credit. It is your own commercial record. The GST adjustment comes from the credit note the supplier then issues.
What a GST debit note must contain
Rule 53(1A) of the CGST Rules lists the same details as for a credit note:
- The supplier's name, address and GSTIN, and a title showing the nature of the document, such as Debit note.
- A consecutive number of up to 16 characters, unique for the financial year, and the date of issue.
- The recipient's name, address and GSTIN if registered.
- The number and date of the original tax invoice.
- The taxable value, GST rate and amount of tax being added, and a signature or digital signature.
Debit note or credit note: which one?
Ask who issues the document and which way the amount moves. A buyer's purchase return note should carry the same details, so the supplier can match it to their bill.
- The seller undercharged: the seller issues a debit note.
- The seller overcharged, or the buyer returns goods: the seller issues a credit note.
- The buyer sends goods back: the buyer may send a debit note with them, and waits for the seller's credit note.
Worked example
Fabric sent back to a mill
A Surat garment brand bought 40 rolls of fabric at ₹2,500 a roll plus 5% IGST from a mill in Maharashtra. Two rolls arrive with dye marks and go back. The brand sends a debit note quoting the mill's bill: 2 × ₹2,500 = ₹5,000 of taxable value plus IGST ₹250, ₹5,250 in all. The mill then issues its credit note for ₹5,250, which lowers the GST on its sale and the input tax credit the brand claims.
In managemate
In managemate, a return to a supplier is recorded against the purchase bill, from the Returns page, the purchase order or a lot in Inventory, and creates a debit note with its own number (DN-00001 by default; the prefix is set in Settings). It prints as an A4 debit note with both GSTINs, the bill it reduces and the supplier's own bill number, each item's HSN code, taxable value and GST, the reason, and a request for the supplier's credit note. The goods leave stock from the lots they came in on, at the cost they came in at, and the amount comes off what you owe, or stays as a refund to collect if you had already paid. managemate does not issue a seller's debit note for an undercharged sales invoice; prepare that one with your accountant.
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