Credit Note and Debit Note in GST India — When to Issue and How to Record

Learn when to issue a credit note or debit note under GST in India. Covers returns, price adjustments, tax implications, and how to record them in billing software.

What is a credit note?

A credit note is issued by a supplier to reduce the value of an invoice already issued. It's the opposite of an invoice — it reduces the amount the buyer owes.

Common reasons to issue a credit note:

Buyer returns goods (full or partial)

Invoice was issued at a higher price than agreed

Quality issues → price reduction given

Discount given after invoice date

What is a debit note?

A debit note is issued by a buyer to a supplier, asking them to increase the invoice amount. In GST context, suppliers can also issue debit notes to charge extra when the original invoice was undercharged.

Common reasons to issue a debit note:

Invoice was issued at a lower price than agreed

Additional charges (freight, insurance) added after invoice

Quantity received was more than invoiced

GST implications

Document	Tax Impact	Filing
Credit note	Reduces supplier's output tax liability	Reported in GSTR-1 (Table 9B)
Debit note	Increases supplier's output tax liability	Reported in GSTR-1 (Table 9B)

Time limit: Credit/debit notes can be issued up to September 30 of the following financial year, or the date of filing the annual return — whichever is earlier.

Format of a GST credit note

A valid credit note must include:

The word "Credit Note" prominently displayed

Serial number (unique, sequential)

Date of issue

Name, address, and GSTIN of the supplier

Name, address, and GSTIN of the recipient (for registered buyers)

Invoice number(s) against which it is issued

Taxable value and tax amount (CGST/SGST or IGST)

Reason for issuing the credit note

How to issue in OwnStore

Credit note: Go to Sales → Credit Notes → New. Link it to the original invoice. OwnStore auto-fills the tax amounts and updates the customer's outstanding balance.

Debit note: Go to Purchases → Debit Notes → New. Link it to the original purchase invoice. The vendor's outstanding increases accordingly.

Both are automatically reflected in GSTR-1 and GSTR-3B calculations.

Manage credit and debit notes on OwnStore →