Which one, and when
| Credit note | Debit note | |
|---|---|---|
| Issued by | The supplier | The supplier |
| Issued when | You charged too much, goods were returned, or the supply was deficient | You charged too little, or the taxable value has increased |
| Effect on invoice value | Reduces it | Increases it |
| Effect on your output tax | Reduces it | Increases it |
| Time limit | Yes — see below | No equivalent limit |
Both are issued by the supplier, not the buyer. A buyer raising what they call a debit note is raising a claim, not a GST document — the supplier still has to issue the credit note for the adjustment to have any tax effect.
What a credit note must contain
- The words “Credit Note”.
- Your name, address and GSTIN, and the recipient's.
- A consecutive serial number from its own series, unique for the financial year.
- The date of issue.
- The number and date of the original tax invoice it corrects.
- The taxable value being credited, the rate, and the tax being credited.
- The reason for issuing it.
- Signature or digital signature.
The reference to the original invoice is the field that makes the document work. A credit note that does not name the invoice it corrects cannot be matched to anything, and neither side can reconcile it.
The deadline that catches people
A credit note only reduces your output tax liability if it is declared in a return within the statutory window — broadly, by the return for September following the end of the financial year in which the original supply was made, or the date the annual return is filed, whichever is earlier.
After that you can still issue a commercial credit note and give the customer the money back. What you cannot do is reduce the tax you have already paid on it. In practice this means a credit note is a thing to issue promptly rather than at the next convenient reconciliation.
Time limits and their interaction with your return filings are exactly the kind of thing to confirm with your accountant against the current rules. This page describes the shape of the document, not your filing position.
Issuing one here
- 01Switch the document type to Credit Note. The number prefix changes to its own CN series.
- 02Put the original invoice number and date in the reference field.
- 03Enter only the lines being credited, at the rates they were originally charged at.
- 04Keep the same tax treatment — if the original was CGST and SGST, the credit note is too.
- 05State the reason in the notes field. “Goods returned”, “rate correction”, “short supply”.
- 06Download it and send it alongside the original invoice, not instead of it.