Section 34 of CGST Act, 2017 : Section 34: Credit And Debit Notes

Bare Act

(1) Where one or more tax invoices have been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable in respect of such supply, or where the goods supplied are returned by the recipient, or where goods or services or both supplied are found to be deficient, the registered person, who has supplied such goods or services or both, may issue to the recipient one or more credit notes for supplies made in a financial year containing such particulars as may be prescribed.

(2) Any registered person who issues a credit note in relation to a supply of goods or services or both shall declare the details of such credit note in the return for the month during which such credit note has been issued but not later than the thirtieth day of November 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, and the tax liability shall be adjusted in such manner as may be prescribed : Provided that 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.

(3) Where one or more tax invoices have been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to be less than the taxable value or tax payable in respect of such supply, the registered person, who has supplied such goods or services or both, shall issue to the recipient one or more debit notes for supplies made in a financial year containing such particulars as may be prescribed.

(4) Any registered person who issues a debit note in relation to a supply of goods or services or both 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.

Explanation - For the purposes of this Act, the expression "debit note" shall include a supplementary invoice.

Simplified Act

(1) If a seller has charged too much tax or the value of the goods or services in the invoice is higher than it should be, or if the buyer returns the goods, or if the goods or services are not up to standard, then the seller can give the buyer a 'credit note'. This credit note is for the difference in amount and must include certain details that are required by law. This applies to sales made within a financial year.

(2) When a seller gives out a credit note, they must report it in their tax return for the month when the credit note was issued. This must be done no later than November 30 of the following financial year or before the annual tax return is filed, whichever is earlier. The seller's tax that they have to pay will be adjusted based on the credit note. However, if the seller has already passed on the tax and interest costs to someone else, they can't reduce the amount of tax they owe.

(3) If a seller has not charged enough tax or the value of the g...

Explanation using Example

Imagine a situation where "ABC Electronics Ltd." sold 50 TVs to "XYZ Supermarket" at a unit price of ₹30,000 plus applicable GST. Later, they realize that the correct price was actually ₹28,000 per TV. As per Section 34(1) of the CGST Act, ABC Electronics Ltd. can issue a credit note to XYZ Supermarket for the excess amount charged.

After issuing the credit note, as required by Section 34(2), ABC Electronics Ltd. must declare the details of this credit note in their GST return for the month in which the credit note was issued and adjust their tax liability accordingly, ensuring this is done before the prescribed deadline.

Conversely, if ABC Electron...