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Credit Note › Credit note vs debit note
Credit note vs debit note under GST
Both correct an invoice already issued. A credit note brings the bill down; a debit note takes it up. Under GST, both are issued by the supplier.
The difference at a glance
| Credit note | Debit note | |
|---|---|---|
| Issued by | Supplier | Supplier |
| When | Invoice value or tax was too high; goods returned; supply deficient | Invoice value or tax was too low |
| Supplier's GST | Goes down | Goes up |
| Buyer's input tax credit | Goes down (buyer reduces it) | Goes up (buyer may claim more) |
| Number series here | CN/26-27/001 | DN/26-27/001 |
| Time limit | Yes (see below) | No limit to issue; buyer's credit has a limit |
Examples
- Goods returned: credit note for the value and tax of the returned goods.
- Rate billed wrongly high: billed 100 units at ₹520 instead of ₹500. Credit note: 100 × ₹20 = ₹2,000 + GST.
- Rate billed wrongly low: billed ₹480 instead of ₹500 on 100 units. Debit note: ₹2,000 + IGST 18% ₹360 = ₹2,360.
- Wrong GST rate: charged 5% instead of 18% on ₹50,000. Debit note for the extra 13% tax, ₹6,500. Choose the reason "Tax corrected".
- Extra freight agreed later: debit note for the freight and its GST.
Discount after the sale
A discount given after the sale (for example a year-end target discount) reduces the GST only when the conditions in the GST law are met: since 1 November 2026 there is no need for an agreement made before the sale or for linking it to particular invoices, but it must be given through a GST credit note under section 34, and the buyer must reverse the input tax credit on it. These conditions have changed more than once, so check the current position with your accountant.
When the conditions are not met, you can still give the discount through a commercial (financial) credit note: it lowers the amount the customer owes but not your GST. In the maker, untick "Show GST on this document" for such a note and write "Commercial credit note, GST not reduced" in Notes.
How to make each one here
- Choose Credit note or Debit note in the form. The number series changes with it.
- Type the original invoice number and date, and pick the reason.
- Enter only the lines that change: the returned quantity, or the rate difference with quantity, at the original GST rate.
- Save, print both copies, and give the original to the customer.
What about a buyer's debit note?
Many buyers send a "debit note" to the supplier when they return goods. In accounts this is fine, but it is not a GST document. For the GST to be reduced, the supplier must issue the credit note. You can make either on this site; only the supplier's credit note counts for GST.
Also read: credit note format and reporting in GSTR-1.