Debit Note and Credit Note: Definition, Meaning & Guide for Indian Businesses

Credit Note reduces a previously issued invoice (returns, discounts). Debit Note increases a previously issued invoice (additional charges). Both must be reported in GSTR-1.

What is Debit Note and Credit Note?

Under Section 34 of the CGST Act, when the taxable value or tax charged in an invoice was less than what should have been, the supplier issues a Debit Note. When more, a Credit Note. Common Credit Note cases: sales returns, post-supply discounts, deficient supply. Common Debit Note: under-billing corrections, additional charges. Both reference the original invoice and must be reported in GSTR-1 in the period of issue.