Glossary
What is a debit note?
Two everyday uses: a supplier raising an invoice it undercharged, and a buyer recording goods sent back.
Updated
In short
A debit note increases the value of an earlier invoice or, in purchasing, records goods returned to a supplier. In SimpleERP a purchase debit note returns stock to the supplier and is applied against their bills.
A debit note is a document that increases the value of an earlier invoice or, in purchasing, records goods returned to a supplier and the amount the supplier now owes back. Under GST a supplier's debit note increases output tax, for example when it undercharged. In everyday Indian practice, buyers also raise debit notes to record purchase returns and claims, while the supplier issues the matching credit note.
Debit note: a worked example
Lakshmi Steel Furnitures finds dented sheets in a delivery from Tamil Nadu Steels and sends back ₹12,000 worth. It raises a debit note against the bill:
| Account | Debit | Credit |
|---|---|---|
| Accounts payable: Tamil Nadu Steels | ₹14,160 | |
| Inventory (steel sheets) | ₹12,000 | |
| Input CGST 9% | ₹1,080 | |
| Input SGST 9% | ₹1,080 |
The amount owed to Tamil Nadu Steels falls by ₹14,160. For GST, Tamil Nadu Steels issues its own credit note, and Lakshmi Steel checks it appears in GSTR-2B before treating the input tax as reversed.
FAQ
Questions, answered
What is the difference between a debit note and a credit note?
Under GST, a supplier issues a credit note to reduce an invoice and a debit note to increase it. In daily practice, a buyer's debit note records a purchase return or claim, and the supplier answers it with a credit note. Each side records the same event from its own view.
When does a supplier issue a debit note under GST?
When the taxable value or tax on an invoice was lower than it should have been, for example a price revision agreed after delivery or tax charged at the wrong rate. The debit note adds output tax and must refer to the original invoice.
Does a debit note affect input tax credit?
A supplier's debit note increases the buyer's eligible credit once it is reported. A buyer's own debit note for a return does not change credit by itself; the supplier's credit note does that, so the buyer reverses the input tax to match it.
Should I wait for the supplier's credit note before posting the return?
Post the return when the goods leave, so stock and the amount owed are right that day. Then check the supplier's credit note against your debit note when it arrives, and follow up if it does not show in GSTR-2B.
Related
Keep reading
Credit note
A document that reduces an earlier invoice, for returns or overcharges.
Read moreAccounts payable
Money owed to suppliers for goods and services received on credit.
Read moreCredit and debit notes
When to issue a credit note or a debit note under GST, what each one changes in your books and returns, with a worked 10-chair return.
Read more
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