GST · 26 June 2026
Credit Note vs Debit Note Under GST: When Do You Issue Each?
A credit note and a debit note under GST are the two documents that correct a tax invoice after it has been issued, both governed by Section 34 of the CGST Act. The supplier issues a credit note under Section 34(1) when the original invoice charged too much: goods are returned, a service falls short, or a discount is agreed after the sale. The supplier issues a debit note under Section 34(3) when the invoice charged too little and the value or tax has to go up. Both are always raised by the supplier, never the buyer. A credit note reduces the supplier's output tax, but only if it is declared in a GST return by 30 November following the end of the financial year of the original supply, or the annual return, whichever is earlier, under Section 34(2). A debit note carries no such issue deadline, and the buyer's credit on it is timed to the debit note's own date under Section 16(4).
By Mrs. Swapna Patel
Last reviewed
26 June 2026
In this section
Answers
- Credit Note vs Debit Note Under GST: When Do You Issue Each?
- What Is GSTR-1, the GST Return of Outward Supplies?
- What Is GSTR-3B, the Monthly GST Summary Return?
- What Is the Time of Supply Under GST, and When Does Tax Become Due?
- Advance Receipt Under GST: When Do You Issue a Receipt Voucher?
- What Is a Pakka Bill? The GST Invoice That Counts as Valid
- What Is a Kaccha Bill? Why the Rough Slip Has No GST Standing
- Why Move From a Kaccha Bill to a Pakka Bill?
- How to Upgrade From a Kaccha Bill to a Pakka Bill (GST Invoice)
- 5 GST Invoice Mistakes That Trigger a Tax Notice (And How to Fix Them)
If I overcharged a customer, I can just hand back the money or pass an accounting credit note.
To reduce your GST liability you must issue a tax credit note under Section 34(1) of the CGST Act. A plain accounting credit note does not reverse the tax, and the GST credit note has a hard deadline.
What is a credit note under GST?
Short answer
A document the supplier issues under Section 34(1) when the original tax invoice charged too much, so the taxable value or tax has to come down.
- Triggers: goods returned, a deficient supply, a price reduction, or a post-sale discount that meets Section 15(3).
- Effect: it reduces the supplier's output tax, and correspondingly the buyer reverses that much input tax credit.
- It is always issued by the supplier, never raised by the buyer.
- Why it matters: only a tax credit note reported in your GST return cuts your liability; an accounting credit in your books does nothing for GST.
What is a debit note under GST?
Short answer
A document the supplier issues under Section 34(3) when the original invoice charged too little, so the taxable value or tax has to go up.
- Triggers: an undercharged invoice, a later price increase, or a short-levy of tax found after billing.
- Effect: it raises the supplier's output tax, and lets the buyer claim the extra input tax credit.
- A supplementary invoice does the same job and is treated as a debit note.
- Why it matters: issuing a debit note is how you fix an undercharge without cancelling and reissuing the whole invoice.
Credit note or debit note: which do you issue?
Short answer
Both are issued by the supplier. Charged too much, issue a credit note; charged too little, issue a debit note. Both are reported in GSTR-1 and flow to the buyer's GSTR-2B.
| Situation | Document | Direction of tax | Statute |
|---|---|---|---|
| Goods returned, deficiency, or post-sale discount | Credit note | Supplier's output tax goes down | Section 34(1) |
| Undercharge or later price increase | Debit note | Supplier's output tax goes up | Section 34(3) |
| Buyer wants a correction | Buyer asks the supplier; never self-issued | Depends on the correction | Section 34 |
Source: Section 34, CGST Act. Both notes must reference the original invoice. A note that reverses tax is different from cancelling an e-invoice; see what an IRN is.
What is the time limit to issue a GST credit note?
Short answer
A credit note must be declared in a return by 30 November following the end of the financial year of the original supply, or the annual return date, whichever is earlier, under Section 34(2). A debit note has no such issue deadline.
Miss that window and the credit note no longer reduces your output tax, so an unbilled return or discount becomes your cost. A debit note is treated differently: there is no deadline to raise it, and the buyer's input tax credit on it runs from the debit note's own financial year under Section 16(4), not the original invoice date. The deadline is tied to the financial year of the supply, so check the exact cut-off for the year you are correcting.
References & related
Primary sources
- Section 34, Central Goods and Services Tax Act 2017 (credit and debit notes) — India CodeWhen a supplier issues a credit note (34(1)) or debit note (34(3)), and the time limit to declare a credit note (34(2)).
- Section 15(3), CGST Act 2017 (discounts) — India CodeWhen a post-sale discount can be excluded from value, the usual basis for a credit note.
- Section 16(4), CGST Act 2017 (time limit for ITC) — India CodeITC on a debit note is timed to the debit note's own financial year, delinked from the original invoice.
- GST portal — Returns and amendments — CBICHow credit and debit notes are reported in GSTR-1 and reflected in the buyer's GSTR-2B.
Last reviewed: 26 June 2026