Invoices are not always the final word. Goods come back, a rate was typed wrong, a price was revised after delivery. Section 34 of the CGST Act deals with these changes through two documents: a credit note when the value or tax goes down, and a debit note when it goes up.
01When to issue which
| Situation | Document |
|---|---|
| Goods returned by the buyer | Credit note |
| Taxable value or tax charged was more than it should have been | Credit note |
| Services found deficient, and the charge is reduced | Credit note |
| Taxable value or tax charged was less than it should have been | Debit note |
| Price revised upward after the invoice | Debit note |
The supplier issues both. A buyer who sends a "debit note" to a supplier for a return is using the word in the accounting sense. Under GST, the supplier's credit note is the document that counts.
02What a credit or debit note must show
Rule 53 of the CGST Rules sets the contents:
- Your name, address and GSTIN.
- The nature of the document: credit note or debit note.
- A serial number of up to 16 characters, unique for the financial year.
- The date of issue.
- The buyer's name, address and GSTIN, if registered.
- The number and date of the invoice or invoices it relates to.
- The taxable value, rate and amount of tax being credited or debited.
- Your signature or digital signature.
Many businesses use a separate series for credit notes, such as CN/26-27/0019, so that numbers never clash with invoices.
03Worked examples
A Morbi tile maker invoiced 200 boxes of vitrified tiles at ₹380 to a dealer in Jaipur: ₹76,000 plus IGST of ₹13,680.
Goods returned
Twenty boxes arrive broken and are sent back.
| Line | Amount |
|---|---|
| 20 boxes at ₹380 | ₹7,600 |
| IGST at 18% | ₹1,368 |
| Credit note total | ₹8,968 |
Price revised upward
The dealer agrees to a ₹10 a box increase for a special finish after delivery.
| Line | Amount |
|---|---|
| ₹10 on 200 boxes | ₹2,000 |
| IGST at 18% | ₹360 |
| Debit note total | ₹2,360 |
04The time limit for credit notes
A credit note relating to supplies of a financial year must be declared in a return by 30 November after the year ends, or by the date you file the annual return, if that is earlier. After that, you can still give the buyer a commercial credit, but you cannot reduce your GST.
For 2025-26 supplies, the last date is 30 November 2026, unless you file the annual return earlier.
Debit notes have no deadline for issue. The buyer's credit on a debit note follows the time limit in section 16(4), counted from the year of the debit note.
05Reporting
- Credit and debit notes go into GSTR-1 for the month or quarter in which they are issued, in the section for registered or unregistered buyers.
- Their effect flows into GSTR-3B through the GSTR-1 figures.
- If you e-invoice, credit and debit notes to registered buyers are also reported to the Invoice Registration Portal, within 30 days if your turnover is ₹10 crore or more.
06How the buyer's response affects you
Credit notes to registered buyers pass through the buyer's Invoice Management System on the GST portal. As of October 2026:
| Buyer's action | Effect |
|---|---|
| Accepts | Your reduction in tax stands. The buyer reduces credit, by the full amount or the amount it declares. |
| Rejects | Your tax liability goes back up by the amount of the credit note. |
| Keeps pending | Allowed for one tax period from the October 2025 period. After that it is treated as accepted. |
The buyer can now say how much credit to reduce on a credit note, which helps where it never claimed full credit on the original invoice.
07Discounts after the sale
A discount given after the invoice, such as a year-end volume discount to dealers, can reduce your GST only when the conditions of section 15(3) are met and a credit note is issued. The Finance Act, 2026 has amended these conditions and the related part of section 34. Read the version in force on the date of your credit note before you design a dealer scheme.
Where the conditions are not met, you can issue a financial or commercial credit note without GST. It reduces what the dealer owes you, while the GST on the original invoice stays as it was.
08Common mistakes
- Raising a new invoice with negative values. Use a credit note.
- Missing the invoice reference. The note must identify the invoice or invoices.
- Issuing credit notes in bulk in December for the previous year, after the 30 November deadline.
- Different amounts in the two books. The buyer books ₹8,500, you book ₹8,968. Agree the figure first.
09For larger businesses
A Rajkot pump maker with 400 dealers issues several hundred credit notes a quarter for returns and schemes. Tying each credit note to its invoice, and agreeing the amount with the dealer before issue, avoids rejections in IMS and the extra tax that comes with them.
10Returns from consumers
Credit notes to unregistered buyers are also reported in GSTR-1. For a shop that takes back goods from walk-in customers, the usual practice is to issue a credit note for each return and reduce the month's consumer sales by the same amount. A Delhi electrical retailer that took back ₹18,000 of fans in a month shows that reduction in the month it issued the notes.
Keep the returned goods record with each note, so the stock count and the credit note agree.
This guide is general information as of October 2026 and does not amount to tax advice.