Debit Note › When to issue a debit note

When to issue a debit note

Ask one question: does the customer now owe more than the original invoice said? If yes, the supplier issues a debit note for the extra amount and its GST. If the customer owes less, it is a credit note instead.

Worked examples

• Rate billed wrongly low: billed ₹480 instead of ₹500 on 100 units to a buyer in another state. Debit note: ₹2,000 + IGST 18% ₹360 = ₹2,360. Reason "Price increased (rate difference)".
• Wrong GST rate: charged 5% instead of 18% on ₹50,000. The extra tax is 13% of ₹50,000 = ₹6,500. Issue a debit note for that tax and choose the reason "Tax charged short"; ask your accountant how they want the line shown in the books.
• More goods than invoiced: 120 cartons went, the invoice says 100. Debit note for the 20 extra cartons at the invoice rate, with GST.
• Charges agreed later: the customer agrees to pay ₹1,500 freight after the invoice. Debit note for ₹1,500 + GST at the rate that applies to the main supply (freight that is part of the supply follows the goods' rate).

When a debit note is the wrong tool

• The invoice has not been given yet: correct the invoice itself instead.
• A new, separate sale: make a fresh tax invoice, not a debit note.
• Interest on late payment: this is a fresh supply under GST; most businesses raise a tax invoice for it. Ask your accountant.
• The customer owes less (returns, price cut, discount): issue a credit note.

The buyer's "debit note"

Many buyers send a "debit note" to their supplier when they return goods or claim a shortage. In accounts this is common and fine: it tells the supplier "we are reducing what we owe you". But it is not a GST debit note. Under GST only the supplier changes the tax, and for a return that means the supplier issues a credit note.

So if you are the buyer, make your debit note here with Purchase (Supplier) chosen under "This note is against". It lowers what you owe the supplier in your books and, for goods returned, takes them out of your stock. Then ask the supplier for a GST credit note, or the tax on your purchase does not change. When their credit note arrives, do not record it again as a second note: the debit note already stands for it.