Understanding debit note

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What does debit note mean?

If you’ve ever run your own business, chances are you’ve had a few questions about debit notes. However, if you have no idea about a debit notehere is a quick explanation. A debit note is a document that that shows the changes made to the invoice amount. Debit notes can be issued at any point during the payment process. 

For example: when you send your customer an invoice for Rs. 100, but after a couple of days, you realize that there was an issue on your end, and the invoice amount should be Rs. 110. Instead of sending another invoice for Rs. 10, you can issue them a debit note, along with the best possible explanation as to why they should pay the higher price (instead of drawing more attention to yourself in case it’s your mistake)

When is a debit note issued?

A buyer typically issues a debit note to a seller in the following cases:

  1. When the invoice has an incorrect amount in it or overstated
  2. When the goods received are damaged or defective
  3. When the purchase has been cancelled
  4. When the goods received are poor in terms of promised quality standards.

A seller would need to issue a debit note to a buyer in the following cases:

  1. When the amount payable to the seller is more than the invoice amount
  2. When more goods are ordered, and the invoice needs to be revised to reflect the additional goods ordered

Whether you take an example of a primary sector or an industry sector, the purpose of a debit note remains the same. Click here to know how it applies to your business.

Is there a time limit to issue the debit note?

There is no time limit stipulated for issuing a debit note. However, according to the GST laws, a debit note should be administered at one of the following dates, whichever comes before:

  1. 30 September of the year, which follows the year in which the supply was made
  2. On or before the date at which the taxpayer files the annual return (GSTR-9) for that financial year

If the debit note is not issued according to these timeframes, then there may be a penalty or 

interest levied

Contents of a debit note:

While there is no strictly prescribed format of a debit note, the following are some of the mandatory fields:

  1. Name of the supplier
  2. Address of the supplier
  3. Contact details of the supplier
  4. GSTIN of the supplier
  5. Unique serial number
  6. Name of the recipient
  7. Address of the recipient
  8. Contact details of the recipient
  9. GSTIN of the recipient
  10. Invoice reference number for which the debit note is issued
  11. Supplementary invoice date of creation
  12. Goods description
  13. A statement in the header specifying that the document is a debit note
  14. Verification with a digital signature

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