2/2 Importance and Scenario to issue Debit Note (DBN) in compliance with GST Act

Provision relating to Debit Notes

As per Section 34(3) of the CGST Act 2017, a supplier of goods & services issue a debit note if taxable value/ taxes charged as per the invoice is lower than the actual taxable value/tax of the supply made.

Scenario of issuing of Debit Note

There can be two scenarios for debit notes, each of which is briefly stated:

1. Debit notes issued by the company.

2. Debit notes received by the company.

1. Debit Note "Issued" by the company

The company shall issue a debit note in the case of rate difference, interest on delayed payment, tax rate difference, etc.,

1.1 Time limit for issuing Debit Notes

As on the date, there is no time limit for issuance of Debit note, so debit note for upward revision of Taxable Value or taxes thereon can be issued at any time either in form of Debit note/ Supplementary Invoice and the treatment of tax liability would be identical to the treatment of a tax invoice as far as returns and payments are concerned.

1.2 Reporting of Debit Notes

If debit note is issued it should be furnished in GSTR-1 & GSTR-3B for the month in which it is to be issued and GST liability shall be discharged along with interest at the time of supply for such debit note shall be treated as that applicable on original invoice.

2. Debit Note "Received" by the company

Several scenarios in which debit notes are received by the company along with their GST Implications are listed below:

2.1 Debit notes reported by the suppliers in GSTR-2A/GSTR-2B aligning with the books of accounts of the company

In this case, details of debit note issued by the supplier to the recipient as furnished by him in GSTR-1 for the month in which it is issued, will be made available in the company’s GSTR2B, post which it will be available in the total ITC available to him.

ITC Eligibility

The ITC on debit note shall be claimed based on the dates relevant to the debit note itself, i.e.,

(a) on or before the 30th day of November following the end of the financial year in which such debit note was made or

(b) the date of furnishing of the relevant annual return for the financial year, whichever is earlier.

Thus, ITC on debit note shall be available. It’s essential to ensure that the tax is not paid due to any demand under Section 74, 129, and 130 of the CGST Act, 2017. If tax payment is made under these sections, it will fall under the category of blocked credit as mentioned in Section 17(5)(i) of the CGST Act, 2017 and the ITC will not be eligible on such debit notes.

2.2 Debit notes reported by the suppliers in GSTR-2A/GSTR-2B “not forming part of books of accounts” of the company

Any data related to debit note appearing in GSTR-2B which is not linked to the company and is not forming part of books of accounts will not be accounted for while ascertaining the amount of total input tax credit available to the recipient and will be reversed under Table 4(B)(2) of GSTR-3B.

Effective measures to be taken : The company shall communicate/inform to the supplier requiring them to report debit note in the returns at their end to enable company to avail ITC.