A Debit Note and a Credit Note are documents used to adjust a previously issued invoice, most commonly for returns, pricing corrections, or discounts applied after the original sale. A Credit Note is issued by the seller to reduce the amount owed by the buyer, typically because goods were returned, an invoice overcharged the buyer, or a post-sale discount was agreed. A Debit Note is the reverse: issued by the buyer (or by the seller to increase the amount owed) when goods received are being returned to the seller, or when an invoice undercharged and needs to be corrected upward. Under GST, both debit notes and credit notes must be reported in GST returns and affect the GST liability and Input Tax Credit accordingly, a credit note reduces the seller's GST liability and the buyer's claimable ITC; a debit note increases them. Getting these two documents and their GST treatment right matters for keeping both parties' books and GST filings consistent with each other.
Example: A buyer returns damaged goods worth ₹20,000 (plus GST) to the seller. The seller issues a credit note for that amount, reducing what the buyer owes and adjusting the seller's own GST liability downward for that period.
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