Key Takeaways
- A credit note reduces the original invoice value or tax; a debit note (which includes a supplementary invoice) increases it (Section 34, CGST Act 2017).
- A credit note must be declared in the GSTR-1 of the month in which it is issued, and not later than 30 November following the end of the financial year of the original supply, or the date of filing the annual return (GSTR-9), whichever is earlier.
- From 1 October 2025, the supplier cannot reduce output tax via a credit note if the registered recipient has not reversed the corresponding ITC (Section 34(2) proviso, substituted by section 126 of the Finance Act 2025).
- Debit notes and credit notes are reported in GSTR-1 Table 9B (registered recipients as CDNR, unregistered as CDNUR). Table 9C is for amending notes reported earlier.
When should you issue a GST credit note or debit note? Issue a credit note under Section 34(1) when the taxable value or tax on the original invoice exceeds what is payable, goods are returned, or goods or services are found deficient. Issue a debit note under Section 34(3) when the original invoice undercharged the tax or taxable value. Both must carry the particulars prescribed in Rule 53(1A) of the CGST Rules, 2017.
You sold goods worth Rs 1,00,000 plus 18% GST. A month later, the buyer returns Rs 20,000 worth of goods. You need to issue a credit note to reduce your GST liability by Rs 3,600. Miss the reporting deadline and you absorb the entire tax yourself.
Credit notes and debit notes are not optional paperwork; they directly change your GST liability and your buyer's ITC. Get the timing wrong, and the adjustment can be lost for good.
What is a Credit Note Under GST?
A credit note is issued by the supplier to the recipient when the original tax invoice needs correction downward. Section 34(1) of the CGST Act lists three situations:
- Taxable value or tax overcharged. You invoiced Rs 1,00,000 but the contract price was Rs 90,000. The credit note corrects the Rs 10,000 difference and the proportional GST.
- Goods returned by the recipient. Defective goods, wrong shipment, excess quantity; the credit note reverses the sale to the extent of the return.
- Goods or services found deficient. The deliverable didn't match the agreement. The credit note adjusts the value and tax downward.
Since 1 February 2019, the supplier may issue one or more credit notes for supplies made in a financial year, so one note can cover several invoices of the same financial year.
The Finance Act 2026 (section 154) adds a fourth situation to Section 34(1): a post-supply discount referred to in Section 15(3)(b). That amendment had not been brought into force when this post was last reviewed, so check the CBIC notification before relying on it.
What is a Debit Note Under GST?
Section 34(3) says that when the taxable value or tax charged on the original invoice is less than what is payable, the supplier shall issue a debit note. The Explanation to Section 34 says the expression "debit note" includes a supplementary invoice.
Practical example: You invoiced a client Rs 2,00,000 plus 18% GST (Rs 36,000). The agreed price was actually Rs 2,50,000. You issue a debit note for Rs 50,000 plus Rs 9,000 GST. Your output liability goes up by Rs 9,000; the recipient's eligible ITC goes up by the same amount.
Unlike credit notes, debit notes have no outer time limit under Section 34. Section 34(4) requires the supplier to declare a debit note in the return for the month in which it is issued.
For the buyer, the ITC time limit under Section 16(4) is linked to the financial year to which the debit note pertains, not the year of the original invoice (the words "invoice relating to such" were omitted by the Finance Act 2020, from 1 January 2021). A debit note dated June 2026 can be claimed up to 30 November 2027 or the date of filing the FY 2026-27 annual return, whichever is earlier.
The 30 November Deadline You Cannot Afford to Miss
Section 34(2) is where most businesses trip up. Here's the exact rule:
The credit note must be declared in the return for the month in which it is issued, but not later than 30 November following the end of the financial year in which the original supply was made, or the date of furnishing the relevant annual return (GSTR-9), whichever is earlier. The Finance Act 2022 moved this date from September to 30 November, from 1 October 2022.
What this means in practice:
Say you issued a tax invoice in February 2026 (FY 2025-26). You discover an overcharge in August 2026. You issue a credit note in August 2026 and report it in the August 2026 GSTR-1. That's fine; you're within the window.
But if you discover the overcharge in December 2026 and try to report the credit note in the December 2026 GSTR-1, you've missed the 30 November 2026 deadline. The supplier cannot reduce output tax liability for that credit note.
The deadline is linked to the financial year of the original supply, not the credit note issue date. A credit note against an FY 2024-25 supply must be declared by 30 November 2025. Against an FY 2025-26 supply, by 30 November 2026.
Deadline Timeline
Credit Note Reporting Timeline (FY 2025-26 Invoice)
Section 34(2), CGST Act
Original supply made
Tax invoice issued during FY 2025-26
Safe window to report credit note
Include in GSTR-1 of the month of issue
Absolute deadline
Last date to declare credit note in GSTR-1
GSTR-9 due date
If you file GSTR-9 before 30 Nov, that becomes the cutoff
Source: Section 34(2), CGST Act 2017
The October 2025 ITC Reversal Rule (Finance Act 2025 Amendment)
Before October 2025, the proviso to Section 34(2) only barred a reduction in the supplier's liability where the incidence of tax and interest had been passed on to any other person. It did not tie the supplier's reduction to the recipient's ITC reversal.
From 1 October 2025 (section 126 of the Finance Act 2025), the substituted proviso says no reduction in the supplier's output tax liability is permitted if:
- (i) the ITC attributable to the credit note, if availed, has not been reversed by the recipient, where the recipient is a registered person; or
- (ii) in other cases (for example, unregistered recipients), the incidence of tax on the supply has been passed on to any other person.
What you need to do as a supplier: Before relying on the credit note to reduce your liability, confirm that the registered recipient has accepted it and reversed the ITC. On the GST portal this flows through the Invoice Management System (IMS).
As a recipient: When a credit note appears in IMS, accept it if it is correct, and the ITC reduction flows into your GSTR-2B. Reject it if it is wrong. From the October 2025 tax period, GSTN lets you keep a credit note pending for one tax period (one month, or one quarter for QRMP filers) and, when accepting, declare the actual amount of ITC to be reduced if you had already reversed or never availed the credit. If you take no action by the end of the pending window, the note is deemed accepted (GSTN advisory, 17 October 2025).
Post-Supply Discounts: Section 15(3)(b)
A discount given after the supply reduces the taxable value only if both conditions of Section 15(3)(b) are met:
- (i) the discount is established in terms of an agreement entered into at or before the time of supply and is specifically linked to the relevant invoices; and
- (ii) the ITC attributable to the discount, on the basis of the document issued by the supplier, has been reversed by the recipient.
Discounts that do not meet these conditions can still be given through a financial or commercial credit note, but the supplier cannot reduce the original tax liability (Circular 92/11/2019-GST).
Circular 212/6/2024-GST had prescribed certificates (a CA or CMA certificate from the recipient where the discount exceeded Rs 5 lakh in a financial year, an undertaking otherwise) as evidence of condition (ii). It was withdrawn by Circular 253/10/2025-GST dated 1 October 2025, so that procedure is no longer required. The Finance Act 2026 (section 153) substitutes Section 15(3)(b) so that a discount is excluded when a credit note is issued and the recipient reverses the ITC under Section 34, dropping the prior-agreement condition. That change was not yet in force when this post was last reviewed.
How to Report in GSTR-1 (Table 9B and 9C)
Credit notes and debit notes are reported in GSTR-1 as follows:
Table 9B, CDNR covers notes issued to registered recipients (B2B). You enter the recipient's GSTIN, the note number and date, taxable value, and tax amounts (IGST, CGST, SGST/UTGST, cess).
Table 9B, CDNUR covers notes issued to unregistered recipients against inter-State B2C large invoices and exports.
Table 9C is used to amend credit or debit notes reported in an earlier period.
E-invoice users: If your aggregate turnover in any financial year from 2017-18 exceeded Rs 5 crore (from 1 August 2023), you must generate an IRN on the e-invoice portal (IRP) for B2B credit and debit notes as well (Rule 48(4)). From 1 April 2025, taxpayers with AATO of Rs 10 crore and above cannot report invoices, credit notes or debit notes on the IRP more than 30 days after the document date (GSTN advisory; IRP release of 31 March 2025).
Mandatory Particulars Under Rule 53(1A)
Rule 53(1A) of the CGST Rules prescribes what a credit note or debit note must contain:
- Name, address, and GSTIN of the supplier
- Nature of the document (credit note or debit note)
- Consecutive serial number of up to 16 characters, in one or multiple series, unique for a financial year
- Date of issue
- Name, address, and GSTIN or UIN of the recipient, if registered
- Name and address of the recipient and the delivery address, with State name and code, if the recipient is unregistered
- Serial number(s) and date(s) of the corresponding tax invoice(s) or bill(s) of supply
- Value of taxable supply, rate of tax and amount of tax credited or debited to the recipient
- Signature or digital signature of the supplier or authorised representative
Missing any of these makes the note non-compliant. The recipient may face issues claiming or reversing ITC if the details don't match their GSTR-2B.
Common Mistakes That Cost Businesses Money
- Missing the 30 November deadline. This is permanent. Once the window closes, the supplier cannot reduce output tax for that credit note. Calendar it in April itself for the previous year's invoices.
- Issuing credit notes without recipient communication. From October 2025, a registered recipient must reverse the ITC before the supplier gets the benefit. A credit note that the recipient rejects in IMS does nothing for your liability.
- Confusing financial credit notes with GST credit notes. A commercial discount note that doesn't adjust GST won't reduce your output liability. If you intend to adjust GST, the note must carry all Rule 53(1A) particulars, meet Section 34 (and Section 15(3)(b) for discounts), and be reported in GSTR-1.
- Wrong note type. If you undercharged, it's a debit note. If you overcharged, it's a credit note. Getting this backwards creates reconciliation problems in GSTR-2B for the recipient.
- Not reconciling with GSTR-2B. Recipients should match every credit note received against their GSTR-2B to ensure ITC reversal is correct. A mismatch means either excess ITC (risk of demand notice) or excess reversal (you paid tax you didn't owe).
Let Tax Garden Handle Your GST Credit Note Compliance
Tracking credit note deadlines, confirming ITC reversals with recipients, and reconciling GSTR-1 with GSTR-2B across dozens of invoices every month is exactly the kind of compliance work that slips through the cracks. Tax Garden's GST compliance service handles the full cycle: from credit note validation to GSTR-1 reporting to GSTR-3B adjustments, with the 30 November deadline tracked automatically.
