GST credit note: Essential Legal Provisions The Central Goods and Service Tax Act, 2017; the Central Goods and Service Tax Rules, 2017; the Integrated Goods and Service Tax Act, 2017; and the State/Union Territory Goods and Service Tax Act, 2017 in conjunction with the Rules made thereunder, Circulars, and notifications issued under the said Act/Rules constitute the first set of pertinent legal provisions that we discuss.
Section 34 (1):
(1) Where one or more tax invoices have been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable in respect of such supply, or where the goods supplied are returned by the recipient, or where goods or services or both supplied are found to be deficient, the Registered person, who has supplied such goods or services or both, may issue to the recipient one or more Credit notes for supplies made in a financial year containing such particulars as may be prescribed. [See Rule 53]
Section 34 (1) provides of issue of credits under the following situations:
- for supply of either goods or services or both (that means it covers both supply of good, services as well as composite supplies like works contract services);
- where a tax invoice has been issued (or more than one);
- Such credit note can be issued to the recipient of goods or services or both.
- where the goods supplied are returned;
- where the goods or services or both so supplies found to be deficient and not acceptable to customer.
- where the tax charged in respect of such supply in the tax invoice is more than what is chargeable;
A credit note may be issued in each of the aforementioned scenarios. The word “recipient of such goods or services or both” in Section 34 (1) extends the reach of the provision to include B2C suppliers, as it does not distinguish between the issue of credit notes to B2B and B2C businesses.
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Section 34 (2):
(2) Any Registered person who issues a Credit note in relation to a supply of goods or services or both shall declare the details of such Credit note in the return for the month during which such Credit note has been issued but not later than 3[the thirtieth day of November] following the end of the financial year in which such supply was made, or the date of furnishing of the relevant annual return, whichever is earlier, and the tax liability shall be adjusted in such manner as may be prescribed: Provided that no reduction in Output tax liability of the supplier shall be permitted, if the incidence of tax and interest on such supply has been passed on to any other person.
In conclusion, Sections 34 (1) and (2) of the Act, which were previously discussed, do not limit the issuance of credit notes to B2C supplies and do not attempt to distinguish between B2B and B2C supplies. As a result, the supplier may return any excess value or tax that has been charged to the customer when the customer is refunded a certain amount, or when excess value has been recovered from him and paid to the government, by issuing a GST credit note and lowering his output tax.
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Rule 53 (1A) of CGST/SGST Rules The legal stand that GST credit notes can be issued with respect to B2C supplies is further evidenced by the provisions of Rule 53 which reads as below: (1A) A credit or Debit note referred to in section 34 shall contain the following particulars:
- name, address and Goods and Services Tax Identification Number of the supplier;
- nature of the document;
- a consecutive serial number not exceeding sixteen characters, in one or multiple series, containing alphabets or numerals or special characters-hyphen or dash and slash symbolised as “-” and “/” respectively, and any combination thereof, unique for a financial year;
- date of issue of the document;
- name, address and Goods and Services Tax Identification Number or Unique Identity Number, if registered, of the recipient;
- name and address of the recipient and the Address of delivery, along with the name of State and its code, if such recipient is un-registered;
- serial number(s) and date(s) of the corresponding tax invoice(s) or, as the case may be, bill(s) of supply;
- value of Taxable supply of goods or services, rate of tax and the amount of the tax credited or, as the case may be, debited to the recipient; and
- Signature or digital signature of the supplier or his Authorised representative.
The following details should be included in the credit note: “(6) name and address of the recipient and the address of delivery, along with the name of State and its code, if such recipient is un-registered;” Rule 53 (1A) makes it very clear that a GST credit note can be issued even with respect to B2C supplies. This clause supports the idea that a GST credit note can be issued for B2C purchases as long as the transaction is settled with the customer net of the credit note. Additionally, the department may object to or request documentation proving the transaction was settled net of the credit note at any time.
CBIC Circular makes it clear that a GST credit note can be issued even to a unregistered recipient of services. Though this circular Circular No. 188/20/2022-GST dated 27th December 2022. Credit notes to service recipients it is equally applicable to supply of goods.
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