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Goods and Services Tax (GST) and Corporate Tax Planning · Procedural Compliance under GST

Tax Invoice, Credit Note and Debit Note under GST

Updated 11 October 2026 · Fact-checked

A tax invoice is the document a registered person issues for a taxable supply, showing description, value and tax charged. Section 31 fixes when it is issued. Section 34 lets the supplier correct it later: a credit note reduces the value or tax, and a debit note increases it.

Understand Tax Invoice, Credit and Debit Notes

GST runs on documents. The supplier's invoice is what lets the recipient claim credit and what proves the tax charged. So the Act says who must issue which document, and by when.

Section 31 covers the main document. A registered person supplying taxable goods issues a tax invoice before or at the time of removal of goods (if goods move), or at delivery or making them available (in other cases). For taxable services, the invoice is issued before or after the service, but within a prescribed period. The invoice must show description, quantity (for goods), value and tax charged, plus prescribed particulars.

Not every supplier issues a tax invoice. A person supplying exempted goods or services, or paying tax under section 10 (composition), issues a bill of supply instead, since no tax is charged. Where the value is less than ₹200, the invoice or bill of supply may be skipped, subject to prescribed conditions. On receiving advance payment, the registered person issues a receipt voucher. If no supply follows and no invoice is issued, a refund voucher may be issued. A person paying tax under reverse charge (section 9(3) or 9(4)) issues an invoice for supplies from an unregistered supplier and a payment voucher when paying.

Section 34 handles corrections after the invoice. If the taxable value or tax charged is more than it should be, or goods are returned, or goods or services are deficient, the supplier may issue a credit note. If the value or tax charged is less than it should be, the supplier must issue a debit note. A debit note includes a supplementary invoice.

The key contrast: the supplier may issue a credit note, but shall issue a debit note. A credit note also has a time limit and a condition on passing on the tax burden, which examiners like to test.

Key rules to remember

Invoice for goods (s.31(1))
Issue tax invoice before or at the time of removal (goods move) or delivery/making available (other cases)
Description, quantity, value, tax charged and prescribed particulars must appear.
Invoice for services (s.31(2))
Issue tax invoice before or after the service, within the prescribed period
The period is in the rules. Do not quote a number of days unless the question gives it.
Revised invoice (s.31(3)(a))
Within one month from the date of the registration certificate, for supplies from the effective date of registration to the certificate date
Applies to invoices already issued in that gap.
Small value (s.31(3)(b))
Value of supply < ₹200: tax invoice may be skipped, subject to conditions
Same ₹200 limit applies to a bill of supply.
Bill of supply (s.31(3)(c))
Exempted supply or section 10 composition → bill of supply instead of tax invoice
No tax is charged on it.
Advance receipt (s.31(3)(d), (e))
Advance received → receipt voucher; no supply and no invoice → refund voucher may be issued
Receipt voucher is mandatory; refund voucher is optional (may).
Reverse charge documents (s.31(3)(f), (g))
Invoice for supply from unregistered supplier; payment voucher at time of payment
A supplier registered only for TDS under section 51 counts as unregistered for this purpose.
Continuous supply of goods (s.31(4))
Invoice before or at the time of each statement of account or each payment received
Applies where successive statements or payments are involved.
Continuous supply of services (s.31(5))
Due date ascertainable → on or before due date; not ascertainable → before or at receipt of payment; linked to an event → on or before completion of event
Advance receipt rules in s.31(3)(d) still apply.
Cessation of service (s.31(6))
Invoice at the time supply ceases, to the extent of supply made
Covers contracts ending before completion.
Sale on approval (s.31(7))
Invoice before or at the time of supply, or six months from date of removal, whichever is earlier
Applies to goods sent on approval for sale or return.
Credit note (s.34(1), (2))
Issued where value/tax is excessive, goods are returned, or goods/services are deficient; declare in the return for the month of issue, not later than 30 November following the end of the financial year of supply or the date of annual return, whichever is earlier
No reduction in output tax if the incidence of tax and interest has been passed on to another person.
Debit note (s.34(3), (4))
Issued where taxable value or tax is less than it should be; declare in the return for the month of issue
Includes a supplementary invoice. No cut-off date like credit note.

How to solve Tax Invoice, Credit and Debit Notes questions

Most questions give a supply and ask which document is needed, when, or how a correction is handled. Use this sequence.

  1. 1Identify the event: sale of goods, service, advance, return, price revision, or reverse charge supply.
  2. 2Check whether the supply is taxable, exempt, or by a composition person. Taxable means tax invoice; exempt or composition means bill of supply.
  3. 3Check the value. If it is below ₹200, note the relaxation, subject to prescribed conditions.
  4. 4Fix the timing rule: goods with movement, goods without movement, services, continuous supply, cessation, or approval basis.
  5. 5If money came before supply, bring in the receipt voucher, and a refund voucher if the supply fails.
  6. 6For corrections, decide direction: lower value or tax, returns or deficiency means credit note; higher value or tax means debit note.
  7. 7For a credit note, check the time limit and whether tax incidence was passed on to another person.
  8. 8Write the conclusion with the section number and the reporting step in the return.

Quickest way: Document-and-date shortcut

When to use it: When you have a few minutes and the question asks 'which document and by when'.

  1. Ask: taxable or exempt/composition? Tax invoice or bill of supply.
  2. Ask: money first or supply first? Money first means receipt voucher.
  3. Ask: goods or services, one-time or continuous? Pick the sub-section.
  4. Ask: correction up or down? Down means credit note (may), up means debit note (shall).
  5. Close with the credit note deadline and the pass-on proviso if relevant.

Common mistakes in Tax Invoice, Credit and Debit Notes

  • Saying a bill of supply is issued for all small supplies.

    Students mix up the ₹200 relaxation with the bill of supply rule.

    Fix: Bill of supply is for exempt supplies and composition persons. The ₹200 relaxation is separate and subject to conditions.

  • Treating a credit note as compulsory.

    Both credit and debit notes seem to be correction documents.

    Fix: Section 34(1) says the supplier 'may' issue a credit note, while 34(3) says 'shall' issue a debit note.

  • Ignoring the pass-on proviso for credit notes.

    Students focus only on the deadline.

    Fix: If the incidence of tax and interest has been passed on to another person, the supplier's output tax liability is not reduced.

  • Applying the goods timing rule to services.

    Both are in section 31 and look alike.

    Fix: Goods: before or at removal or delivery. Services: before or after provision, within the prescribed period.

  • Forgetting the receipt voucher on advances.

    Students think only an invoice is needed.

    Fix: Under 31(3)(d), advance payment needs a receipt voucher. A refund voucher is the optional follow-up if no supply is made.

  • Quoting a debit note deadline like the credit note one.

    Students assume the two clauses are symmetrical.

    Fix: Section 34(4) only requires declaring the debit note in the return for the month of issue.

Worked examples

Example 1

Arjun Traders, a registered dealer in Pune, receives ₹50,000 from a customer on 5 May as advance for goods to be supplied later. On 20 May the customer cancels the order and no goods are supplied. No invoice was issued. What documents arise under the CGST Act?

Show the solution
  1. Arjun Traders is registered and has received advance payment for a supply of goods.
  2. Section 31(3)(d) requires a receipt voucher on receipt of the advance.
  3. The supply was not made and no tax invoice was issued.
  4. Section 31(3)(e) allows the registered person to issue a refund voucher to the person who made the payment.
  5. The refund voucher is optional ('may'), the receipt voucher is mandatory.

Answer: Arjun Traders must issue a receipt voucher on 5 May. After the cancellation, it may issue a refund voucher against the ₹50,000 received.

Example 2

Meera Pharma Ltd issued a tax invoice for goods with a taxable value of ₹2,00,000. The correct value was ₹1,80,000, and the tax charged was therefore excess. Separately, for another invoice, the taxable value was understated by ₹10,000. Which notes are issued, and how are they reported?

Show the solution
  1. First invoice: the taxable value (₹2,00,000) exceeds the correct value (₹1,80,000) by ₹20,000.
  2. Section 34(1) allows a credit note where taxable value or tax charged exceeds what is payable. The supplier may issue it.
  3. Section 34(2): declare the credit note in the return for the month in which it is issued, not later than 30 November following the end of the financial year of the supply, or the date of the annual return, whichever is earlier.
  4. Proviso: output tax is not reduced if the incidence of tax and interest has been passed on to another person.
  5. Second invoice: value is understated by ₹10,000, so taxable value is less than it should be.
  6. Section 34(3) requires a debit note, which includes a supplementary invoice. It must be declared in the return for the month of issue under 34(4).

Answer: For the ₹20,000 excess, Meera Pharma may issue a credit note, subject to the 30 November or annual return cut-off and the pass-on proviso. For the ₹10,000 shortfall, it shall issue a debit note, declared in the return for the month of issue.

Exam tips

  • Always cite the sub-section: 31(1) goods, 31(2) services, 31(3) special cases, 34(1) credit note, 34(3) debit note.
  • Use the 'may' versus 'shall' contrast for credit and debit notes; it is a common point to earn marks.
  • In case studies, state the provision, apply facts, then conclude in one line. List each document separately.
  • Do not quote prescribed time periods, rates or e-invoice thresholds from memory unless the question supplies them. Say 'within the prescribed period'.
  • Elective papers are open book, so mark section 31 and 34 in your bare Act and practise finding sub-clauses quickly.

Practice questions from Procedural Compliance under GST

Tax Invoice, Credit and Debit Notes in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Tax Invoice, Credit and Debit Notes: frequently asked questions

What is the difference between a tax invoice and a bill of supply?

A tax invoice is issued for taxable supplies and shows the tax charged. A bill of supply is issued by a person supplying exempted goods or services, or paying tax under section 10 (composition), because no tax is charged. Both may be skipped below ₹200, subject to conditions.

What is the time limit to issue an invoice for goods and services?

For goods, issue the invoice before or at the time of removal, or at delivery or making available where there is no movement. For services, issue it before or after the service within the prescribed period. Continuous supplies, cessation and approval sales have their own rules in section 31.

When can a credit note be issued under GST?

Under section 34(1), when the taxable value or tax charged exceeds what is payable, when goods are returned, or when goods or services are deficient. It must be declared in the return within the time set by section 34(2). The supplier's tax liability is not reduced if the tax burden was passed on to another person.

Is a debit note compulsory under GST?

Yes. Section 34(3) says the supplier shall issue a debit note where the taxable value or tax charged in the invoice is less than it should be. A supplementary invoice counts as a debit note.