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CA Intermediate · Taxation · Tax Invoice; Credit and Debit Notes

Kapoor Steel Ltd (registered, Pune) supplied goods worth Rs 5,00,000 plus 18% GST on an invoice dated 20 August 2025. On review, it found the taxable value was understated by Rs 50,000 (tax at 18% extra). It issued a debit note dated 10 January 2026 for the additional Rs 50,000 plus tax. What is the additional output tax and in which period will it be reported?

The additional output tax is Rs 9,000, being 18% of Rs 50,000, and it is reported in the return for the month in which the debit note is issued, January 2026. Unlike credit notes, a debit note's liability is not related back to the original invoice month.

  1. ARs 9,000, reported in the return for the month of the original invoice, August 2025
  2. BRs 9,000, reported in the return for the month in which the debit note is issued, January 2026Correct
  3. CRs 9,000, in the return for the month of the original invoice only if the buyer agrees
  4. DRs 10,000, in the return for January 2026

Explanation

Additional tax is 18% x 50,000 = Rs 9,000. A debit note's tax liability is declared in the return for the month in which the debit note is issued, not that of the original invoice. Rs 10,000 uses a wrong rate of 20%; reporting in August 2025 is the mistake of relating it back to the original invoice.

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