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CA Final · Indirect Tax Laws · Tax Invoice, Credit and Debit Notes

Kaveri Textiles, a registered supplier in Surat, issued a tax invoice in July 2024 (FY 2024-25) to Mehta Garments, a registered buyer, and later found that the taxable value charged was higher than the actual value of the supply. Which statement correctly describes the supplier's position under section 34 of the CGST Act, 2017?

The supplier may issue a credit note to the recipient with the prescribed particulars. Under section 34(1), a credit note is the instrument used when the taxable value or tax charged in the invoice exceeds what was actually payable. A debit note applies only where the invoice undercharged.

  1. AIt may issue a credit note to the recipient, containing the prescribed particularsCorrect
  2. BIt must issue a debit note to the recipient
  3. CIt must cancel the original invoice and re-issue a fresh invoice with the same number
  4. DIt cannot adjust the liability because an invoice, once issued, cannot be corrected

Explanation

Section 34(1) says that where the taxable value or tax charged in the invoice exceeds the taxable value or tax payable, the registered supplier may issue a credit note containing the prescribed particulars. A debit note is for the opposite case, where the value charged is less than what is payable. Hence the debit note option is wrong.

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