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

Mehta Consultants, a registered firm in Pune, provided taxable consulting services to a registered client on 5 August. The invoice was issued on 20 August. Mehta later found that the taxable value on that invoice was understated by Rs 20,000 and that GST at 18% applies. Mehta issues a document on 10 September to correct this. Which statement is correct?

Mehta should issue a debit note with additional taxable value of Rs 20,000 and GST of Rs 3,600, totalling Rs 23,600. A debit note is used when the original invoice shows a lower taxable value than the correct value, and tax is payable on the extra amount.

  1. AMehta issues a credit note of Rs 23,600 to the client
  2. BMehta issues a debit note of Rs 20,000 only and no GST is charged on it
  3. CMehta issues a debit note showing taxable value Rs 20,000 and GST Rs 3,600, total Rs 23,600Correct
  4. DMehta cancels the original invoice and issues no further document

Explanation

Where the taxable value on an invoice is lower than the correct value, the supplier issues a debit note. The debit note carries the additional taxable value of Rs 20,000 and GST at 18%, i.e. Rs 3,600, totalling Rs 23,600. A credit note is for reductions in value, so option A is wrong, and option B wrongly omits the tax.

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