Skip to content

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

Nair Engineering, Kochi, a registered person, issued an invoice in July 2025 for services of taxable value Rs 80,000 plus IGST 18% (Rs 14,400) to a client in Bengaluru. In September 2025 it found that the taxable value was actually Rs 90,000. What document should it issue, and for what amount?

Nair Engineering should issue a debit note for additional taxable value of Rs 10,000 and IGST of Rs 1,800. A debit note is the correct document when the original invoice shows a lower taxable value or tax than the amount actually payable.

  1. ADebit note for taxable value Rs 10,000 and IGST Rs 1,800Correct
  2. BCredit note for taxable value Rs 10,000 and IGST Rs 1,800
  3. CDebit note for Rs 10,000 with no tax, as the original invoice already carried tax
  4. DFresh invoice for Rs 90,000 plus Rs 16,200 IGST, cancelling the earlier invoice without any other document

Explanation

Taxable value was understated by Rs 10,000, so additional tax is 18% of 10,000 = Rs 1,800. A debit note is issued when the taxable value or tax charged in the invoice is less than what is payable. A credit note is for excess, which is not this case.

Did you get it right without looking?

One question tells you little. A timed set on Tax Invoice; Credit and Debit Notes shows your real accuracy, how long you take and where you lose marks.

Practise Tax Invoice; Credit and Debit NotesFree diagnostic mock

More Tax Invoice; Credit and Debit Notes questions