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

Sundaram Traders, Madurai, a registered person, supplied goods to Kaveri Stores (registered) on 10 June. A tax invoice was issued on 10 June for goods valued at Rs 1,00,000 plus GST at 18%. On 20 July, Sundaram Traders found that the invoice was prepared for a higher quantity than actually delivered, and the taxable value should have been Rs 80,000. Which document should Sundaram Traders issue to correct this?

A credit note should be issued. The original invoice overstated the taxable value (Rs 1,00,000 against the correct Rs 80,000), and under the CGST Act a credit note is the document used when the taxable value or tax charged exceeds the amount actually payable.

  1. AA credit note, since the taxable value is reducedCorrect
  2. BA debit note, since the invoice was incorrect
  3. CA fresh tax invoice, cancelling the earlier invoice without any other document
  4. DA bill of supply, since the supply value has changed

Explanation

Where a tax invoice has been issued for a supply and the taxable value or tax charged exceeds what is actually payable, the supplier may issue a credit note. Here the value falls from Rs 1,00,000 to Rs 80,000, so a credit note of Rs 20,000 plus tax of Rs 3,600 is appropriate. A debit note is used when value or tax is understated.

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