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

Verma Engineering Ltd received a show cause notice and, after the proceedings, a demand under section 74 was confirmed on a supply it made to Joshi Industries. Verma pays the tax and issues a debit note for the supplementary amount. Which statement is correct?

The debit note must prominently carry the words 'INPUT TAX CREDIT NOT ADMISSIBLE'. Rule 53(3) requires this for any invoice or debit note issued for tax payable under section 74, 129 or 130, so the recipient cannot claim credit on it.

  1. AThe debit note need not be declared in any return because it relates to a demand
  2. BThe debit note must prominently contain the words 'INPUT TAX CREDIT NOT ADMISSIBLE'Correct
  3. CThe debit note must be labelled 'Revised Invoice' under Rule 53(1)(a)
  4. DThe debit note must be issued only by an unregistered recipient

Explanation

Rule 53(3) says any invoice or debit note issued for tax payable under section 74, 129 or 130 must prominently contain the words 'INPUT TAX CREDIT NOT ADMISSIBLE'. The 'Revised Invoice' wording belongs to revised tax invoices, not debit notes. A debit note is also declared in the return under section 34(4), so the first option is wrong.

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