Credit & debit notes under Revised Model GST Law -Only Supplier can Issue not recipient?

By | December 29, 2016
(Last Updated On: December 29, 2016)

Credit and debit notes under Revised Model GST Law

Section 31 of revised Model GST Law states that credit or debit notes will be raised by the supplier who has supplied such goods and / or services. Thus in case where  Vendor – supplier –  has supplied material & debit note is raised by recipient for short supply or rejection where such debit note raised has to be reflected in monthly returns. This cannot be reflected in GSTR 1 under details of credit / debit notes as what is to be reflected under this section is debit/credit notes only if issued as supplier.

Neither this can be reflected in GSTR 2 under details of credit/debit notes as this is an auto populated section based on GSTR 1 filed by counterparty.

Thus unless the supplier – Vendor – raises credit note this cannot be relected in GSTR 1 or GSTR 2.

What would happen to debit note raised on which GST has been charged but not reflected in our return for non issuance of credit note by Vendor – supplier & GST not paid by us.

Read section 31 of Revised Model GST Law ( Relevant portion is Highlighted in Red )

Section 31 of Revised Model GST Law

(1) Where a tax invoice has been issued for supply of any goods and/or services and the taxable value and/or tax charged in that tax invoice is found to exceed the taxable value and/or tax payable in respect of such supply, or where the goods supplied are returned by the recipient, or where services supplied are found to be deficient, the registered taxable person, who has supplied such goods and/or services, may issue to the recipient a credit note containing such particulars as may be prescribed.

(2) Any registered taxable person who issues a credit note in relation to a supply of goods and/or services shall declare the details of such credit note in the return for the month during which such credit note has been issued but not later than September following the end of the year in which such supply was made, or the date of filing of the relevant annual return, whichever is earlier, and the tax liability shall be adjusted in the manner specified in this Act:

PROVIDED that no reduction in output tax liability of the supplier shall be permitted if the incidence of tax and interest on such supply has been passed on to any other person.

(3) Where a tax invoice has been issued for supply of any goods and/or services and the taxable value and/or tax charged in that tax invoice is found to be less than the taxable value and/or tax payable in respect of such supply, the taxable person, who has supplied such goods and/or services, shall issue to the recipient a debit note containing such particulars as may be prescribed

Explanation: – ‘Debit Note’ shall include a supplementary invoice.

(4) Any registered taxable person who issues a debit note in relation to a supply of goods and/or services shall declare the details of such debit note, in the return for the month during which such debit note has been issued and the tax liability shall be adjusted in the manner specified in this Act.

Section 32 which talks about furnishing details of outward supplies . Explanation to section says that outward supplies shall include invoices , debit notes etc in relation to outward supplies.

Relevant portion of Section 32 of Revised Model GST Law :-  Furnishing details of outward supplies

Explanation.- For the purposes of this section, the expression “details of outward supplies” shall include details of invoices, debit notes, credit notes and revised invoices issued in relation to outward supplies made during any tax period. “

Thus is purchase return should be treated as outward supply & reflected in GSTR 1 , which however seems incorrect as GSTR 1 should include debit notes raised as supplier.

Clarification should be given to sort out this case as

i) Vendor( supplier)  – would not issue credit note immediately based on debit note issued by Recipient .

ii) For accounting also we would have to raise debit note on vendor in absence of which this would result in excess payment to vendor – supplier.


[Editor Note : New The Draft Model GST Law, Draft IGST Law and Draft Compensation Law which would be considered by the GST Council for approval are placed in the public domain for information of trade, industry and other stake holders. on 25.11.2016 :-

Draft Model GST Law,

Draft IGST Law and

Draft Compensation Law ]

Earlier, the Draft Model GST Law was put in public domain in the month of June, 2016 for comments  Download:  Old Draft Model GST Law -june 2016 ]

Taxable person- Section 10 of New Draft Model GST Law

3 Types of Supply Defined under Revised Model GST Law -be careful to avoid Litigation

GST Refund Claim –Key Changes under Revised Model GST Law

GST compliance rating- Section 138 of New Draft Model GST Law

Anti-profiteering Measure – Section 163 of New Draft Model GST Law

Schedule V of New Draft Model GST Law -Person Liable to be Registered

Leave a Reply

Your email address will not be published.