Credit and debit notes under GST: a forwarder's guide

Invoices get corrected. A rate was wrong, a charge was billed to the wrong party, a detention amount was waived after negotiation, an extra service was performed after the invoice went out. Under GST the correction is not an edit to the original; it is a separate document that references it.

What is the difference between a credit note and a debit note?

A credit note, under Section 34 of the CGST Act, reduces what was billed: the taxable value or tax charged was higher than it should have been, or the service was deficient. A debit note increases it: the value or tax charged was lower than it should have been. Both must reference the original invoice.

The time limit on credit notes

A credit note has to be declared in a return no later than 30 November following the end of the financial year in which the original supply was made, or the date the annual return is filed, whichever is earlier. After that, the tax on the original invoice cannot be reduced through a credit note, so year-end corrections deserve attention before the deadline rather than after.

Should you cancel the e-invoice or issue a note?

If you are covered by e-invoicing, an invoice can be cancelled on the IRP only within 24 hours of its IRN. After that the route is always a credit or debit note, and those notes are themselves e-invoiced with their own IRN.

A correction should point back at exactly what it corrects, line by line, or it will not reconcile.

Common forwarder cases

• Billed to the shipper when the consignee should pay: credit the shipper's invoice and invoice the consignee.
• Detention waived: credit the detention line.
• Rate agreed higher after the fact: issue a debit note for the difference.

In Freightflow, notes are raised against the original invoice line and carry the same pricing basis, and they can also be raised on their own where no single invoice applies.