We have started a RTP series on GST in MCQ form where we will post MCQs along with detailed Explanations along with additional questions surrounding the concepts asked in RTP for GST CA Final issued for May 2024.
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Concept of Debit & Credit Notes
Facts
Registered Person Received a debit note in respect of inward intra- State taxable supplies received in the financial year 2020-21 (Invoice related to 2020-21) for the quantity difference as agreed. These inward supplies were used for all goods manufactured in factory. Date of debit Note is 16th October, 2023.
Question: What is the Time Limit for taking ITC against such Debit Note
Options:
A. 30 November 2021
B. 30 November 2023
C. 30 November 2024
Answer: "C" i.e. 30 November, 2024 (For Explanation, please refer Next Section)
Question: Original Invoice Date is 15 Feb, 2023. Maximum Time Limit for issuance of Debit Note against this Invoice
Options:
A. No Time Limit
B. 30 November 2023.
Answer: "A" i.e. No Time Limit
Question: Question: Original Invoice Date is 15 Feb, 2023. Maximum Time Limit for issuance of Credit Note against this Invoice
Options:
A. No Time Limit
B. 30 November 2023.
Answer: "B" i.e. 30 November 2023.
Question: As per Section-34, Debit Notes or Credit Notes can be issued by whom
Options:
A. Supplier
B. Recipient
C. Both
Answer: Supplier
Question: By way of issuance of Debit Notes, Tax Liability of the Supplier is Increased or Decreased
Answer: Increased in case of Debit Notes & Decreased in case of Credit Notes.
Question: Credit Notes can be issued for any reason or for some specific reasons only as prescribed in the Law
Answer: Only for specific reasons as specified in the Law.
Explanations
As per Section-34, (Legal Text of the Section is provided at the end of the Section)
Debit Notes are issued to address any short payment of GST in original Invoice. Similarly, Credit Notes are issues to address any excess Payment or Complete Reversal of GST pertaining to Original Invoice.
For Debit Notes, there is No Time Limit for issuance as logical also as in this case Government is getting extra GST. However, Credit Notes can be issued up to 30 November following the year in which original supply (i.e. invoice) was made or filing of Annual Return which ever is earlier.
Debit Note can be issues for any kind of Short Payment of GST. However, Credit Notes can be issued only on account of following reasons:
a. Over Valuation in Original Invoice.
b. Over GST Charged in Original Invoice
c. Original Goods are Returned
d. Where Goods or Services supplied are found to be deficient.
As per Section-16(4), (Legal Text of the Section is provided at the end of the Section)
For Invoice
For any Invoice, ITC can be availed till 30 November of the following year to which such invoice pertains. (Like Invoice date is 15 March, 2022, ITC against such Invoice can be taken maximum till 30 November, 2022 or Filing of Annual Return which ever is earlier.
For Debit Note: W.e.f. Debit Notes are delinked with Original Invoice Date i.e. Now ITC against Debit Notes will be governed by the Date of Debit Note not the Invoice Date. For instance in above case, if Debit Note is issued against this Invoice on 20 April, 2022, ITC against such Debit Note Can be taken up to 30 November, 2023.
The same has been clarified by the Circular: 160/16/2021-GST.
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Legal Text of the Section
Section 16(4)
(4) A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the 6 [thirtieth day of November] following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier.
Section 34. Credit and debit notes.-
(1) Where one or more tax invoices have] been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable in respect of such supply, or where the goods supplied are returned by the recipient, or where goods or services or both supplied are found to be deficient, the registered person, who has supplied such goods or services or both, may issue to the recipient one or more credit notes for supplies made in a financial year containing such particulars as may be prescribed .
(2) Any registered person who issues a credit note in relation to a supply of goods or services or both 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 the thirtieth day of November following the end of the financial year in which such supply was made, or the date of furnishing of the relevant annual return, whichever is earlier, and the tax liability shall be adjusted in such manner as may be prescribed:
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 one or more tax invoices have] been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to be less than the taxable value or tax payable in respect of such supply, the registered person, who has supplied such goods or services or both, shall issue to the recipient one or more debit notes for supplies made in a financial year containing such particulars as may be prescribed .
(4) Any registered person who issues a debit note in relation to a supply of goods or services or both 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 such manner as may be prescribed.
Explanation .-For the purposes of this Act, the expression " debit note " shall include a supplementary invoice.
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Disclaimer: We have taken due care to the best of our knowledge while explaining the provisions surrounding the issue purely for informational/academic purpose. It should not be considered as professional advice or consultancy to be relied upon. While due care has been taken by Fab Gyan in preparing this article, certain mistakes and omissions may creep in. The Fab Gyan or its Author does not accept any liability for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon.