Credit note format under GST

When a credit note is issued

Under section 34 of the CGST Act, a registered supplier may issue a credit note when, after a tax invoice:

• the taxable value or tax charged on the invoice was more than it should have been,
• the buyer returned the goods, or
• the goods or services supplied were found deficient.

Only the supplier issues a GST credit note. If a buyer returns goods and sends a document called a debit note, that is the buyer's own record; the supplier still issues the credit note that reduces output tax.

This is general information, not tax advice.

Mandatory fields

The serial number follows the same rule as invoices: up to 16 characters, consecutive and unique for the financial year. A separate CN/ series is easiest.

Worked example: a sales return

Patel Electricals invoiced 400 modular switches at ₹300 each on 2 November. On 15 November the buyer returns 40 damaged pieces.

The credit note is reported in GSTR-1 for November and reduces output tax. The buyer must reduce their input tax credit by ₹2,160 in turn. The supplier cannot reduce its tax if the buyer keeps the credit. More in sales returns under GST.

The time limit

A credit note for a financial year must be declared in a return no later than 30 November following the end of that year, or the date the annual return is filed, whichever is earlier. For an invoice of 2025-26, that means by 30 November 2026 at the latest. After that, you can still issue a commercial credit note, but GST cannot be reduced through it. Confirm the current limit on cbic-gst.gov.in.

Discounts after the sale: GST or commercial credit note?

A discount given after the invoice reduces GST only if it was agreed at or before the supply and can be linked to specific invoices, and the buyer reverses the matching credit. A turnover discount promised in the dealer agreement at the start of the year usually qualifies. An ad-hoc settlement discount decided later usually does not; it goes on a commercial or financial credit note with no GST, which reduces the party's balance but not your output tax.

See GST on discounts and schemes.

One credit note for many invoices

A single credit note can cover several invoices, for example a quarterly rate difference across 30 bills. List each invoice number and date in the credit note or in an annexure, with the amount credited against each, so both sides can match it later. If you are under e-invoicing, credit notes also need an IRN from the Invoice Registration Portal.

Checklist

1. Original invoice reference is present and correct.
2. Tax type matches the original (IGST or CGST plus SGST).
3. Reason is written plainly.
4. Goods return is backed by a receipt or inward entry.
5. Declared before the 30 November deadline.
6. Buyer informed so they reverse credit in the same period.

Doing this with Tally and Cashflow OS

Credit notes are vouchers in TallyPrime. With Cashflow OS, an authorised user can create a credit note voucher from the phone or the web app through the connector, with GST worked out from the item and party's state; Tally validates it before saving. The party's outstanding updates once Tally syncs, and the GSTR-1 view in Cashflow OS shows credit notes along with invoices.