Issue a GST credit note when the taxable value or tax on an invoice turns out too high — goods returned, a post-sale discount, or an overcharge — and a debit note when it was too low. Both must reference the original invoice, be reported in GSTR-1, and a credit note can only reduce your tax if issued by 30 November after the end of the financial year (or your annual return date, if earlier).
Invoices don't always survive contact with reality: customers return goods, prices get corrected, and discounts get agreed after billing. Under GST, you don't edit or delete the original invoice — you issue a credit note or a debit note against it. Here's when to use each and what they must contain.
Credit note or debit note?
| Situation | Document | Effect on your output tax |
|---|---|---|
| Customer returns goods | Credit note | Reduces |
| Taxable value charged was too high | Credit note | Reduces |
| Tax rate charged was too high | Credit note | Reduces |
| Goods or services found deficient | Credit note | Reduces |
| Post-sale discount agreed in advance and linked to invoices | Credit note | Reduces |
| Taxable value charged was too low | Debit note | Increases |
| Tax rate charged was too low | Debit note | Increases |
What a credit or debit note must contain
Under Rule 53 of the CGST Rules, a credit or debit note needs:
- Your name, address, and GSTIN
- The nature of the document (credit note or debit note)
- A consecutive serial number, unique for the financial year (up to 16 characters)
- Date of issue
- The recipient's name, address, and GSTIN (or name, address, state for unregistered recipients)
- The original invoice number(s) and date(s)
- The taxable value, tax rate, and tax amount being credited or debited
- Signature or digital signature
The time limit for credit notes
A credit note that reduces your tax liability must be declared no later than 30 November following the end of the financial year in which the original supply was made, or the date you file the annual return for that year, whichever is earlier. Miss it and you can still issue a commercial credit note, but you can't reduce the GST you paid. Debit notes have no such restriction on the supplier, but the recipient's input tax credit on them follows the usual ITC time limits.
A worked example
A Surat wholesaler invoices a retailer in Gujarat for ₹50,000 + 18% GST (CGST ₹4,500 + SGST ₹4,500). The retailer returns goods worth ₹5,000.
| Original invoice | Credit note | Net | |
|---|---|---|---|
| Taxable value | ₹50,000 | −₹5,000 | ₹45,000 |
| CGST 9% | ₹4,500 | −₹450 | ₹4,050 |
| SGST 9% | ₹4,500 | −₹450 | ₹4,050 |
| Total | ₹59,000 | −₹5,900 | ₹53,100 |
The credit note must use the same tax heads as the original invoice — CGST and SGST here, not IGST.
Reporting and the buyer's ITC
- Report credit and debit notes in GSTR-1 for the month or quarter they're issued.
- If you're on e-invoicing (turnover above ₹5 crore), B2B credit and debit notes need an IRN too.
- When you issue a credit note, the buyer must reverse the matching input tax credit — it appears in their GSTR-2B.
- Discounts given after supply without a prior agreement linked to specific invoices can't reduce your GST through a credit note.
StashBill (launching soon) creates credit and debit notes from the original invoice, so the reference, tax heads, and numbering series are filled in automatically — see invoicing & billing.
Frequently asked
Can I cancel a GST invoice instead of issuing a credit note?
Only before it's reported in GSTR-1 (and, for e-invoices, within 24 hours on the IRP). After that, use a credit note.
Can one credit note cover several invoices?
Yes — a single credit or debit note can reference multiple invoices, as long as each original invoice is listed.
Do credit notes need a separate numbering series?
Yes. Use a consecutive series for credit notes (and another for debit notes) that's unique within the financial year.
Sources
General information, not tax advice. Current as of October 2026 — confirm with your accountant.