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Debit Notes in GST: Navigating Input Tax Credit Eligibility

Understanding Debit Notes and Input Tax Credit Eligibility in GST


In the realm of Goods and Services Tax (GST), debit notes play a crucial role in rectifying discrepancies in invoicing and ensuring accurate taxation. This article delves into the concept of debit notes, their issuance, legal provisions, contents, and most importantly, the eligibility of input tax credit associated with them.

Understanding Debit Notes

A debit note is a commercial document utilized in business-to-business (B2B) transactions to adjust the invoiced amount for goods or services. It serves as an additional note accompanying an invoice, indicating the need for an adjustment due to various reasons such as undercharging, incorrect tax rates, or discrepancies in quantity.

Instances Requiring Debit Note Issuance

Debit notes are issued by registered suppliers in specific situations, including:

  • When the invoiced amount is less than the actual value of goods or services supplied.
  • When the tax rate charged is lower than the applicable rate.
  • When the quantity of goods or services received exceeds the quantity declared in the original invoice.
  • Other relevant reasons necessitating an adjustment.

Legal Provisions Governing Debit Notes

Section 34(3) and 34(4) of the CGST Act, 2017, outline the provisions related to debit notes. These provisions mandate the issuance of debit notes by registered suppliers in case of undercharged or incorrectly invoiced transactions. The explanation provided in the Act clarifies that debit notes encompass supplementary invoices.

Contents of Debit Notes

Rule 53(1A) of the CGST Rules, 2017 specifies the essential particulars to be included in debit notes. These include details such as the supplier’s name, address, and GSTIN, nature of the document, consecutive serial number, date of issue, recipient’s details, details of corresponding tax invoice, taxable value, tax rate, and signature of the supplier.

Eligibility of Input Tax Credit (ITC)

Section 16 of the CGST Act, 2017, governs the eligibility of input tax credit. It stipulates that a registered person can claim ITC only if certain conditions are met, including possession of a valid tax invoice or debit note issued by a GST-registered supplier. Additionally, the recipient must have received the goods or services, and the tax charged must have been paid to the government.

Time Limit for Eligibility of ITC on Debit Notes

The time limit for claiming input tax credit on debit notes underwent amendments through the Finance Act, 2020. Previously, the eligibility of ITC on debit notes was linked to the due date of furnishing annual returns or monthly returns for the month of September following the end of the financial year to which the debit note pertained. However, the amendment delinked the issuance date of debit notes from the corresponding invoices, extending the time limit for claiming ITC until the 30th of November following the end of the financial year.

Illustration and Clarifications

An illustrative example demonstrates the application of the amended provisions regarding the time limit for claiming ITC on debit notes. Additionally, Circular No. 160/15/2021-GST issued by the Central Board of Indirect Taxes and Customs (CBIC) provides further clarification on the intent behind the amendment and its implications for taxpayers. It emphasizes the decoupling of debit notes from their corresponding invoices to facilitate the claiming of input tax credit.


Understanding the nuances of debit notes and the associated eligibility of input tax credit is imperative for businesses operating under the GST regime. With clear insights into the legal provisions, contents, and time limits for claiming ITC on debit notes, taxpayers can ensure compliance and maximize the benefits of GST. The recent amendments aimed at streamlining the process of claiming ITC on debit notes signify the government’s commitment to fostering a transparent and taxpayer-friendly GST framework.



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