Initially, the discussion about delinking provisions of Credit/Debit Notes with Individual Tax Invoices was started in the 28th GST council meeting held on 21st July 2018. On February 1, 2019, the CGST Amendment Act, 2018, IGST Amendment Act 2018, UT GST Amendment Act 2018 and GST (Compensation to States) Amendment Act, 2018, and GST Notification No 03/2019 – Central Tax was issued.

As per Section 34 of the Central Goods and Services Act, 2017, earlier a registered person was required to issue each credit or debit notes in respect of tax invoice raised in a financial year. Thus, there was a necessary requirement of linking every credit note with a single invoice.

However as per common business practice, the taxpayers used to issue one credit note against multiple invoices.

Thus, later Section 34 was amended via CGST Amendment Act, 2018 to allow one credit/debit note against multiple invoices with effect from 1st Feb 2019. This change was however not made on GST portal until very recently. Thus, the long-awaited change has been brought into practice on the official GST Portal on 14th September 2020.

Let us get into the basics and understand how it affects the regular affairs.

Debit Note and Credit Note

Under GST provisions, debit notes or credit notesare normally issued in the following situations:

Debit Note:

Supplier issues one or more debit notes to the recipient; 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.

Credit Note:

Supplier issues one or more credit notes to the recipient; 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.

Delinking of Credit Note/Debit Note from invoice, while reporting them in Form GSTR 1/GSTR 6 or filing Refund

Till now, the original invoice number was mandatory to be quoted by the taxpayers, while reporting a Credit Note or Debit Note in Form GSTR-1 or Form GSTR-6. However, with the latest de-linking update, the taxpayer will have some relief and leisure as it will be time-saving and also very cost-effective. The process will become hassle-free and a little smoother.

What does this change mean?

• There is no need for one to one mapping between invoice and credit note, this means you can issue one note for all your invoices. However, even if the reference invoice(s) are not required to be sent in GSTR1, it is advisable for the taxpayers to maintain the references for their records. Moreover, there are specific cases like discounts for which if credit note is issued then it is important to maintain the reference invoice in their accounting systems.
• Compliance becomes less taxing, but there are some things to be cautious of, such as:
  • Some data points which you were not providing earlier, now you need to report like Point Of Supply (POS), invoice type and reverse charge. So if your accounting systems do not have these provisions, you are in a soup. However, if you are an IRIS GST user,you need not worry as our input format already has this covered.
  • Even in GSTR 2A you would not get a link between invoice and Credit/Debit Note. This means companies who do net off accounting will not be able to reconcile at document level, instead they will have to go for vendor level reconciliation.
• Earlier the deadline to claim Input Tax Credit available on a debit note as per section 16 (4) was based on the date of reference invoice, but now it will be based on the date of debit note. This was brought into effect with the amendment of Finance Act 2020 where in section 16(4) of the CGST Act, the words “invoice relating to
  such” is omitted. Thus, the date of issuance of debit note is delinked from the date of issuance of the underlying invoice for purposes of availing input tax credit from 1st Jan 2021.
  For example, a debit note was issued on 10th May 2020 and its reference invoice was dated 3rd March 2020, then earlier the deadline for ITC on such debit note was Sept 2020 (i.e. upto 3B filing of Sept 2020). However, with this change now the date of debit note is to be considered and thus the deadline will now be Sept 2021 (i.e. upto 3B filing of Sept 2021)

E-invoicing Schema:

The e-invoicing system started rolling in India from the 1st of October 2020 for taxpayers with a turnover of more than Rs 500 crores. The e-invoice schema has already made it optional to assert the preceding document details about a debit or credit note via notification 60/2020-Central Tax ,date. 30-07-2020. Invoice does have fields for preceding document details which entities can use to provide cross reference of credit note in invoice or in credit note for invoice. Optional to be reported though.

Conclusion: 

The government is trying to simplify the GST processes thus so many measures are coming up. The introduction of a new GST return – GSTR 2B, a lot of new forms, regular updates via notifications and circulars etc. Credit and Debit note de-linking is one of the steps towards bettering GST processes.

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