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Difference between a credit note and a debit note under GST
Both documents fix a bill you have already issued. One brings the amount down. The other takes it up. Here is when you issue each, who signs it, and how to tell them apart in seconds.
What is the difference between a credit note and a debit note?
A credit note reduces the amount on a tax invoice you already issued. A debit note increases it. The seller issues both to the buyer, and both correct the original invoice without editing it. Section 34 of the CGST Act covers the two documents.
Think of the direction of the change. Down means credit note. Up means debit note.
The original invoice stays as it was. The note sits beside it and carries the correction.
When does a seller issue a credit note?
Section 34(1) lets a registered seller issue a credit note in three cases. The taxable value or tax on the invoice is more than it should be. The buyer returned the goods. Or the goods or services supplied were found to be deficient.
A shop bills 10 shirts and the buyer returns 2. The shop issues a credit note for the 2 shirts. This is an illustration, not a real customer.
The word in the Act is "may". The seller decides to issue it, usually when the buyer asks.
When does a seller issue a debit note?
Section 34(3) applies when the taxable value or tax on an invoice is less than it should have been. In that case the seller shall issue a debit note to the buyer. The Act also says a debit note includes a supplementary invoice.
A seller bills Rs 10,000 of goods but forgets the freight of Rs 500 agreed earlier. The seller issues a debit note for the extra Rs 500 plus its GST. This is an illustration, not a real customer.
Notice the word "shall". When the invoice undercharged, the Act expects a debit note.
Does the buyer issue a debit note to the seller?
Under Section 34, the registered supplier issues both notes to the recipient. A buyer who returns goods does not issue a GST credit note. Buyers often send their own paper to ask for one, but the GST document comes from the seller.
In everyday trade, a buyer may send a "debit note" to claim a return. That is a request. It is not the document Section 34 describes.
The seller reviews the claim and then issues a credit note of their own.
How do credit and debit notes show up in GST returns?
Section 34 asks the seller to declare each note in the return for the month in which it was issued. The tax liability is then adjusted as prescribed. A credit note cannot reduce the seller's output tax if the tax was already passed on to someone else.
So a note belongs in the month you issue it, not the month of the original bill.
Your CA will decide the exact return table. We do not state filing dates here, because they change.
Can I just edit the invoice instead?
Once an invoice is issued and reported, fix it with a note, not an edit. The note leaves a clear trail for you, your buyer and your accountant. Editing the original would make your books and your buyer's books disagree.
A typo in a name or address is a different case. Ask your CA whether that needs a note or a fresh invoice.
Does Invoice Saathi issue credit and debit notes?
Yes, the app has both document types. A credit note is raised against an issued invoice and cites its lines, so you cannot credit more than was billed. Issued invoices are never edited. Corrections go through a note, as the Act intends.
The app works out the GST on the note the same way it did on the invoice. You still need to declare the note in your return. Your CA or the GST portal does that, not the app.
Sources
Checked on 21 October 2026. Rules change, so confirm anything that affects your filing with your CA.
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