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GST · Registration & returnsGST credit notes and debit notes: rules, time limits and examples
Goods returned, prices revised or discounts given after the sale – each needs a GST credit or debit note to adjust tax. From 1 November 2026, post-sale discounts no longer need a prior agreement. Here are the rules, time limits and examples.
Section 34 of the CGST Act deals with credit notes (reducing tax) and debit notes (increasing tax) issued after an invoice. They are reported in GSTR-1 and affect both the supplier's liability and the buyer's ITC.
When to issue
| Situation | Document |
|---|---|
| Taxable value or tax in invoice exceeds actual | Credit note |
| Goods returned by buyer | Credit note |
| Services found deficient | Credit note |
| Post-supply discount | Credit note (from 1 Nov 2026, no prior agreement needed) |
| Taxable value or tax in invoice is less than actual | Debit note |
| Price escalation after supply | Debit note |
Time limits
| Document | Supplier's limit | Buyer's ITC limit |
|---|---|---|
| Credit note | Declare by 30 November of next FY or annual return date, if earlier | Buyer reverses ITC |
| Debit note | No limit to issue | ITC by 30 November following the FY in which the debit note is issued |
The November 2026 change on discounts
Earlier, Section 15(3)(b) allowed post-supply discounts to reduce value only if agreed before or at the time of supply and linked to invoices. Disputes on year-end schemes were common. From 1 November 2026, the prior-agreement condition is removed: a credit note is enough, provided the recipient reverses the corresponding ITC. See GST changes from 1 November 2026.
Worked example 1: sales return
Example: A Delhi wholesaler sold goods worth ₹5,00,000 + 18% GST (₹90,000) to a registered retailer in February 2026. Goods worth ₹50,000 were returned in May 2026.
- Credit note: ₹50,000 + ₹9,000 GST, referencing the original invoice.
- Reported in GSTR-1 of May 2026 (CDNR table); supplier's liability reduces by ₹9,000.
- Retailer's GSTR-2B shows the credit note; retailer reverses ₹9,000 ITC.
- Time limit: by 30 November 2026 for the FY 2025-26 supply – met.
Worked example 2: year-end turnover discount
Example: A paint company gives a dealer a 2% turnover discount on FY 2025-26 purchases of ₹1 crore (₹2,00,000), via credit note in December 2026.
- The credit note is after 30 November 2026 – the time limit for FY 2025-26 supplies. GST cannot be reduced; only a financial credit note (without GST) can be issued. The dealer keeps the ITC.
- Lesson: issue scheme credit notes by 30 November.
Worked example 3: debit note
Example: A contractor raised an invoice in March 2026 at ₹10,00,000; price escalation of ₹80,000 was agreed in June 2026. A debit note of ₹80,000 + 18% GST is issued in June 2026 and reported in June GSTR-1. The buyer can claim ITC up to 30 November 2027 (FY of the debit note is 2026-27).
Financial credit notes
Where a discount does not meet the conditions or the time limit has passed, a credit note without GST can be issued. CBIC has clarified that the supplier's liability does not reduce, the buyer does not reverse ITC, and such discounts are not consideration for a separate supply by the dealer (unless the dealer provides a service, like promotion, to the supplier).
Reporting
- Supplier: GSTR-1 Table 9B (CDNR for registered, CDNUR for unregistered inter-State above ₹1 lakh), with original invoice reference where available.
- Buyer: credit notes appear in GSTR-2B (and IMS); reverse ITC in GSTR-3B Table 4B.
- E-invoicing applies to credit and debit notes for businesses covered by e-invoicing.
Common mistakes
- Issuing GST credit notes after 30 November for the previous year.
- Supplier reducing tax without the buyer reversing ITC (now linked).
- Not linking credit notes to original invoices.
- Treating dealer incentives for promotional services as discounts.
Key takeaway
Use credit notes to reduce tax and debit notes to increase it, within the 30 November limits. From November 2026, post-sale discounts need only a credit note and buyer reversal. Our GST team reviews scheme credit notes and reconciles them with buyers before the deadline.
Official references
Provisions discussed (summaries in our Law Library):
- CGST Act, 2017 – Section 34: Credit and debit notes
Official sources to verify the current text, notifications and circulars:
Frequently asked questions
What is the time limit for issuing a GST credit note?
A credit note for supplies of a financial year must be declared by 30 November of the following year or the date of filing the annual return, whichever is earlier. For FY 2025-26 supplies, that is 30 November 2026.
Is there a time limit for debit notes?
Debit notes can be issued at any time, but the recipient can claim ITC on a debit note only within the time limit of Section 16(4) – 30 November following the financial year in which the debit note is issued.
Do I need a prior agreement to give a post-sale discount via credit note?
From 1 November 2026, the Finance Act, 2026 removed the prior-agreement condition. A credit note with corresponding ITC reversal by the buyer is enough to reduce value.
Can a credit note be issued without GST (financial credit note)?
Yes. Commercial or financial credit notes that do not reduce GST can be issued; the buyer need not reverse ITC, and the supplier's tax liability does not reduce.
Can one credit note cover many invoices?
Yes. A consolidated credit note can be issued for multiple invoices of the same recipient, with details of the invoices where required.
Is a credit note needed for a rate difference due to a rate cut?
If the original invoice charged a higher rate and the supply is taxable at a lower rate, a credit note can correct the tax, within time limits.
Should the buyer accept credit notes in IMS?
Yes. Credit notes appearing in IMS should be accepted if genuine; this reduces the buyer's ITC and enables the supplier's liability reduction.
This article is general information on the law as on 10 November 2026, written for educational purposes. It is not professional advice for your case. Section numbers under the Income-tax Act, 2025 should be confirmed with the official section mapping on the Income Tax Department website before use in filings.
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