May 24, 2023

Conditions for Charging GST on Credit Notes: Unveiling Section 34 of CGST Act

Credit and debit notes are strictly governed by Section 34 of the CGST Act when it comes to goods and services. The goal of this page is to give readers a thorough grasp of this section and all of its ramifications. The provisions of Sections 34(1) and (2) will be examined, along with the justifications for issuing credit notes, the time constraints for doing so, and the requirements for qualification. We may better understand the conditional nature of GST credit notes and their importance within the GST framework by looking into these elements.

Section 34: Credit and debit note

Credit and debit notes are covered under CGST Act Section 34(1). The following is an excerpt from that section: "Where one or more tax invoices have been issued for the supply of any goods or services or both, and the taxable value or tax charged in those tax invoices 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 the goods or services or both supplied are found to be deficient, the registered person, who has supplied such goods or services or both, shall pay the difference between the amount of tax charged in

Analysis of the provision of Section 34 of CGST Act, 2017:

A provider may choose to issue a credit note with GST (also known as a "GST credit note") under the circumstances described in section 34: 

1. It is determined that the taxable value or tax on the tax invoice is excessive. 

2. The consumer returns the delivered products (sales return). 

3. The provided goods, services, or both are discovered to be lacking (quality rejection).

Points 2) and 3) above clearly outline the justifications for establishing a GST credit note. However, scenario 1 is flexible enough to include instances like rate changes or discounts offered, among others.

Time limit to issue GST credit note:

The deadline for the supplier to issue a credit note with GST is set forth in Section 34(2). "Any registered person who issues a credit note in connection with a supply of goods or services or both shall declare the details of such credit note in the return for the month during which such credit note has been issued but not later than the 30th October following the end of the financial year in which such supply was made, or the date of furnishing the relevant annual return, whichever is earlier, and the tax liability shall be adjusted in such manner as may be prescribed. Provided that no reduction in output tax liability of the supplier shall be permitted, if the incidence of tax and interest of such supply has been passed on to any other person.“

The aforementioned clause places a deadline on when the provider must issue a GST credit note. The GST credit note needs to be reported in the GST return, which needs to be submitted no later than the 31st day of October after the end of the financial year. This means that the original invoice and the associated GST credit note can both be included in the return for the month of October that comes after the end of the financial year. In a nutshell, the October return of the following year is the deadline for including the GST credit note.

In other words, following the October return, a provider cannot state the specifics of the GST credit note. In order to clear the accounts, the supplier may then provide a financial credit note (a credit note without GST). In addition, the provider must satisfy requirements in Section 15(3)(b) before issuing a GST credit note. If a discount is offered, a GST credit note could be generated: 

1. Prior to or during the supply by noting it on the invoice. 

2. Following the supply, provided that: 

1. The discount is determined in accordance with a contract signed at or before the time of the provision and is expressly related to the original invoice. 

2. The consumer reverses the input tax credit that is linked to the discount. 

Point 1) is obvious, but point 2) is debatable. A GST credit note can only be given if the supplier meets the requirements stated.


The word "may" is used in Section 34(1) to describe issuing a GST credit note. There is a deadline for reporting the GST credit note under Section 34(2). Conditions must be met in order to be eligible to provide a GST credit note on discounts, according to Section 15(3)(b). A GST credit note can only be issued if the seller satisfies the requirements, so to speak. Therefore, a GST credit remark is optional and not required.


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