Time Limit for issue of credit note

[Kaustubh Karandikar]

If original invoice with GST is issued in the financial year 2020 – 21, whether credit note with GST can be issued in financial year 2023 – 24? In my view it can be issued and there is no restriction for the same. The restriction as per Section 34(2) is, 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 thirtieth day of November following the end of the financial year in which such supply was made, or the date of furnishing of the relevant annual return, whichever is earlier. Views of the experts please.

[Shilpi Jain]

If you are referring to a GST credit note then what is the use of it if you issue it and are not able to report in the returns to reduce your output liability? Thereby, even though the time limit is only for declaring the CN in returns, it is implied that the issuance has to be on or before such date to be able to reduce your output liability.

If it is not a GST credit note then agree that there is no time limit prescribed under the GST law

[Padmanathan KV]

Agreed with Shilpi Ma'am. What will be the point of issuing GST credit note without being able to declare the same in returns?

[Kaustubh Karandikar]

Thanks Shilpi ji and Padmanathan ji for your kind advice. But my query is If original invoice with GST is issued in the financial year 2020 – 21, whether credit note with GST can be issued in financial year 2023 – 24? In my view it can be issued and there is no restriction for the same.

[Amit Agrawal]

I broadly agree with my professional colleagues though one view is that there is no time limit - for BOTH - to issue credit-notes u/s 34 (1) as well as for declaring them in returns. As per this view, time-limit prescribed u/s 34 (2) is applicable if issuer wants to adjust his tax-liability (i.e. against such credit-notes issued and declared). Anyway, there is no material change on account of such different views (& I am not sure if portal allows such disclosure beyond time-limit prescribed u/s 34 (2))

However, in my view, issuance of credit-note u/s 34 is OPTIONAL and not compulsory. So, once time-limit prescribed u/s 34 (2) is passed, it is better NOT to issue credit-note u/s 34 at all but issue financial / commercial / accounting credit-note for 'BASIC AMOUNT' towards reduction of / discount in 'taxable value' BUT NO GST on such 'basic amount' should be considered while issuing such credit-notes.

This is with the understanding that underlying supply is indeed made and credit-note is only for reduction of value for any reason (i.e. not for cancellation of supply per se). And if so, recipient need not have to reverse proportionate ITC against such financial / commercial / accounting credit-note and there will not be any loss of GST (which was paid at time of supply i.e. against tax-invoice) to the supplier as well.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[KASTURI SETHI]

Dear Sir,

Answer is NO. Emphasis is laid on phrases 'month of supply' and 'following' the end of financial year, 'the date of furnishing relevant annual return' , 'whichever is earlier'. All these phrases are integrally related to Credit Note. At this stage only commercial/financial credit note can be issued without restriction of time , if tax liability is not to be reduced.

AI Summary

Time limit for GST credit notes restricts their ability to reduce output liability if not declared within the prescribed return period.
A GST credit note must be declared in the return for the month of issuance but not later than the statutory reporting cutoff following the end of the financial year in which the supply was made or the annual return filing date, whichever is earlier. If issued after that cutoff it cannot be used to reduce the issuer's output tax liability, and practitioners therefore often advise issuing non-GST commercial or accounting credit notes to adjust the taxable value without reflecting GST.