Must Knows

Debit notes: Everything you need to know

[] A seller issues a debit note for the purpose of notifying a purchaser about the current debt obligations. Here’s a complete guide on debit notes and how to create one.

What are debit notes?

A seller issues a debit note as a reminder of the purchaser’s current debt obligation. A purchaser issues a debit note when he returns goods purchased on loan. A debit notes tallies revision of prices in an already issued invoice and informs the parties of the future liability to be paid.

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Debit notes are raised when a tax invoice is issued due to the changes in the taxable value of the goods. There is no specific format to issue a debit note and can be issued as a letter or a formal document. This document curtails future liability and other commercial implications. It serves as a reminder of potential debt commitments based on the amount yet to be formally invoiced.

How to curate debit notes?

A debit note can be issued with purchased goods as shipping credit. While the sum entered in a debit note is payable, the purchaser does not need to make payment before realising the actual invoice. Several debit notes can act as informative postcards to remind the buyers of their credit.

What are the details you should include in a debit note?

  1. GSTIN, name and address of the supplier.
  2. An alphanumeric document serial number for the financial year.
  3. Date of issue.
  4. GSTIN, name and address of the recipient.
  5. The invoice number the debit or credit note is being issued against.
  6. The taxable value of the goods/service, the applicable rate of tax, amount of tax credit or debit to the recipient.
  7. A stamp and signature of the supplier.

Reasons to issue debit notes

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Debit notes are usually issued during business to business transactions for several reasons explained below.

  • The value declared in the invoice is lower than the actual value of the goods or services provided.
  • The rate of GST or tax amount charged is at a less rate than what is applicable for the kind of goods or services supplied. 
  • Damaged or defective goods received.

What are the alternative forms of Debit Note?

  1. Debit note issued in the form of shipping receipts
  2. Sale Return voucher
  3. Sale invoices
  4. Alternative postcards acting as a reminder of the debt accrued by the buyer

Debit notes as postcards contain details on how to settle the debt. This is also beneficial in case the vendor is not sure if the initial invoice was received or has been updated. 

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Category: Must Knows

Debora Berti

Università degli Studi di Firenze, IT

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