Credit notes and debit notes

Which one, and when

• Credit note — the invoice charged too much, or goods came back. It reduces what the customer owes.
• Debit note — the invoice charged too little. It increases what the customer owes.

Both refer to the original invoice, and both carry their own number and date.

Why you do not just edit the bill

The customer already has the original, and if they are registered they may already have claimed credit on it. Changing your copy makes the two disagree, which is exactly what a reconciliation is designed to catch. The correcting document is the audit trail — it says what changed and why.

A credit note is a full document

It is not a scribbled adjustment. It carries the same discipline as the invoice: its own series, the reference to the original, the taxable value being reversed, the tax being reversed, and — where goods came back — the stock moving back onto the shelf.

That last part is easy to forget by hand. A return that reverses the money but not the goods leaves the shelf permanently wrong.

They appear in your return

Credit and debit notes are reported in GSTR-1 in their own right, netted against the supplies they correct. That is another reason the correcting document exists rather than an edit: there has to be something to report.

This page explains how GST works so a shopkeeper can follow it. It is not tax advice, and GST rules change — check the current position on the GST portal or with your accountant before you rely on it for a filing.

Questions

What is the difference between a credit note and a debit note?

A credit note reduces what the customer owes — an overcharge or a return. A debit note increases it — an undercharge.

Can I just edit the original invoice instead?

No. The customer already holds the original and may have claimed credit on it. The correcting document is the audit trail.

Does a goods return move stock back?

It should. A return that reverses the money but not the goods leaves your stock permanently wrong.