Section 34 – Credit and Debit Notes
Section 34 of CGST Act, 2017 – Credit Notes and Debit Notes
Updated on: February 2026 (as applicable till date)
Prepared by: Yours Tax Consultant
1. Scope and Importance of Section 34
Section 34 provides the statutory mechanism to rectify errors or changes discovered after issuance of tax invoice by issuing credit notes or debit notes.
This section is crucial for:
- Post-supply discounts
- Excess tax charged
- Short supply or excess supply
- Revision of taxable value or tax rate
2. Credit Note – Section 34(1)
A registered person may issue a credit note where:
- Taxable value or tax charged exceeds the actual value or tax payable
- Goods are returned by the recipient
- Goods or services supplied are found to be deficient
Credit note reduces:
- Taxable value, and
- GST liability
Important condition:
Credit note must be declared in the return.
3. Debit Note – Section 34(3)
A registered person shall issue a debit note where:
- Taxable value or tax charged is less than the actual value or tax payable
Debit note results in:
- Increase in taxable value, and
- Increase in GST liability
Debit note can be issued at any time whenever short-charging is identified.
4. Time Limit for Declaring Credit Notes – Section 34(2)
Credit notes must be declared:
- On or before 30th November following the end of the financial year in which the supply was made, or
- Date of filing annual return,
whichever is earlier.
After this time limit:
- Credit note can be issued
- But tax adjustment is not allowed
5. No Time Limit for Debit Notes
There is no statutory time limit for issuance or declaration of debit notes.
Debit notes can be issued:
- Whenever short payment of tax is noticed
Tax must be paid along with applicable interest.
6. Section 34 Read with CGST Rules
Credit and debit notes must comply with:
7. Effect on Input Tax Credit (ITC)
When a credit note is issued:
- Supplier reduces output tax liability
- Recipient must reverse proportionate ITC
When a debit note is issued:
- Supplier pays additional tax
- Recipient becomes eligible for additional ITC
This ensures ITC symmetry.
8. Credit Notes for Discounts
Post-supply discounts can be adjusted only if:
- Discount is established in terms of prior agreement
- Linked to specific invoices
- Recipient reverses proportionate ITC
These conditions flow from:
9. Common Practical Issues
- Missing credit note declaration in returns
- Issuing credit note after statutory time limit
- Recipient not reversing ITC
- Wrong linkage with original invoice
10. Related Provisions
- Section 31 – Tax Invoice
- Section 33 – Amount of tax to be indicated
- Section 15 – Value of taxable supply
11. Professional Tip
Always track the statutory deadline for credit notes. Missing the 30th November limit permanently blocks tax adjustment, even if the credit note is genuine.
Disclaimer: This article is prepared based on the CGST Act, CGST Rules, notifications and prevailing legal position as applicable till date. Future amendments or judicial pronouncements may require revision.
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