Which one you need
The direction of the correction decides it, and nothing else does.
| Credit note | Debit note | |
|---|---|---|
| Use it when | The invoice charged too much | The invoice charged too little |
| Effect on your liability | Reduces it | Increases it |
| Typical cause | Sales return, post-sale discount, overcharge | Undercharge, a rate applied too low, extra supplied |
| Deadline | Yes — see below | No time limit |
| GSTR-1 table | CDNR if the customer is registered, CDNUR if not | |
A debit note has no deadline for the simple reason that it increases the tax you owe. The government is in no hurry to stop you paying more.
Why you never edit or delete the invoice
Once an invoice is issued it is a legal document with a serial number in an unbroken series, and your customer may already have claimed credit against it. Changing it after the fact breaks the audit trail on both sides — your return says one thing, the copy in their file says another.
A note is the correction mechanism precisely because it leaves the original intact. The invoice stays as sent; the note sits beside it, references it, and adjusts it. Anyone reconciling later can see both what was billed and what it became.
The same logic explains why a note cannot cancel an invoice you simply should not have raised. A credit note for the full value is the closest thing available, and both documents remain in your records and your return.
What a note must carry
- A reference to the original invoice — its number and its date. This is what makes it a Section 34 note rather than a loose adjustment, and GSTR-1 rejects a note without it.
- Its own serial number, from a series consecutive and unique within the financial year, exactly like an invoice.
- Its own date of issue.
- The tax adjustment split by head, following the original — a note against an IGST invoice adjusts IGST, not CGST and SGST.
- A reason, from the seven codes below.
The seven reason codes
These are the values the portal accepts. A note without one is rejected, so the reason is not an optional description field.
| Code | Reason | When |
|---|---|---|
| 01 | Sales return | Goods came back. |
| 02 | Post-sale discount | A discount agreed after the invoice went out. |
| 03 | Deficiency in service | The work was not delivered as billed. |
| 04 | Correction in invoice | A wrong rate, quantity or value on the original. |
| 05 | Change in place of supply | The delivery moved, flipping IGST to CGST and SGST or the reverse. |
| 06 | Finalisation of provisional assessment | Rare for a small business. |
| 07 | Others | Anything the six above do not cover. |
The deadline that catches people out
A credit note only reduces your liability if you declare it in time. The cutoff is 30 November following the end of the financial year the original invoice belongs to, or the date you file that year's annual return, whichever comes first.
Past that point you can still issue a commercial credit note to settle things with your customer — but it will not reduce the GST you have already paid. A March invoice returned the following December is the classic version of this, and the money is simply gone.
There is a second condition worth knowing: the reduction in your liability depends on the recipient reversing the corresponding input tax credit at their end. A credit note is not something you can complete unilaterally.
How BahiSathi handles it
You raise a note from the invoice it adjusts rather than from a blank document. Pick the invoice, pick one of the seven reasons, and the customer, the lines and the tax heads come across already matched to the original — so a note against an inter-state invoice cannot accidentally adjust the wrong heads.
The reference to the original number and date is stored on the note, not printed and forgotten, which is what lets the GSTR-1 export place it in CDNR or CDNUR automatically depending on whether your customer is registered. Credit and debit notes run in their own numbering series, restarting on 1 April like every other series.
A note whose linked invoice is missing is reported to you as a warning when you build the return, rather than being quietly dropped from the file you are about to upload.
A plain-language summary of Section 34, not legal advice. The deadline in particular has been amended before — confirm the current position with your accountant before relying on it.
Filling one in by hand instead? Free downloadable credit note and debit note templates, each with the reference fields above already laid out.