Credit & Debit Notes

A posted invoice is never edited. When goods come back, a discount is agreed or a price was wrong, you issue a note against it. Lekhya books it, adjusts what the party owes, and puts it in the right place in your GST returns.

The short version

1. Start from the invoice

Open a posted invoice or bill and choose Credit note or Debit note. The form opens with the same party, currency, GST treatment and lines.

2. Keep what changes

Cut the quantities or prices down to what is being credited (or add the extra charge for a debit note), and say why.

3. Post it

The note takes back exactly what the invoice booked: the sale, the tax and what the customer owes. The invoice shows the credit and its balance falls.

Which one do I issue?

What happened	Issue a	Reason to choose
The customer returned goods, or you cancelled part of a service	Credit note	Sales return
You agreed a discount after the sale	Credit note	Post-sale discount
The invoice charged too much (wrong rate, quantity or tax)	Credit note	Correction in invoice
The invoice charged too little, or you forgot freight or a charge	Debit note	Correction in invoice
A supplier credited you for a return or a discount	Supplier credit note	Open the bill and choose Supplier credit note; type the number printed on theirs

An invoice that has not been posted yet can simply be edited. A note is only for a document that is already in your books.

What Lekhya books

Credit note to a customer: the entry of the invoice, turned round. It debits Sales and the output GST, and credits what the customer owes. A foreign-currency note keeps the rate of the invoice it corrects.
Debit note to a customer: posted like an invoice. It is a new amount for the customer to pay.
Supplier credit note: debits what you owe the supplier, and credits the cost and the input tax credit you had claimed.
The invoice: a credit note is set against the invoice it names, so that invoice's balance falls, and it shows the credit as Less: credit notes applied. A credit note is never itself a bill to collect.
Credit left over: if the customer has already paid, part of the credit is left. It stays with the party and shows in their statement. From the credit note's page you can set it against another open invoice of theirs, or pay it back as a refund.
A refund is a payment voucher to a customer (it debits their account and credits the bank or cash account). When a supplier refunds you, it is a receipt. Either way, the credit left on the note falls by that amount and the voucher shows in Receipts & Payments.

In your GST returns

Note	GSTR-1	GSTR-3B
To a registered customer or SEZ unit	Table 9B, credit/debit notes (registered): CDNR, listed by customer	3.1(a) and 3.1(b) are net of the note
Against an export	Table 9B (unregistered): CDNUR, type EXPWP or EXPWOP	3.1(b), net
Against a large inter-state retail invoice	CDNUR, type B2CL	3.1(a) and 3.2, net
Against ordinary retail sales	Netted in B2C small (Table 7), by place of supply and rate	3.1(a), net
Against nil-rated or exempt sales	Netted in Table 8	3.1(c), net
From a supplier	—	Credit already claimed on the bill is reversed in 4(B)(2). Reverse-charge tax comes down with it

A note is reported in the month it is issued, not the month of its invoice, so a filed return is never reopened. If a month's notes are larger than that month's sales, the return shows the net figure, no negative tax is paid out, and a message tells you so.

Rules Lekhya checks for you

Name the invoice. A note must give the number and date of the invoice it corrects (section 34 and Rule 53 of the CGST Rules). If the invoice is in Lekhya, they are filled in; if it was issued elsewhere, type them in.
Same party, not before the invoice. A note goes to the party on the invoice, and cannot be dated before it.
Not more than the invoice. Credit notes against one invoice cannot add up to more than its value.
The time limit for a credit note. A credit note can reduce the GST you owe only if it is issued by 30 November after the end of the financial year of the invoice (section 34(2)). Later than that, Lekhya still lets you issue it and shows it in your return, but flags it. The department can refuse the reduction in tax, so check with your CA before you rely on it. Debit notes have no limit.
A note is not edited once posted. To correct a mistake, use Reverse / Void on the note: it reverses the entry, and the invoice is open again.

Good to know

Voiding an invoice that has notes. Void the notes first. Lekhya will not leave a credit note without its invoice.
Refunds are corrected with a new voucher. Like any receipt or payment, a refund is not reversed. A credit note that has been refunded in cash cannot be voided; issue a debit note for the correction.
e-Invoice. If your turnover requires e-invoicing, a credit or debit note to a business also needs its own IRN. Open the note and choose Generate e-Invoice: Lekhya sends it as a credit or debit note that names the invoice it corrects.
Interest, late fee and TDS are not notes. Record those as invoices or as part of the payment.