Section 9 of Sales Tax Debit and Credit Note in Lawkidunya, the word Debit Note or Debit Memorandum is a commercial document issued by a buyer to a seller as a means of formally requesting a credit note. Debit note acts as the Source document to the Purchase returns journal. In other words it is an evidence for the occurrence of a reduction in expenses.
Debit and Credit Note in Sales Tax Act
Where a registered person has issued a tax invoice in respect of a supply made by him and as a result of cancellation of supply or return of goods or a change in the nature of supply or change in the value of the supply or some such event the amount shown in the tax invoice or the return needs to be modified, the registered person may, subject to such conditions and limitations as the Board may impose, issue a debit or credit note and make corresponding adjustment against output tax in the return.
Difference Between Debit and Credit Note
Debit Note and Credit Note are used while the return of goods is made between two businesses. Debit Note is issued by the purchaser, at the time of returning the goods to the vendor, and the vendor issues a Credit Note to inform that he/she has received the returned goods.
Debit Note and Credit Note with Example
An example of a situation when a debit note is issued: Company A issues a debit note – containing all the relevant information including original purchase amount and VAT. When Company B receives the debit note, they can review and approve the request, and issue a credit note as proof of reimbursement to Company A.
What is Debit Note Example
Debit notes are usually issued to rectify erroneous values recorded in previous invoices. For example, if a product costs Rs. 450, and the invoice is wrongly recorded as Rs. 400, then a debit note of Rs. 50 is issued by the seller.