What are debit notes?
Debit notes are issued by a supplier when the price is increased after a tax invoice was issued.
Important - GST rate change
The debit note is accounted for in the period the debit or credit note was received . The rate is the one that applied to the original supply.
Ravi supplies Matt with an invoice for some goods on 20 August 2010. On 3 December 2010 Ravi realises that he has put incorrect figures on the invoice for the transaction with Matt. Ravi sends Matt a debit note for the difference using the GST rate of 12.5%.
Matt makes an adjustment to reflect the debit note on the return which covers the December 2010 period.
What information must a debit note show?
A debit note must show:
- the words "debit note" in a prominent place
- the name or trade name and GST number of the supplier
- the name and address of the recipient
- the date it was issued, and
- a brief explanation of why it was issued.
It must also have either:
- the GST-inclusive price shown on the tax invoice with the correct GST-inclusive amount payable and the difference between the two amounts of GST charged on the difference, or
- the difference between the incorrect and correct amounts, and a statement that the difference includes GST (but only if it is at 12.5%).
Important
- If a copy of the debit note is issued, it must be clearly marked "copy only".
- When the amount payable is increased, you will need to make an adjustment in your GST return.
Example: Issuing a debit note
Melissa sells goods worth $1,100 to Wei for $1,000 by mistake. Melissa then issues a debit note to Wei for $100. Both Melissa and Wei use the invoice basis.
Melissa's return
$1,000 included in Box 5 (sales). The extra $100 is also included in Box 5, but in the return covering the period the increase was made.
Wei's return
$1,000 included in purchases, in Box 11. $100 claimed in Box 11 in the return covering the time the increase was made.
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Date published: 29 Sep 2010
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