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Credit note

Suchita Shivaji More (Accountant) (168 Points)

16 July 2016

Please guide me whether credit note issued on basic amount of invoice or gross amount (after adding taxes) ?

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10 Replies

CA Shree Jain (Chartered Accountant) (1572 Points)
Replied 16 July 2016

Credit note issued on basic amount of invoice only..

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CMA Poornima Madhava (CMA) (13112 Points)
Replied 16 July 2016

In general, credit note would be issued for the total amount of invoice. Break up of basic value, ED, VAT etc shall be mentioned in the credit note in order to reverse the liability.
But wherever tax liablity cannot be reversed (time barred), then basic value can be shown in which case, the customer would get benefit of basic value only (without taxes etc).

Suchita Shivaji More (Accountant) (168 Points)
Replied 16 July 2016

Will TAX added in credit note?

CMA Poornima Madhava (CMA) (13112 Points)
Replied 16 July 2016

Generally yes

CA Shree Jain (Chartered Accountant) (1572 Points)
Replied 16 July 2016

No need of Add Tax in Credit note.. Only Give Credit note to Basic Amount .. Because Customer already taken credit on VAT Amount which we wull charges in our Tax Invoices.. SO no need to give double credit for VAT Amount..

Suppose our Basic Amount is 1000 and VAT 5% = 50.. so our Tax Invoice is 1000+50 = 1050

Now Customer want the 10% Credit note for our Invocies...

We will give 10% Credit note on Basic amount that means = 1000 @ 10% = 100

Hope this is clear...

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CMA Poornima Madhava (CMA) (13112 Points)
Replied 16 July 2016

when credit note is raised, Vat is not double credited instead it is debited

CA Shree Jain (Chartered Accountant) (1572 Points)
Replied 16 July 2016

In this quarries they give ctedit note to customer... Why are not give again credit to Customer...

In our invoices we chargs VAT Rs. 50 from our customer than why we given again credit for VAT..

No need of given credit note on VAT and EXCISE again and again..

Hope you agree the same

CMA Poornima Madhava (CMA) (13112 Points)
Replied 16 July 2016

Credit note is raised for accounting sales return. Entry would be: Sales/ED/VAT Dr To Customer A/c. How is VAT credited twice here?

CA Shree Jain (Chartered Accountant) (1572 Points)
Replied 16 July 2016

We can issue a credit note and it should be basic amount.. if we added vat and excise than more credit goes to customer..

Please read carefully... Why we give excess Credit note to Customer ????

CMA Poornima Madhava (CMA) (13112 Points)
Replied 16 July 2016

Let me ask you a practical question. Suppose I buy a TV for Rs.50k (say 45k basic price + 5k VAT) and make full payment in advance. After I buy, I find that it is defective and hence return the TV to the vendor. How much money should I get back: 50k or 45k?