GST Invoicing Method for Service Upgrade

Dear All,

Would request your views on the correct invoicing method for service upgrade packages. Let me elaborate further:

We at Indiamart provide online subscripttion services to customers for advertising their products. When a customer purchases a package of say, Rs 100 for 1 year we collect the money upfront and issue an invoice of Rs 100 + GST. Now lets assume the customer opts for a upgrade (means higher package with additional features) after ,say, using the services for 6 months and the price of new package if Rs 200 for 1 year.

Current invoicing method: We issue a credit note of Rs 50 + GST against the old service, collect the balance amount from the customer (which is Rs 150 + GST) and issue a new invoice for Rs 200 + GST.

Proposed invoicing method: We propose to just issue a new invoice for Rs 150 + GST and don't issue any credit note.

Please let me know if the proposed method of invoicing sounds good.

PS: The GST rate for all our services is 18% only and the packages are different versions of online advertising.

Thanks

Hi Avijit,

Regarding your service upgrade invoicing under GST, here’s my take:

Current method (Credit note + fresh invoice) — Correct approach:

When a customer upgrades from a Rs. 100 package (for 1 year) to Rs. 200 package (for 1 year) after 6 months, the balance to be paid is Rs. 150 (for remaining 6 months).
The right GST-compliant approach is to issue a credit note for the unused portion of the old package (Rs. 50 + GST) and then raise a new invoice for the full upgraded package amount (Rs. 200 + GST).
This method ensures proper accounting of earlier invoice and the adjustment of value and tax.

Proposed method (Invoice only for Rs. 150 + GST) — Not advisable:

Simply invoicing Rs. 150 + GST without issuing a credit note will not account for the reversal of the old service value.
This may cause mismatch in GST records and compliance issues since the original invoice of Rs. 100 + GST remains unadjusted.
GST law requires that any reduction or cancellation of supply value should be documented via credit notes/debit notes (Section 34 of CGST Act).

Summary:

Stick to your current method: issue credit note for Rs. 50 + GST against old invoice, then invoice Rs. 200 + GST for upgraded package.
This keeps your GST records clean and compliant.
Avoid skipping credit notes, as it can cause issues during reconciliation and audits.