/ GST Compliance

GST Compliance for Credit Notes: Separate SAC/ HSN code

GST bank account

GST Compliance for Credit Notes: a separate SAC or HSN  code

In GST, credit notes for trade discounts and cash discounts are linked to the original transaction and are not assigned a separate SAC (Service Accounting Code) or HSN (Harmonized System of Nomenclature) code. Here’s how it works:

  • Reference to the Original Invoice: A credit note must reference the original invoice to which the trade or cash discount applies. The SAC/HSN code on the credit note must match the code used in the original invoice.
  • Purpose of the Credit Note:
    • Trade Discounts: These are pre-agreed discounts on the invoice value and are often included in the invoice itself. If a subsequent adjustment is needed, a credit note is issued.
    • Cash Discounts: These are discounts provided post-sale based on timely payment or other agreed terms. The credit note issued will adjust the taxable value accordingly.
  • SAC/HSN Code:
    • There is no separate SAC/HSN code for trade or cash discounts. Use the same SAC/HSN code as the original goods or services being adjusted.

GST Compliance for Credit Notes

  • The GST amount on the credit note must be calculated proportionate to the taxable value being reduced. Credit notes must be reported in GSTR-1 under the appropriate section, with the details of the original invoice and adjusted value.

Example

  • Original Invoice: Includes an HSN code 8708 (Car parts) for a taxable value of ₹1,00,000.
  • Trade Discount Credit Note: If a ₹10,000 discount is issued, the HSN code in the credit note will remain 8708.
  • Cash Discount Credit Note: If ₹5,000 is discounted post-payment, the credit note will also use 8708 as the HSN code.

Conclusion

The SAC/HSN code on the credit note for trade or cash discounts should match the SAC/HSN code of the goods or services in the original invoice. This ensures proper compliance and linkage with the GST system.

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