When do I need a credit note?
Section 34 of the CGST Act lets the supplier issue a credit note when, after an invoice:
- the goods are returned by the buyer,
- the taxable value or tax charged was too high, or
- the goods or services are found deficient.
For a Shopify store that means a return with a refund, a partial refund for a fault, an order cancelled after its invoice was issued, and a cash-on-delivery order that comes back undelivered (a return to origin, or RTO). The invoice is never deleted or edited once issued; the credit note is how it is reversed.
What must a GST credit note show?
Rule 53 of the CGST Rules asks for:
- your name, address and GSTIN;
- the words "Credit Note", a serial number of up to 16 characters, unique in the financial year, and the date;
- the buyer's name and address, and GSTIN if registered; for an unregistered buyer, the delivery address with the state name and code;
- the number and date of the original invoice or invoices;
- the taxable value, the rate, and the tax being credited, split as on the invoice (CGST and SGST, or IGST);
- your signature or digital signature.
Since February 2019 one credit note can cover several invoices of the same financial year, which helps when a buyer returns items from more than one order.
What is the deadline for a credit note?
Declare it in the return for the month you issue it, and no later than 30 November after the end of the financial year in which the sale was made, or the date you file the annual return for that year, whichever is earlier (section 34(2), the November date since 1 October 2022).
| Sale made in | Credit note must be declared by |
|---|---|
| FY 2025-26 (Apr 2025 to Mar 2026) | 30 Nov 2026, or the GSTR-9 filing date for 2025-26 if earlier |
| FY 2026-27 (Apr 2026 to Mar 2027) | 30 Nov 2027, or the GSTR-9 filing date for 2026-27 if earlier |
The deadline runs from the date of the sale, not the date of the return. A refund given after it is still a refund, but the GST on it can no longer be reduced.
Does a credit note always reduce my tax?
Not always. Since 1 October 2025 (the Finance Act 2025, notified by Notification 16/2025-Central Tax), section 34(2) says:
- Business buyer (registered): your tax goes down only once the buyer has reversed the input tax credit it took on the original invoice. In practice the buyer accepts the credit note in the GST portal's Invoice Management System (IMS).
- Consumer (unregistered): your tax goes down unless the tax has been passed on to someone else. A full refund to the customer, tax included, means it has not.
Where do credit notes go in GSTR-1?
| Original invoice | Where the credit note goes |
|---|---|
| B2B, to a registered buyer | Table 9B, as CDNR, with the buyer's GSTIN |
| B2CL, inter-state to a consumer above ₹1 lakh | Table 9B, as CDNUR, type B2CL |
| Export | Table 9B, as CDNUR, type export |
| Any other consumer sale (B2CS) | No separate row: reduce Table 7 for the same state and rate |
It also reduces the HSN summary (Table 12) for its product code and is counted in Table 13 as a document issued. In GSTR-3B, the reduction reaches your tax on sales through GSTR-1.
Returns, exchanges and RTO on a Shopify store
- Return and refund: credit note for the items and amount refunded, dated when you issue it.
- Partial refund for a fault: credit note for the refunded part.
- Cancellation after the invoice: credit note for the whole invoice. Both stay in the books and net to zero.
- RTO on a cash-on-delivery order: the invoice was issued when the order was placed, so the order is cancelled and a credit note issued, or the sale stays in your GSTR-1 although no money came in.
- Exchange for a different item or price: a credit note for the first item and a new invoice for the second. A size swap at the same price changes no figure GST counts; many sellers still use a credit note and a new invoice because it keeps stock records simple, and the tax comes out the same.
- Goodwill credit: store credit offered for a late delivery, outside the terms of the sale, is a commercial gesture rather than a reduction in the price of the goods. Ask your CA before issuing a GST credit note for it.