Under Section 34(3) of the CGST Act, a debit note (or supplementary invoice) is issued by the supplier when the taxable value or tax charged in a tax invoice is found to be less than what is actually payable, and it is reported in the supplier's return so the buyer can take the additional credit. Separately, in commercial usage a buyer may raise a "debit note" on the supplier to record a deduction it intends to make (shortage, rejection, penalty, scheme). The buyer's debit note has no GST effect of its own; it is a claim that the supplier may accept or dispute.
How debit notes work in India
Supplier debit notes are straightforward: if a price escalation or an under-billed quantity is discovered, the supplier issues a debit note referencing the original invoice, charges the extra value and GST, and reports it; the buyer takes the extra ITC. Buyer debit notes are where disputes start. The buyer's accounts team raises a note for, say, "quality rejection ₹40,000" or "late delivery penalty ₹25,000", reduces the payment accordingly and expects the supplier to issue a GST credit note to match. If the supplier does not agree, the amount remains outstanding in the supplier's books and the mismatch persists until resolved.
Why it matters for getting paid
Silence is treated as acceptance. A supplier that receives a buyer debit note and says nothing will find it hard to recover the deducted amount later. Reply in writing within days, with evidence (challan, GRN, inspection report) and a clear statement that the deduction is not accepted. Only issue a credit note for deductions you actually agree. See credit note dispute and statement of account.
How FundRaksha uses it
FundRaksha's advocates separate accepted and disputed buyer debit notes in the statement of account, pursue the undisputed balance immediately and put the buyer to proof on the disputed deductions. This keeps the claim clean and fast. Fee: 30% of recovery; a dedicated advocate is assigned within 24 hours.
Worked example (hypothetical)
A Baddi pharma packaging supplier invoices ₹10,00,000. The buyer raises three debit notes: ₹30,000 for a shortage noted on the GRN (supplier agrees), ₹1,20,000 for "artwork rejection" with no inspection report (supplier disputes) and ₹50,000 "annual scheme" with no agreement (supplier disputes). The supplier issues a GST credit note for ₹30,000, replies in writing rejecting the other two, and claims ₹9,70,000. The buyer pays ₹8,00,000. The legal notice demands the ₹1,70,000 balance with Section 16 interest; assuming a 6.5% bank rate (19.5% a year, monthly rests) for four months, that is about ₹11,300. The buyer, unable to produce a rejection report or scheme agreement, pays ₹1,70,000.
Last reviewed: 2026-10-08. Information for Indian businesses; not legal advice.