29 Jan 2018Posted By: Mudit Handa

How to deal with a GST tax liability on overdue invoices?

Unquestionably, the introduction of GST has all the more simplified taxation system and has relaxed the shoulders of the common man as well as the tax authorities. Amid all the avails that any law has to offer, there are certain complications that are inevitable in every system. There are some exceptional instances where people are sure to face hindrances due to new legislation.

This is exactly what is happening in the case of raising GST invoices to the clients. There are certain cases where this can really pose an entangling awkwardness for a business entity, especially small businessmen. The most common scenario that traders very often face, relates to a situation where a GST invoice is due for payment till the filing of the GST returns. Often such circumstances come as a bone in the throat for an average medium scale entrepreneur.

Whether such invoices raised are encashable in near future or will they become a bad debt?

Let’s take help of a case study to understand this problem.


A trader ‘M’ raises a GST INVOICE in the name of his client 'P' for a sum of ₹ 50,000 on 25th of April. The amount of GST to be paid is ₹ 9,000. (18% of 50000)

Now, after a month, i.e. on 20th of May, the deadline for filing GSTR-3B approaches but the payment is yet to be received by M.

Now, M can logically raise the question that how could he be able to incur his tax liability when he has not yet received the payment in lieu of the goods he had supplied to P.

The apparent query raised here is- “Is the dealer M liable to pay GST?”


Legally, the answer to this question is that the Tax liability will arise on M, irrespective of whether he has received his payment from P, according to the mercantile system.

It’s evident that the problem is not yet solved for small enterprises, who generally face the problem of Cash crunch, and are often short of liquid money to meet even their regular expenses.

The obvious question raised here is-

“How can M save himself from an unnecessary Tax Liability?”

The solution is that he can do so by issuing a credit note.


Will that really work?

Yes, the trader will get rid of such avertable Tax Liability by issuing of the credit note to the buyer. A credit note is an instrument in relation to a supply of goods or services, if the goods are returned by the buyer on account of any reason such as defect, overcharged value, etc.

In this case, where the tax liability has arisen despite non-payment of invoice, a credit note can annul such superfluous tax burden on the trader.


How can it adjust the GST tax liability? 

One who issues a credit note must specify all the details of such credit note in the GST return for the respective month during which this credit note was issued. However, that shouldn’t be later than September of the subsequent fiscal year in which the invoice was made, or the date of filing of the annual return GSTR 9 & 9A, whichever is earlier.

Evidently, the output tax liability can’t be reduced or canceled when credit note has been issued after September.


Basic Elements of the credit note w.r.t. GST return filing:

There is no prescribed Format of the credit note. However, it must specify the following particulars in the correct series:

  • Name, address and Goods and Services Tax Identification Number (GSTIN) of the supplier
  • Nature of the invoice.
  • Unique invoice serial number not more than 16 characters, in alpha-numerical form and with special characters.
  • Date of issuing invoice
  • Name, address and GSTIN of the recipient (if registered).
  • Address of delivery point along with the State and ZIP code, (if recipient is unregistered)
  • Taxable value of supply of goods or services, rate of GST and the amount of the tax credited to the recipient
  • Signature or DSC of the supplier or his authorized Representative.


To know more about GST 


If you have any doubt regarding GST on invoice, click here to get complete GST on invoice e-guide.

If you need any assistance with filing of GST return online, feel free to contact us at 8881-069-069.    






Posted Date 2019-09-12 17:58:34

How do I get GST refund thro GST Return on Sales In voice when Vendor has defaulted to make payment.

Posted By Mudit Handa
Posted Date 2019-09-13 12:01:52

You can't claim ITC unless your vendor has not paid GST. The GST Return will not termed valid u/s 2(117), until full GST paid by the vendor. In such case, your vendor has to make full GST & file rectification return GSTR-1A, which shall match with your GSTR-2A. Only then, ITC claimed shall be valid.

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