Credit Note
A credit note is a document issued by a seller to reduce the amount owed on a previously issued invoice — commonly used for refunds, discounts, or returned goods/services.
If you’ve already issued an invoice but need to reduce what the client owes — because of an overcharge, a discount agreed after the fact, or a service issue — you issue a credit note referencing the original invoice, rather than editing or deleting the original.
Under GST, credit notes have specific rules: they must reference the original invoice number, be issued within a specified time limit, and be reported in your GST returns, since they affect your GST liability for that period.
Keeping a clear paper trail of credit notes (rather than just adjusting future invoices informally) makes it much easier to reconcile your books and defend your GST filings if ever queried.
Written by the InvoicePilot Team.