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GST (Goods and services tax) Te tāke hokohoko

What are debit notes?

Debit notes are issued by a supplier when the price is increased after a tax invoice was issued.

Important - GST rate change

The debit note is accounted for in the period the debit or credit note was received . The rate is the one that applied to the original supply.

Ravi supplies Matt with an invoice for some goods on 20 August 2010. On 3 December 2010 Ravi realises that he has put incorrect figures on the invoice for the transaction with Matt. Ravi sends Matt a debit note for the difference using the GST rate of 12.5%.

Matt makes an adjustment to reflect the debit note on the return which covers the December 2010 period.

What information must a debit note show?

A debit note must show:

  • the words "debit note" in a prominent place
  • the name or trade name and GST number of the supplier
  • the name and address of the recipient
  • the date it was issued, and
  • a brief explanation of why it was issued.

It must also have either:

  • the GST-inclusive price shown on the tax invoice with the correct GST-inclusive amount payable and the difference between the two amounts of GST charged on the difference, or
  • the difference between the incorrect and correct amounts, and a statement that the difference includes GST (but only if it is at 12.5%).

A debit note can be combined and issued with a tax invoice, provided it contains the required information (listed above) and must relate to a different supply that a tax invoice has been issued for previously. A combined invoice and debit note cannot be issued for the same supply.

Important
  • If a copy of the debit note is issued, it must be clearly marked "copy only".
  • When the amount payable is increased, you will need to make an adjustment in your GST return.

 

Example: Issuing a debit note

Melissa sells goods worth $1,100 to Wei for $1,000 by mistake. Melissa then issues a debit note to Wei for $100. Both Melissa and Wei use the invoice basis.

Melissa's return 
$1,000 included in Box 5 (sales). The extra $100 is also included in Box 5, but in the return covering the period the increase was made.

Wei's return 
$1,000 included in purchases, in Box 11. $100 claimed in Box 11 in the return covering the time the increase was made.

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