Credit note
A document a seller issues to reduce the value of an earlier invoice — for a sales return, a rate correction, or a discount agreed after billing.
A credit note says: the earlier invoice charged more than is now due. It reduces what the customer owes you, and where GST was charged, it reduces the tax as well.
Why not just edit the invoice
Because the invoice has already been issued, reported and, in most cases, taken into your customer's credit. Editing it breaks the trail on both sides. A credit note leaves the original intact and records the correction as its own dated document, linked to the invoice it adjusts.
Reasons you will use one
Goods returned. Goods rejected as short or damaged. A rate or quantity billed wrongly. A discount agreed after the sale, where the terms allowed for it. Deficiency in a service supplied.
The GST side
A credit note against a tax invoice is reported in your GSTR-1, and there is a time limit for issuing one with a tax reduction, tied to a date after the end of the financial year of the supply. Beyond that limit you can still settle the money commercially, but not reverse the tax. Confirm the current limit with your tax advisor.
How KillStock handles it
Credit notes are first-class documents. A sales return raises the credit note and puts the stock and the ledger back where they belong in the same step, and the note flows into the GST reports with the sale it adjusts.
A common mistake
Issuing a credit note with no reference to the original invoice. The amount is then floating on the account, and the reconciliation becomes someone's problem next quarter.