For an Indian GST rate change, use section 14 of the CGST Act—not the date a credit note is issued or the date the rate change was announced—to determine the applicable rate. The result depends on whether the supply took place before or after the effective date and on when the invoice was issued and payment received. For an advance, the statutory payment date may depend on both the supplier’s books and bank credit.
This guide concerns India’s CGST framework and the corresponding state/UT or integrated tax rules. Check the notification’s effective date and the law and return guidance applicable to the transaction’s tax period; special facts may change the analysis.
How section 14 determines the rate
Section 14 of the CGST Act overrides the ordinary time-of-supply rules in sections 12 and 13 where the tax rate changes. It states: “Notwithstanding anything contained in section 12 or section 13, the time of supply, where there is a change in the rate of tax in respect of goods or services or both, shall be determined in the following manner, namely:”. In the table, “before” and “after” refer to the effective date of the rate change in the applicable notification. Where the time of supply falls before that date, the old rate applies; where it falls on or after the effective date, the new rate applies, subject to the applicable notification and facts.
| When the supply is made | Invoice | Payment | Section 14 time of supply |
|---|---|---|---|
| Before the rate change | Issued after the change | Received after the change | Earlier of the payment date or invoice date; both are after the change, so the new rate applies. |
| Before the rate change | Issued before the change | Received after the change | Date the invoice was issued; the old rate applies. |
| Before the rate change | Issued after the change | Received before the change | Date payment was received; the old rate applies. |
| After the rate change | Issued after the change | Received before the change | Date the invoice was issued; the new rate applies. |
| After the rate change | Issued before the change | Received after the change | Date payment was received; the new rate applies. |
| After the rate change | Issued before the change | Received before the change | Earlier of the payment date or invoice date; both are before the change, so the old rate applies. |
The relevant supply date must be established under the law applicable to that supply; do not assume the contract date, dispatch date, or a later return filing date settles it. The matrix is the section 14 framework, not a replacement for checking the underlying supply and invoicing facts.
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Which date counts as receipt of an advance?
For section 14, payment is generally treated as received on the earlier of the date it is entered in the supplier’s books or credited to the supplier’s bank account. The section’s proviso addresses a bank credit made more than four working days after the rate-change date: in that case, the date of bank credit is treated as the date of receipt. Keep evidence of both dates, including the books entry and bank statement, rather than relying only on the date shown on a remittance instruction.
How to handle an advance and the later invoice
First apply the relevant time-of-supply rule, including section 14 where there has been a rate change. Separately, report and adjust the advance in the return as required. Return reporting does not itself determine which tax rate applies.
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Advance received for services
The GST Portal’s GSTR-1 FAQ says suppliers report advances received for services in the period received, net of amounts for which invoices have already been issued. When the invoice is later issued, the advance is adjusted in the GSTR-1 period for that invoice. Apply this guidance within its stated scope and confirm current portal instructions for the relevant return period.
Advance received for goods
Do not extend the GSTR-1 FAQ’s service-advance guidance to goods without checking the applicable rules. Consider the relevant section 12 rule, section 14 if rates changed, the invoice timing, and any applicable amendments or notifications. CBIC’s older FAQ booklet includes an example in which goods supplied and invoiced after a rate change attracted the new rate despite an advance paid before the change. That historical example illustrates a timing analysis; it does not decide every transaction or replace the current statutory rules.
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Advance refunded because the supply does not happen
If an advance is refunded and no supply or tax invoice follows, distinguish this from a return or deficiency after an invoiced supply. Section 31(3)(e) provides for a refund voucher against the receipt voucher. CBIC’s FAQ says tax paid on a refunded advance may be adjusted in the return. Check the current return procedure and the facts before making the adjustment; this is not automatically a section 34 credit note.
When to use a credit note or debit note
Section 34 sets out when a supplier may issue a credit note for an invoiced supply. The statutory grounds include that the original tax invoice overstates taxable value or tax payable, goods are returned, or the goods or services are deficient. A credit note is not a general mechanism for choosing a different rate after the event.
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Returned goods or deficient supplies
A return after a rate change may support a section 34 credit note, but the return date and credit-note date do not by themselves determine the rate on the original supply. Identify the original supply and the reason for the note, then check the statutory reporting deadline and whether the supplier is permitted to reduce output tax. Section 34 bars that reduction where the incidence of tax and interest has been passed to another person.
Overstated tax or value
If the original invoice charged more taxable value or tax than was payable, section 34 may provide grounds for a credit note. The supplier must report the note in the return for the month it is issued, subject to the applicable statutory cutoff. Issuing the note alone does not establish an entitlement to reduce output tax; the passed-on-incidence restriction still matters.
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Understated tax or value
Where the original invoice charged less taxable value or tax than was payable, section 34 provides for a debit note. Declare it in the return for the month it is issued. If the undercharge relates to a rate change, determine the rate using section 14 as well: the later debit-note date is not the rate-selection rule.
Deadline and filing check
Section 34(2) sets an outer time limit for declaring a credit note: 30 November following the end of the financial year in which the supply was made, or the date the relevant annual return is furnished, whichever is earlier, subject to the law applicable to the tax period. Check the current statutory text and GST Portal guidance before filing, since amended statutory wording and older FAQ language may differ. The GST Portal’s GSTR-1 FAQ and its “Creation of Outward Supplies Return in GSTR-1” manual describe return reporting, but portal steps and filing requirements should be confirmed for the period in question.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.A practical record-and-filing sequence
- Confirm the effective date. Use the effective date in the applicable rate notification, not merely the date the change was announced.
- Establish the supply facts. Determine whether the supply was made before or after the change under the rules applicable to that transaction.
- Record invoice timing. Preserve the invoice and evidence showing when it was issued.
- Record both payment dates. Preserve the date payment was entered in the supplier’s books and the date it was credited to the bank, then apply section 14’s receipt-date rule and proviso.
- Apply the section 14 branch. Use the combination of supply, invoice, and payment timing in the table to identify the time of supply and applicable rate.
- Classify the later adjustment. A service advance adjusted against an invoice, a refund of an advance before supply, and a credit note for returned or deficient invoiced goods or services are different situations.
- Check eligibility and reporting. For a credit note, verify the section 34 ground, the tax-incidence restriction, the deadline, and the return procedure applicable to the period. For a refunded advance, verify the refund-voucher and return-adjustment treatment.
For partial advances, continuous or bundled supplies, disputed supply dates, or unusual invoice/payment combinations, the materials cited above do not settle every possible fact pattern. Check the current Act, relevant notification and filing guidance, and seek advice from a qualified Indian GST professional where needed.
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