Debit Note in Singapore: What It Is, When to Issue & How to Comply

Debit Note in Singapore: Rules and Requirements

Singapore businesses issue debit notes under the Goods and Services Tax (GST) system regulated by the Inland Revenue Authority of Singapore (IRAS).  A debit note is a legal document that increases the value of a previously issued tax invoice when goods or services are undercharged, or additional charges are required. It applies to GST-registered businesses and ensures that the taxable value reported matches the corrected transaction. According to IRAS, debit notes are only meant for adjustments where no new GST is being charged. If GST was already charged and additional taxable supply arises, a new tax invoice must be issued instead. Businesses use debit notes to adjust invoices for reasons like added charges or pricing errors. This blog explains when to issue a debit note, the required contents, and examples of practical scenarios.

What Is a Debit Note in Singapore

A debit note is a commercial document that a seller will issue to a buyer when an additional payment is required on a previously issued invoice. It acts as the opposite of a credit note and serves to correct the value of a tax invoice that was undercharged. A debit note will ensure that the correct amount is billed and the seller can recover the full payment owed on the transaction.

Debit notes do not add GST on their own. If extra taxable goods or services are supplied after the original invoice, the seller must issue a new tax invoice instead. Debit notes are meant for adjustments without charging additional GST.

Debit notes are commonly issued for situations such as additional charges on freight, packaging, or handling, underbilling on the original invoice, or extra services provided after the invoice date. A debit note will serve as a legally recognized document and provide evidence of the adjustment on the accounts of both the seller and the buyer.

When to Issue a Debit Note

A debit note must be issued whenever the amount on the original invoice is lower than it should be. Common cases include:

• Errors in calculation – This happens when the total of an invoice is added wrongly and the buyer is billed less than the real amount.

• Missed charges – This occurs when additional costs of freight, packaging, or handling are left out on the original invoice.

• Additional goods or services – This applies when extra products or extra hours of service are supplied but not included on the first invoice. If such items are taxable, a new tax invoice should be issued instead of a debit note.

Key Details Required on a Debit Note

IRAS requires debit notes to contain specific information. A valid debit note must show:

• The words “Debit Note” – These must appear clearly at the top of the document.

• Supplier’s details – The name, address, and GST registration number of the supplier.

• Customer’s details – The name and billing information of the customer.

• Reference to the original tax invoice number and date – both must be stated to clearly link the debit note to the correct supply.

• Reason for the adjustment – e.g., underbilling, omitted freight, or additional service.

• Description of adjustment – A clear explanation of the goods or services being added.

• Amounts – The additional charges and the new total payable. Where GST applies, a tax invoice must be issued, not a debit note.

• Date of issue – adjustments from debit notes are reflected in the GST return of the period in which the debit note is issued. They cannot be used to adjust older returns retroactively.

• Identifying number – IRAS requires an identifying number on debit notes. It does not have to be strictly sequential, though sequential numbering is good practice.

Scenarios Where Debit Notes Are Used

Debit notes are issued in practical situations like:

• Shipping Charges: When the cost of transport or freight was omitted from the original invoice.

• Service Extensions: When additional service hours are provided beyond the original agreement. If those hours are taxable, the supplier must issue a new tax invoice.

• Underbilling: If the price of goods or services was entered lower than agreed.

• Packaging or Handling Fees: If extra costs are added after the original invoice.

Record Keeping and Audit Requirements

Businesses will keep debit notes for five years to follow GST rules. Each debit note must link to the original invoice and remain traceable. Debit note transaction data is also part of the invoice data that must be submitted through InvoiceNow (Singapore’s e-invoicing regime) once fully implemented.

Debit notes can exist in paper or electronic form as long as records stay clear and accessible. This allows the Inland Revenue Authority to check adjustments during audits and ensures accurate GST reporting.

Penalties for Incorrect Issuance

If a business fails to issue a debit note when required or provides incomplete details, IRAS may impose penalties. Non-compliance can result in underreporting of GST, fines, and interest charges. The severity depends on whether the error was due to negligence or was deliberate.

Training staff to issue debit notes correctly and maintaining accurate records will reduce financial risks. Consistent compliance will ensure smooth operations, proper reporting on GST, and verification of all adjustments on the accounts of the business.

Conclusion

A debit note in Singapore is a document that will increase the value of a previously issued invoice and ensure GST is reported correctly under IRAS rules. It will apply on additional charges, underbilling, missed costs, or other adjustments on the original transaction. Debit notes will not be used to charge new GST. When additional taxable supply is involved a new tax invoice must be issued.

A debit note will include the supplier and customer details, the GST registration number, a reference to the original invoice number and date, the reason for the adjustment, and the added amounts. Keeping these records for at least five years and submitting debit note data through InvoiceNow when required will support compliance, prevent disputes and protect a business from financial risks.

FAQs

1. Who can issue a debit note in Singapore?
 Only GST-registered businesses are allowed to issue debit notes.

2. What is the difference between a debit note and a credit note in Singapore?
 A debit note increases the payable amount while a credit note reduces it.

3. Is GST applied on debit notes in Singapore?
 No. Debit notes do not add GST. If additional taxable supply arises, a new tax invoice must be issued.

4. How long must debit notes be kept in Singapore?
 Debit notes must be kept for at least five years for audit purposes.

5. Are electronic debit notes valid in Singapore?
 Yes, electronic debit notes are valid if all required details are included and records remain accessible.