How to revise B2B invoice?

It’s common to err as humans. The same goes while invoicing in business too. However, you should also know how to rectify mistakes or else it can have a not-so-good impact on your business relations and tax compliances.

This article deep dives into various types of errors committed while invoicing your Business-to-Business (B2B) clients/customers and how to deal with them. You will understand how to revise B2B invoices in various scenarios.

Common mistakes in the invoice

Some of the mistakes commonly committed by a person raising any invoice are given below:

• Writing the incorrect invoice number and invoice date.
• Omitting or giving an unclear description of the products or services or wrong HSN codes where it applies.
• Reference to the wrong or old Purchase Order (PO) number.
• Incorrectly stating or omitting invoice/payment due date and details needed for the payment.
• Errors in the customer information such as name, GSTIN, address, contact information
• Omitting the GSTIN and incorrectly depicting a B2B invoice as Business-to-Consumers (B2C).
• Not stating the correct GST-related details in the tax invoice such as the GSTIN of seller and buyer, tax rate, cess and amount, etc.
• Keeping the shipping address the same as the billing address, when otherwise it is not the same.
• Charging the wrong price or fare or rate for the products or services or using an incorrect scale or unit of measurement, thus overcharging or undercharging the buyer.
• Charging tax in a tax invoice despite the sale applying to payment on a reverse charge basis or the seller being a composition taxable person.
• Levying CGST and SGST instead of IGST or vice versa in the invoice by entering the wrong place of supply, contravening the GST law.

Consequences of raising an erroneous invoice

The impact of an incorrect invoice can be severe or not depending on the scale of business, whether or not the seller is registered under GST, etc. It is easier to rectify mistakes in invoices that are yet to be issued to the buyer, as it will have less severe consequences. 

Errors in an invoice can lead to mistrust and chaos with your customers. Customers who notice frequent errors in open invoices before making payment tend to feel cheated and may reconsider continuing business with you. 

On the other hand, errors on already paid invoices have more grievous consequences. A customer may find it cumbersome if they find out that they owe more money on an invoice they thought was fully paid. It could block your working capital as well.

Moreover, there can be an accounting impact for habitual and significant errors in invoice amounts with the assets being under or overvalued. Suppose there are errors in the quantity of the product sold. In that case, it will lead to an erroneous inventory count, accounted for in the books. Thus, such habitual errors will lead to the balance sheet not giving the stakeholders an accurate and fair view. 

If the seller is registered under GST, then penalties could be levied for raising invoices that do not have the mandated fields. Purposely issuing incorrect invoices is an offence under Section 122(1)(i) of the CGST Act.

How to revise a B2B invoice?

Many businesses have the common doubt of whether editing an invoice already raised is the proper practice. A few others may also ask if it is legal to delete invoices once raised. If you notice an error in the invoice before sending it to your customer, the issue can be fixed. You can directly edit the invoice and rectify the error. Note that an invoice is not considered as ‘issued’ if it has not been delivered or communicated to the buyer as yet.

On the other hand, if the invoice is already issued to your buyer or customer, there are some options you can consider. Suppose you want to change the original invoice amount or correct the GST amount.

In that case, you can use debit notes and credit notes without editing the original invoice. It is the best business practice to follow and be legal under GST and helps maintain clean and transparent accounts. It will come in handy to explain at the time of audit observations and discussions as well.

Further, if you raised the invoice with the wrong buyer details such as GSTIN or name, you must raise a credit note for cancelling the invoice and raise a fresh invoice with the correct GSTIN. 

However, suppose the mistake found in the invoice is not a grave one, such as a grammatical error or typographical error. In that case, the original can be edited out, although not recommended. Note that since you have already sent the original invoice once, the details remain the same. 

This practice of editing invoices may not be helpful where invoice communication and payment processing are automated between the seller and buyer. Also, note that the amended invoice will continue to have the same invoice number, and no price change is advised in such cases.

GST provisions for handling invoicing errors

Section 34 of the CGST Act deals with the correction of tax invoices. Rectification of tax invoices can take numerous forms, with the outcome being either a revised invoice or a supplemental invoice or debit-credit note.

A credit note can be used to make a downward revision in the invoice value. In contrast, a supplementary invoice or debit note can be used to make an upward modification or other deficiencies in invoices. 

A change in the GST rate may result in an upward or downward revision in the prices of goods or services. A ‘revised invoice’ is issued when a registered person is required to produce an invoice for supplies made before acquiring registration.

ClearOne invoicing software allows businesses to raise error-free invoices with many validations and useful nudges.