Returns and replacements process

Start with a written return policy

Most return disputes come from unclear terms. A one-page policy shared with dealers and printed on invoices should cover:

• Time limit: for example, damage or shortage to be reported within 48 hours of delivery; other returns within 15 days.
• Condition: unopened, original packing, with invoice reference.
• Non-returnable items: cut lengths, mixed paint, custom orders, expired or near-expiry goods where relevant.
• Defective goods: replaced, repaired or credited — and whether it goes through the brand's service centre.
• Who approves: salesperson cannot accept returns without office approval.

Types of returns and how to treat them

Step-by-step return process

1. Request: customer reports the return with invoice number, item, quantity and reason; photos for damage.
2. Approval: office approves or rejects against the policy and gives a return reference.
3. Receipt: goods arrive with the reference; store staff count and inspect, and record condition — resaleable, damaged, defective.
4. Accounting: issue a credit note against the original invoice for accepted returns; stock goes back into the right godown or a separate damaged-goods location.
5. Replacement: if replacing, raise a fresh invoice for the replacement goods, so both movements are visible.
6. Supplier claim: for defects, send the item or claim to the supplier and track it until you receive a credit or replacement.
7. Close: share the updated party statement so the customer sees the credit.

GST on returns: the basics

A sales return after an invoice is generally handled by issuing a credit note that refers to the original invoice. The credit note reduces your output tax when reported in your GST return, within the time limit allowed for the financial year. If the buyer is registered, their input credit reduces too. See sales returns under GST and the credit note format.

If you cancel the invoice instead — for example, goods refused at the door on the same day — the treatment differs, and e-invoiced bills have their own cancellation window. Confirm your approach with your CA. This is general information, not tax advice.

A worked example

A lighting dealer sold 40 LED panels at ₹850 each (₹34,000 + GST) to a retailer. Four panels arrive cracked.

• Retailer reports the same day with photos; office approves return of 4.
• Four panels come back; store marks them damaged, not resaleable.
• Credit note for ₹3,400 + GST against the original invoice.
• Four new panels sent with a new invoice for ₹3,400 + GST.
• Transit damage claim filed with the transporter for ₹3,400.

The retailer's ledger shows the original bill, the credit and the new bill — and nets to what they actually received.

Track returns as a number

Look at returns monthly: by customer, by item, by reason and by salesperson. A rising return rate on one item points to a quality issue to raise with the supplier. A rising rate from one customer may mean over-selling. Damaged stock sitting in a corner should be counted and written down; see dead stock.

Returns with Tally and Cashflow OS

When writing back to Tally is switched on, an authorised user can create a credit note or debit note from the Cashflow OS phone or web app; Tally validates it and GST is worked out from the item and the party's state. The customer's ledger and bill-wise outstanding update after sync, and you can share the party statement as a PDF on WhatsApp so the customer sees the credit. See party ledger statements.