Credit Note in GST: How to Handle a Sales Return (and Make One in BizBahi)

When do you issue a credit note?

Under Section 34 of the CGST Act, a registered seller issues a credit note when the tax invoice turns out to be higher than it should be. The common cases for a shop are:

• The customer returns some or all of the goods.
• The goods were damaged, defective or not what was ordered.
• You charged a higher rate, or agreed a discount after the bill was made.
• You billed more quantity than you actually supplied.

What a GST credit note must show

• Your name, address and GSTIN, and the words "Credit Note" as the type of document.
• A credit note number: a consecutive serial number of up to 16 characters, unique for the financial year.
• The date of the credit note.
• The customer's name, address and GSTIN if they are registered (and the delivery address with state for an unregistered customer where the original bill needed it).
• The number and date of the original tax invoice it is issued against.
• The taxable value being reduced, the GST rate, and the GST amount credited.
• Signature or digital signature of the seller or an authorised person.

Time limit and GST return reporting

A credit note for a supply must be declared in your GST return no later than 30 November after the end of the financial year in which the supply was made, or the date you file the annual return for that year, if that is earlier. After that, you cannot reduce your GST for it.

In GSTR-1, credit notes are reported by who the customer is: notes to registered customers (with GSTIN) go in the CDNR table; notes against large inter-state bills to unregistered customers (B2CL) go in CDNUR; returns against ordinary small B2C bills are adjusted in the B2CS figures. The tax on the credit note reduces your output tax in GSTR-3B for that month.

If the customer is registered, they must reduce the input tax credit they claimed on the original bill. That is why the original invoice number and date on the credit note matter.

How to make a credit note in BizBahi

1. Open the original sale bill and tap Sales return / Credit note. (You can also start from the Credit note option in the menu and search by bill number or customer name.)
2. Enter the quantity being returned for each item, or tap Return all. BizBahi shows how much of each line can still be returned, so you cannot return more than was sold, even over several returns.
3. Choose a reason: customer returned goods, damaged / defective, wrong item supplied, excess quantity, rate difference / discount, or write your own.
4. Keep "Add returned items back to stock" ticked if the goods are going back on the shelf. Untick it for damaged goods you will not sell again.
5. Check the credit note total and save. BizBahi gives it the next number in the credit note series (for example CN-2026-27-0001).

What BizBahi calculates for you

• GST on the credit note follows the original bill: CGST + SGST if the sale was inside your state, IGST if it was to another state, at the same GST % per item.
• Any discount on the original line is reduced in proportion to the quantity returned.
• The credit note total is never more than the original bill minus earlier returns.
• The note prints with "Against invoice <number> dt <date>", the reason, and whether the stock was put back. You can print it on A4/A5, as a PDF, on a 58mm or 80mm thermal printer, or share it on WhatsApp.
• Once a bill has a credit note, editing that bill is locked, so the bill and its return always match.

Refund or customer credit: how the money is settled

If the customer still owes money on that bill, the credit note first reduces that due amount. Whatever is left over can be refunded now (cash, UPI, bank transfer or card), and BizBahi records the refund as money paid out. Or you can keep it as customer credit: it lowers the customer's balance in their udhaar khata and gets adjusted against their future bills.

For an exchange, make the credit note for the returned item first, then a new bill for the item the customer takes.

Purchase returns: the debit note side

When you send goods back to your supplier, BizBahi has the matching purchase return (debit note). You pick the purchase bill, enter the quantity, and BizBahi can take the items out of stock and record the supplier's refund or keep it as credit with that supplier.

Under GST, the supplier is the one who issues the credit note for goods you return, and that credit note reduces your input tax credit. Your debit note is your record of the return and a request to the supplier, so ask them for their credit note too.

GSTR-1 help and what BizBahi does not do

On paid plans (and during the 7-day trial for new accounts), BizBahi's GSTR-1 / GSTR-3B export includes your credit notes in the CDNR, CDNUR and B2CS figures as described above, and reduces the HSN summary. It is filing help: you or your CA still check the figures and file on the GST portal.

BizBahi's e-Invoice JSON export covers sales invoices only. If e-invoicing applies to your business, a credit note to a registered customer also needs an IRN, and you will have to generate it on the IRP portal yourself. See the e-way bill and e-Invoice JSON guide.

Can I delete or edit a GST bill when goods are returned?

You should not. Keep the original invoice and issue a credit note against it. That keeps your invoice series and GST returns correct. In BizBahi, editing a bill is locked once it has a credit note.

What is the time limit to issue a credit note in GST?

It must be declared in a return by 30 November after the end of the financial year of the original supply, or by the date you file that year's annual return, whichever comes first.

Is GST refunded on a sales return?

The GST on the returned goods reduces your output tax for the month you report the credit note. If the customer is registered, they reduce the input tax credit they claimed on the original bill.

Can I give store credit instead of cash on a return?

Yes. In BizBahi, choose "Keep as customer credit" when you save the credit note. The amount lowers the customer's balance and is adjusted against their next bills.

Does a return put the items back in stock in BizBahi?

Yes, if "Add returned items back to stock" is ticked when you save the credit note. Untick it for damaged goods that you will not sell again.