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How to Issue a Credit Note / Sales Return

Reverse stock and tax with a single voucher.

5 min read Updated Jun 2026   How-To

Purpose

Issue a credit note (sales return) against a posted sales invoice to reverse stock, tax and the customer's outstanding in one document. Always credit-note rather than cancel-and-reissue — cancellation breaks GST audit trails and gapless voucher numbering.

Before you begin

  • The original sales invoice number (the credit note refers to it).
  • Reason code agreed with the customer (defective, wrong item, short-shipped, price adjustment).
  • Physical receipt of the returned stock if it is a goods return (or written agreement for a value-only adjustment).
  • Day Closure status of the period — you can credit-note across periods, but tax-period implications differ.

Steps

  1. Start → Purchase & Sales → Transactions → Credit Note / Sales Return.
  2. Pick the customer.
  3. Enter or pick the original invoice number; the system pulls all lines into the grid pre-filled.
  4. Edit the returned quantity per line — leave rows where nothing was returned at quantity zero, or delete them. Tax recomputes automatically.
  5. Pick the credit reason from the dropdown — this drives the GST treatment.
  6. For a goods return, pick the location where the returned stock will land; for a value-only adjustment, tick Value adjustment only (no stock movement).
  7. Click Save & Print. The credit note gets a CN number, the customer's outstanding reduces, and (for a goods return) stock at the selected location increases.
  8. Hand or email the printed credit note to the customer.

What success looks like

  • A printed / PDF credit note referencing the original invoice number is generated.
  • Customer's outstanding reduces by the credit-note value; visible on their Statement of Account.
  • For a goods return, stock at the receiving location increases (see How to Track Stock Movement).
  • The credit note appears in GSTR-1's CDNR section.

Troubleshooting

"Original invoice not found" error.
Either the invoice number is mistyped or it was posted at a different location. Use the picker rather than typing.
Cannot edit returned quantity above original.
That is intentional — you cannot return more than was sold. If the customer is returning extra, raise a separate stock-receipt entry.
Tax breakup looks wrong after editing quantities.
Click Re-compute Tax. The auto-recompute fires on save anyway, but a manual click confirms before printing.

Tips

  • Always reference the original invoice number — standalone credit notes are valid but harder to audit.
  • For partial returns, never edit and re-save the original invoice — credit-note the difference.
  • Warning. A credit note dated after the GST filing of the original invoice still affects the current period's 3B. Watch this around month-end.