Reverse Logistics in India: Returns Table and Tax Cut-Off

Reverse logistics is the flow of goods from the customer (or a later point in the chain) back to the seller, the maker or a processor. The goods end in one of a few outcomes: resold as they are, repacked and resold, repaired or refurbished, sent back to the supplier, or scrapped or recycled.

Transport is only one step. The part a stock team controls is what happens from the moment the goods are received: which status they get, where they sit, and which document goes with them.

Record each return by its condition on receipt, because the condition decides the stock status, the stock movement and the paperwork. This is our recommended routine, and it works for sales returns from customers.

The exact treatment depends on the original invoice and your registration.

A return entry records that goods came back and that money is owed or credited. It does not say the goods can be sold. Condition is a human judgement made at receiving, and the system should wait for it.

Accounting packages already split these ideas. The help for Tally.ERP 9, a legacy release of the Tally accounting software, lists sales returns (Rejections In) and purchase returns (Rejections Out) as separate inventory vouchers. We apply the same split inside the warehouse: Received, then Held, then Released to sellable stock or Written off.

A common worry is how to post damaged returns so stock goes down. The sale already reduced stock when you invoiced. The credit note settles the money. The damaged units simply never enter sellable stock.

Run three tests at receiving, each with a pass or fail:

• Match test. Item code, lot number and quantity agree with the original invoice line. Any difference means Held as disputed. See our goods receipt note guide for tolerances.
• Condition test. Seal, visible damage and expiry date checked and photographed. Pass only if the item is sealed and meets the minimum remaining shelf life you set. Anything else stays in hold.
• Release test. A named person, not the person who received it, approves the move to sellable stock.

Keep the original lot number on a returned item. If lot and batch numbers are confused in your records, lot number versus batch number explains which to use, and inventory discrepancy causes shows what happens to stock counts when returns are booked wrongly.

As of 5 November 2026, a credit note for returned goods must be declared in the GST return for the month you issue it, and no later than 30 November following the end of the financial year of the original supply, or the date you furnish the annual return (the yearly GST return, GSTR-9) for that year, whichever is earlier. This is set by section 34(2) of the CGST Act, published by the Central Board of Indirect Taxes and Customs (CBIC).

The deadline follows the financial year of the sale, not the date the goods come back. A credit note (the document a supplier issues to reduce an invoice) is allowed under section 34(1) where "the goods supplied are returned by the recipient".

Two worked examples, which are our illustrations:

Copies of the Act dated before 1 October 2022, such as the CBIC copy dated 1 January 2022, show September; the current text says 30 November (Finance Act 2022, section 102).

The proviso also matters. As of 1 November 2026, you cannot reduce your output tax liability (the GST you owe on your sales) through a credit note unless a registered recipient has reversed the input tax credit (ITC, the GST a buyer claims back on purchases) attributable to it, if availed. Section 126 of the Finance Act 2025 substituted this proviso with effect from 1 October 2025 (Notification 16/2025-Central Tax, 17 September 2025). From 1 November 2026, section 154 of the Finance Act 2026 adds post-supply discounts to section 34(1) (Notification 03/2026-Central Tax, 26 October 2026). It does not change the returns deadline.

Our recommendation: raise credit notes in the month the goods are accepted, and every October list returns still waiting for a decision. A credit note declared after the cut-off does not reduce your output tax, so the GST on that sale stays payable.

A return recovers resale value times the share you can resell, minus return freight, inspection and repacking. Calculate it before agreeing to collect a return, because low-value items often lose money.

Our model: net recovery = resale value × recovery rate − return freight − inspection − repacking.

With assumed inputs of a ₹1,000 item, a 70% recovery rate, ₹150 freight, ₹30 inspection and ₹20 repacking: ₹700 − ₹150 − ₹30 − ₹20 = ₹500. These inputs are examples; use your own.

With a ₹300 item and the same 70% recovery rate, ₹150 freight, ₹30 inspection and ₹20 repacking: ₹210 − ₹150 − ₹30 − ₹20 = ₹10 (our model with assumed inputs).

You can record returns with our purchase orders, warehouse transfers and multiple-warehouse stock records. As of November 2026, here is what applies to this routine.

• Hold, then release. Because we support multiple warehouses and warehouse transfers on our Basic plan, our recommendation is to set up a returns hold as its own warehouse. The transfer out of it is your release step.
• Lot, expiry and serial tracking. On our Enterprise plan, a returned item keeps its lot or batch number, expiry date and serial number. Our warehouse management feature picks the lots that expire first for lot- or batch-tracked items, and uses first-in, first-out (FIFO) picking for other items. Bin tracking is also on Enterprise.
• Barcodes, packing slips and alerts. All are on our Basic plan.

We are inventory software. Pickup, repair and recycling stay with your logistics and service partners; we keep the stock record they feed.

Every new account starts with a 15-day free trial with full access to all features and no credit card. Onboarding takes a minimum of two weeks, depending on data readiness and integrations. As of November 2026, Basic costs $199 a month billed annually, Advance $499 and Enterprise is custom-priced (pricing). Lot, serial and bin tracking need Enterprise. Book a demo with our team.