Post each marketplace return as a Credit Note voucher against the original sales invoice, using a separate Sales Returns ledger and the same GST treatment as the original sale. Bring stock back only after quality check, book commission and fee reversals from the settlement report, and match the net deduction in the marketplace ledger. Treat RTO, damaged and lost returns separately.
Know which return you are booking
A marketplace return is not one event. Each type changes the entry you post, so tag every line before you open Tally.
- Customer return: the order was delivered and the customer sent it back. This needs a credit note against the original invoice. Stock returns only after quality check.
- RTO (return to origin): the shipment was not delivered and came back to you. Whether you cancel the invoice or issue a credit note depends on your invoicing flow and your tax adviser's view, so confirm this once and apply it consistently.
- Partial return: one or more items from a multi-item order. The credit note must cover only those items and their tax.
- Lost or damaged in reverse transit: the sale is reversed, but the stock never reaches you. This becomes a recovery claim, not a normal restock.
Set up ledgers and masters first
Most return errors start with a thin chart of accounts. Before posting credit notes, check that you have these in place:
- A party ledger for each marketplace, under Sundry Debtors, so receivables and deductions are visible per channel.
- Separate Sales - Marketplace and Sales Returns - Marketplace ledgers under Sales Accounts. Do not net returns directly against sales.
- Output GST ledgers as already used on your sales invoices.
- Expense ledgers for commission, fixed or closing fees, shipping and fulfilment, and reverse logistics.
- A ledger or stock location for returned stock pending quality check, and another for damaged or non-saleable stock.
- A TCS receivable ledger if your adviser treats marketplace TCS that way. Confirm the treatment and the applicable rate with your tax adviser and the marketplace's statements.
Use the order ID and return ID in every voucher reference or narration. Without them, matching later becomes guesswork.
Post the credit note step by step
- Pull the return line from the marketplace return report: order ID, original invoice number and date, SKU, quantity, return date and amount.
- Open a Credit Note voucher in Tally. Menu paths differ slightly between Tally Prime and older versions, but the voucher type is the same.
- Select the same party you used on the original sales entry, so the credit note mirrors the sale.
- Reference the original invoice number and date. In GST-enabled Tally this feeds your credit note reporting.
- Use the Sales Returns ledger and the GST treatment of the original invoice. Do not re-key tax from memory. Copy it from the invoice.
- Add stock details in item mode if you track inventory: item, quantity and the location where it will land.
- Add narration with order ID and return ID, then check the GST reports to confirm the credit note appears where expected.
Credit notes under GST have a time limit and conditions. Check Section 34 of the CGST Act and current notifications, or ask your tax adviser, before posting returns that cross a financial year.
Treat restock, damage and RTO stock correctly
The accounting entry for the sale reversal and the stock movement are two separate decisions.
- Saleable on receipt: bring stock in at original cost to your main location.
- Pending quality check: take it into a holding location so it is not available to sell.
- Damaged or not resaleable: move to a damaged-stock location and write it off through a stock journal once you decide it is unrecoverable.
- Never received: do not bring stock in. Raise a claim with the marketplace, and track it until it is paid or rejected.
Claim eligibility, time windows and compensation rules sit in your seller agreement and the marketplace's current policy. Check those documents instead of assuming a standard rule.
Reverse commission and fees, then match the settlement
The marketplace may reverse some or all of the commission on a returned order, and may charge reverse shipping. What applies depends on your agreed terms and rate card, which can change, so confirm the latest version with your account manager or seller panel.
Book these from the settlement report line, not from estimates:
- Commission or fee reversal: debit the marketplace ledger and credit the relevant expense ledger, splitting GST the way you booked the original charge.
- Reverse logistics or return handling charges: debit the expense ledger and credit the marketplace ledger.
- TCS adjustments, if the settlement shows them: follow your adviser's treatment.
The net of the credit note, fee reversals and return charges is what the marketplace deducts from a later payout. If you work on Myntra, a tool like MarketplaceMetrics by Fundle can review the Excel reports and flag where a deduction does not match your terms. Other marketplaces are in scope discussion.
Month-end checks that catch return errors
- Count of credit notes in Tally against returns in the marketplace report for the month.
- Credit notes without an original invoice reference, or with a different tax amount from the invoice.
- Sales Returns ledger total against return deductions in settlements, with timing differences listed.
- Returns pending quality check for more than your internal limit.
- Lost or damaged returns with no open claim, and open claims with no follow-up date.
- Marketplace ledger balance against the latest settlement statement.
This is the point where manual reconciliation gets slow on high-volume catalogues. Fundle's MarketplaceMetrics tracks returns and recovery cases alongside reconciliation, so unresolved claims do not sit in a spreadsheet. Pricing is a tailored quote.
Worked example
Illustrative example only. All figures are made up to show the mechanics, not actual rates or fees.
A customer returns one item from an order with a taxable value of ₹1,000 and GST of ₹120 as per the original invoice, so the invoice total was ₹1,120. The marketplace later reverses ₹100 of commission (including GST) and charges ₹60 for reverse logistics.
| Entry | Debit | Credit |
|---|---|---|
| Credit Note: Sales Returns - Marketplace | ₹1,000 | |
| Credit Note: Output GST (as per original invoice) | ₹120 | |
| Credit Note: Marketplace party ledger | ₹1,120 | |
| Commission reversal: Marketplace party ledger | ₹100 | |
| Commission reversal: Commission expense (and GST as booked) | ₹100 | |
| Reverse logistics: Reverse logistics expense | ₹60 | |
| Reverse logistics: Marketplace party ledger | ₹60 |
Net effect on the marketplace ledger: ₹1,120 credit + ₹60 credit − ₹100 debit = ₹1,080 less receivable. Your next settlement should show a deduction of about ₹1,080 for this order. If it shows a different figure, check the fee terms before accepting it.
Questions and answers
Do I need a credit note for every marketplace return?
Generally every return that reverses a sale you invoiced needs a documented reversal, usually a credit note against the original invoice. RTO cases may be handled differently depending on invoicing flow. Confirm the treatment with your tax adviser and apply it consistently.
Should I use a Sales Returns ledger or reduce the Sales ledger?
Use a separate Sales Returns ledger under Sales Accounts. It keeps gross sales visible, lets you track the return rate by marketplace, and makes it easier to reconcile against settlement reports and return data month by month.
How do I book an RTO where the invoice was already raised?
Decide with your tax adviser whether such cases are cancelled invoices or credit notes, then follow one rule. In Tally, reverse the sale with the chosen voucher, reference the original invoice, and handle stock separately depending on whether goods physically returned.
What if the return happens after the financial year ends?
Credit notes under GST are subject to time limits and conditions, found in Section 34 of the CGST Act and later notifications. Check the current rule with your tax adviser before posting, and keep the return report and order references as support.