Enable credit notes in Tally's features, create a separate Sales Returns ledger and a ledger for each marketplace, then pass a Credit Note voucher against the original invoice. Enter the returned items, let the GST ledgers reverse tax, add the order and return IDs in the narration, and match each credit note to the return deduction in the settlement report.
When a marketplace return needs a credit note
A credit note reverses all or part of a sale you have already booked. For marketplace sales, it reduces your sales, reverses the output GST and reduces what the marketplace owes you. Whether you need one depends on what you booked and when.
- Customer return: the sale was booked and delivered, then returned. Pass a credit note.
- RTO (return to origin): if you booked the sale at dispatch, reverse it with a credit note. If you book sales only on delivery, there is no sale to reverse, and you only restore stock.
- Cancellation before dispatch: usually no sale voucher exists, so there is nothing to reverse.
- Partial return or price adjustment: pass a credit note only for the value or quantity affected.
Your sales booking policy decides the treatment. Confirm the GST treatment and the time limits for credit notes with your chartered accountant, because the rules and who documents the return can differ by arrangement.
Set up ledgers and features before you post
Do the one-time setup first, so every return follows the same pattern.
- Enable credit notes: in the F11 features for accounting and inventory, make sure debit and credit notes are switched on. The menu path varies by Tally version.
- Sales Returns ledger: create a separate ledger such as Sales Returns - Marketplace, instead of posting negative amounts to Sales. This keeps gross and net sales visible.
- Party ledgers: keep one ledger per marketplace under Sundry Debtors, the same one you use for sales.
- GST ledgers: use the same output tax ledgers as your sales vouchers, so the reversal lands in the right place.
- Numbering series: consider a separate credit note series per marketplace, for example CN/MYN, so audits and searches are easier.
- Stock location: create a separate godown for returns awaiting quality check, so damaged goods do not inflate saleable stock.
Step-by-step: pass the credit note voucher
- Go to Gateway of Tally, then Vouchers, and select Credit Note. The shortcut is Ctrl+F8 in most versions.
- Set the date according to your policy, usually the date the return was received or accepted.
- Choose the marketplace ledger as the party account.
- Enter the original invoice number and date in the reference or original sale details, so the GST return can link the two.
- Select the returned stock items and quantity. Use the same rate as the original invoice, not the refund amount shown on a customer screen.
- Choose the Sales Returns ledger, and check that the GST ledgers calculate the same tax as the original sale.
- Add a narration with the order ID, return ID and AWB number.
- Save, then check that stock went to the correct godown, saleable or held for inspection.
Do not post the credit note from the customer's refund alone. Post it from the return record, and then reconcile it to the settlement.
Handle RTO, partial returns and fees
| Scenario | Tally treatment | What to check |
|---|---|---|
| Full customer return | Credit note for all items on the invoice | Return status is accepted in the marketplace report |
| Partial return | Credit note for returned items only | Quantity and tax match the original line |
| RTO after dispatch booking | Credit note, stock back to returns godown | Goods actually received at your warehouse |
| Return rejected or damaged | Hold the stock separately, and raise a claim if the marketplace is at fault | Return quality check evidence and claim window |
Marketplace fees on returns, such as commission adjustments or reverse shipping, appear in the settlement report. Do not assume the rates. Check them against your seller agreement and the current rate card, and book fee entries as your accountant advises. Any tax collected at source on the sale is also adjusted through the marketplace, so confirm the latest rules with your tax adviser.
Match credit notes to the settlement report
A credit note proves the return in your books. The settlement report proves what the marketplace deducted. You need both to agree.
- Export the returns and settlement reports for the same period.
- Match each credit note to a return line using order ID or return ID.
- Compare the credit note value with the amount deducted. Differences usually come from fee reversals, partial deductions or timing.
- List returns that were deducted but not received, or received but not deducted.
- Raise claims for unreceived, wrong or damaged returns inside the marketplace's claim window, which you should confirm in your agreement.
Doing this by hand across thousands of orders is slow. MarketplaceMetrics by Fundle reconciles marketplace sales and settlements, checks fees against agreed terms, and tracks returns and recovery cases. Myntra Excel reports are reviewed, and other marketplaces are in scope discussion.
Common mistakes to avoid
- Posting returns as negative sales, which hides your real return rate.
- Using the refunded amount instead of the original invoice value and tax.
- Leaving out the original invoice reference, which complicates GST reconciliation.
- Restocking damaged returns as saleable inventory.
- Booking a credit note for an RTO that was never received back.
- Missing the claim window because returns were reviewed only at month end.
Worked example
Illustrative example only. Figures are not real rates or results.
A brand booked a sale to a marketplace ledger with a taxable value of ₹1,000 and GST of ₹120 as per the original invoice, so the invoice total was ₹1,120. The customer returned the item and the marketplace accepted it.
| Ledger | Dr / Cr | Amount (₹, illustrative) |
|---|---|---|
| Sales Returns - Marketplace | Dr | 1,000 |
| Output GST (as on original invoice) | Dr | 120 |
| Marketplace party ledger | Cr | 1,120 |
In the settlement report, the marketplace deducted ₹1,120 for the return and also charged ₹85 as a return-related fee (illustrative). The credit note matches the ₹1,120 deduction. The ₹85 is a separate item to verify against your rate card and agreed terms before you accept it.
Questions and answers
Can I pass a credit note in Tally without the original invoice?
Technically yes, but you should not. Reference the original invoice number and date so the GST return can link the credit note to the sale. Without that link, reconciliation and audit queries become harder. Confirm requirements with your chartered accountant.
Should I pass a credit note for every RTO?
Only if you booked the sale at dispatch. If your policy books sales on delivery, an RTO shipment never became a sale, so you just bring stock back. Apply one policy consistently and confirm it with your accountant.
Which date should a marketplace credit note carry?
Most brands use the date the return is received or accepted, as per their accounting policy. The date can affect which GST period the reversal falls in, so confirm the correct date and the latest time limits for credit notes with your tax adviser.
Why does my credit note not match the settlement deduction?
Common reasons are partial returns, fee or commission reversals, reverse shipping charges, timing differences across settlement cycles, or returns deducted before receipt. Match by order ID, then check each difference against your seller agreement and the current rate card.