Purchase Returns — Credit Notes from Supplier
Recording purchase returns using Alt+F9 Credit Note — Sunrise Retail's April 22 return to TechWorld
Module 11 of 31 — Tally Prime. Purchase returns — recording supplier credit notes and ITC reversal. Duration: 40 min.
Prerequisites: Module 09 — Purchase Voucher
Learning Objectives
- Understand the difference between Debit Note and Credit Note in the purchase context
- Record a purchase return against the original purchase invoice using
Alt+F9 - Understand ITC reversal impact on GSTR-3B
- Enter Sunrise Retail's April 22 return of 10 defective phones to TechWorld Distributors
Purchase Return — The Concept
When goods purchased from a supplier are returned (defective, wrong specification, excess), two things happen:
- Stock is sent back → inventory reduces
- Supplier's outstanding reduces → you owe them less
From Sunrise Retail's perspective: We raise a Debit Note to the supplier (we are debiting their account — reducing what we owe them).
From TechWorld's perspective: They raise a Credit Note to us (they credit our account — reducing what we owe).
In Tally Prime: Use Alt+F9 — this opens the Credit Note voucher. (Tally labels it "Credit Note" for purchase returns — it credits the purchase ledger, reversing the original purchase.)
Tally Key Sequence
Alt+F9 is the dedicated shortcut for Credit Note (purchase return) in Tally Prime 4.x. Do not confuse with F9 (Purchase voucher). You can also navigate: Vouchers → top toolbar → Credit Note.
Sunrise Retail — April 22: Return 10 Defective Phones to TechWorld Distributors
On April 22, Sunrise Retail discovers that 10 of the 100 Samsung phones received from TechWorld Distributors, Mumbai (GSTIN: 27AABCT1234F1ZP) are defective (cracked screens on arrival). The goods are returned immediately.
- Original purchase: Invoice TW-2025-0183, dated April 5 — 100 phones × ₹12,000 = ₹12,00,000 + IGST 18% (Maharashtra → Telangana, interstate)
- Return: 10 phones × ₹12,000 = ₹1,20,000 + IGST ₹21,600
Credit Note Entry
New ledger during voucher entry: If "Purchase — Mobile Phones Return" is not yet created, press Alt+C while in the ledger field to create it on the fly without leaving the voucher.
Tally Screen ASCII — Credit Note (Alt+F9)
What Tally Records Automatically
After Ctrl+A (save), Tally posts the following:
Journal entry:
Stock movement:
Outstanding ledger — TechWorld Distributors:
ITC Reversal in GSTR-3B
The Input IGST reversal of ₹21,600 flows into Sunrise Retail's GSTR-3B automatically:
Tally links the reversal to the original voucher automatically when you use "Against Ref" correctly.
GST on Purchase Returns — Key Rules
Time limit: The credit note must be issued before the earlier of — (a) 30th November of the following financial year, or (b) the date of filing the annual return. Late credit notes cannot be adjusted.
- Link to original invoice: Always enter the original invoice number in "Against Ref" — this ensures correct ITC reversal in GSTR-3B.
- GSTR-1 impact (TechWorld's side): TechWorld reduces their outward supply in their GSTR-1 by issuing a credit note. This reduces Sunrise Retail's ITC in GSTR-2B.
- ITC reversal: Sunrise Retail reverses ITC proportionally for returned goods — automated by Tally when vouchers are properly linked.
Practice Exercise
Exercise: Sunrise Retail also returns 3 laptop bags purchased from Office Supplies Bangalore on April 30 (original purchase April 16, Invoice OS-2025-0789, rate ₹1,500 each, IGST 18%). Record the purchase return.
Show Solution
Net outstanding to Office Supplies reduces by ₹5,310.
Key Terms
| Term | Meaning |
|---|---|
| Credit Note (Alt+F9) | Tally voucher for purchase returns — reverses purchase and ITC |
| Debit Note (buyer's document) | Sunrise Retail's own document acknowledging the return |
| Against Ref | Links return to original purchase invoice — ensures correct ITC reversal |
| ITC Reversal | Reducing Input Tax Credit when goods purchased are returned |
| Net Payable | Outstanding after deducting return amount from original invoice |
Module Summary
- Purchase returns use
Alt+F9(Credit Note) in Tally — must be linked via "Against Ref" to the original purchase - Sunrise Retail April 22: 10 defective phones returned to TechWorld Distributors → reduces payable by ₹1,41,600, reverses Input IGST ₹21,600
- Net IGST ITC after return: ₹2,16,000 − ₹21,600 = ₹1,94,400
- TechWorld outstanding reduces from ₹14,16,000 to ₹12,74,400
- ITC reversal flows automatically into GSTR-3B Section 4(A)(5) when linked correctly
Checklist before moving on:
-
Alt+F9shortcut confirmed - Credit Note linked to TW-2025-0183 via Against Ref
- Stock shows 90 phones net (100 received − 10 returned)
- TechWorld outstanding = ₹12,74,400
- GSTR-3B IGST ITC net = ₹1,94,400
Quick Quiz
1. In Tally Prime, purchase return is recorded using:
- a) F9 (Purchase)
- b) Alt+F9 (Credit Note)
- c) Alt+F8 (Debit Note)
- d) F7 (Journal)
Answer
b) Alt+F9 — Credit Note is the correct voucher type for purchase returns in Tally Prime 4.x.
2. After the April 22 return of 10 phones, net Input IGST available to Sunrise Retail is:
- a) ₹2,16,000
- b) ₹21,600
- c) ₹1,94,400
- d) ₹2,37,600
Answer
c) ₹1,94,400 — original ITC ₹2,16,000 (100 phones × ₹12,000 × 18%) minus reversal ₹21,600 (10 phones × ₹12,000 × 18%) = ₹1,94,400.
3. After the return, TechWorld Distributors' outstanding balance is:
- a) ₹14,16,000
- b) ₹1,41,600
- c) ₹12,74,400
- d) ₹11,32,800
Answer
c) ₹12,74,400 — original invoice ₹14,16,000 minus return credit note ₹1,41,600.
Next: Module 12 — Sales Returns: Debit Notes for Customer Returns