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A small-business owner sends goods on approval or for display and does not know which document should travel with them.
Rule 55 allows a delivery challan for movements that are not a supply at that moment. A tax invoice follows when the supply happens, and an e-way bill is still needed above ₹50,000.
Keep a DC series with date, consignee, goods, HSN, quantity, value, reason for movement, vehicle and signature, and track each challan until it is invoiced or returned.
Every challan closes as invoiced, returned or both, and challan, invoice and e-way bill values agree.
A delivery challan is the document that travels with goods when no sale has happened yet. Typical cases are goods sent on approval, goods sent to an exhibition or to another of your own locations, and gas tankers where the final quantity is not known at dispatch. It is not a tax invoice. When a sale does take place, you issue a tax invoice for what was actually sold.
The rules for challans are in Rule 55 of the CGST Rules.
What format should a delivery challan follow?
| Field | Example |
|---|---|
| Challan number (own series, up to 16 characters) | DC/26/0412 |
| Date of issue | 6 October 2026 |
| Consignor name, address and GSTIN | Your business |
| Consignee name, address and GSTIN (if registered) | The customer or branch |
| Description, HSN and quantity of goods | 50 pieces, HSN code |
| Taxable value | ₹85,000 |
| Tax rate and amount, if moved to a consignee | Shown for reference |
| Place of supply, for inter-state movement | State name |
| Reason for movement | Sent on approval |
| Vehicle number and signature | Filled at dispatch |
Make three copies: original for the consignee, duplicate for the transporter, triplicate for you.
When must you issue a full tax invoice instead of a challan?
Use a tax invoice straight away whenever the goods are being sold at dispatch. A challan is only for movements where the sale comes later or never comes.
For goods sent on approval, Section 31(7) of the CGST Act says the tax invoice is due when it becomes known that the supply has happened, or six months from removal, whichever is earlier. So a challan cannot sit open forever.
Does a challan movement still need an e-way bill?
Yes, in most cases. An e-way bill is needed for movement of goods worth more than ₹50,000, whether the reason is a sale, a return, approval or a branch transfer. The e-way bill carries the challan number and value in place of an invoice.
Worked example: goods on approval
A handicrafts wholesaler in Jaipur sends ₹85,000 of brassware to a Delhi retailer on approval under challan DC/26/0412 on 6 October. Because the value is above ₹50,000, an e-way bill is generated against the challan.
On 20 October the retailer keeps ₹60,000 worth and returns the rest.
| Item | Value |
|---|---|
| Sent on challan | ₹85,000 |
| Kept by retailer, tax invoice INV/26/0233 | ₹60,000 |
| GST at 18 percent on the invoice | ₹10,800 |
| Invoice total | ₹70,800 |
| Returned unbilled | ₹25,000 |
₹60,000 kept plus ₹25,000 returned equals ₹85,000, so the challan closes in full. The wholesaler’s stock register shows ₹25,000 back in stock, the sales register shows only INV/26/0233, and GSTR-1 for October reports ₹60,000 of taxable sales. The challan itself never reaches GSTR-1 as a sale.
A simple challan check at month-end
- List every open challan by number and date.
- For each, record what was invoiced and what came back.
- Flag any challan older than five months for goods on approval, so the six-month limit is not missed.
What to read next
- Next in this series: What is an e-way bill, and when do you need one?
- How challan, invoice and goods receipt line up: PO, GRN and invoice three-way matching
- When the e-way bill needs fixing: What does the e-way bill cancellation window mean?
- GST reconciliation software: GST outward reconciliation (GSTR-1 and GSTR-3B) leads the TransactIG GST roadmap.