Approval terms do not permit indefinite invoice deferral
Where goods genuinely sent or taken on approval for sale or return are removed before supply, section 31(7) of the CGST Act requires an invoice before or at supply or six months from removal, whichever is earlier. Approval that completes the supply can therefore require invoicing well before six months. Conversely, leaving the customer decision pending does not let outstanding goods remain indefinitely on a delivery challan.
This guide was checked on 22 October 2026 using CBIC’s section 31(7) text, rule 55 on transportation without an invoice and Circular 10/10/2017-GST dated 18 October 2017. The circular explains approval-basis movement with a delivery challan and e-way bill wherever applicable. It must be read with the Act’s invoice backstop. This is a domestic goods-control guide, not an export, job-work or general branch-transfer exemption.
Prove that movement precedes the supply
Read the commercial terms and actual conduct. A completed sale is not transformed into a pre-supply approval movement by putting “sale or return” on the dispatch note. Transfers between distinct persons and other transactions independently constituting supply need their own analysis. Segregate those from stock genuinely sent for a customer’s decision. The examples assume genuine pre-supply movements and no separate supply trigger on initial removal.
Use a serialised delivery challan with the particulars required by rule 55 and the applicable movement documentation. Keep the consignment identity, date, quantities and destination aligned with physical dispatch. Check the current e-way bill and any applicable e-invoice requirements separately; this article does not prescribe a universal threshold or promise an exemption from them. A delivery challan records movement, while the later tax invoice records the relevant supply obligation.
Keep three quantity balances, not one customer balance
For each removal lot, show quantities approved/supplied, physically returned before supply, and still outstanding. Reconcile opening outstanding plus dispatches less supplies and actual returns to closing outstanding. A buyer’s email saying “not required” is not itself proof that the goods returned to the supplier. Retain inward receipt and transport evidence for the goods marked returned, and investigate shortages instead of clearing them through a balancing journal.
Link every partial approval invoice to the original challan and reduce only the affected units. Record each return against its own lot. If multiple deliveries go to one customer, the latest delivery date must not replace earlier removal dates. One consolidated receivable balance cannot expose which physical consignment is approaching its invoice limit.
Compute calendar months and retain the original date
The statutory period is six months, not a fixed 180-day period. Keep the six-calendar-month date alongside the actual supply date and select the earlier for invoice control. The illustrations avoid month-end ambiguity and assume no intervening change to the provision. An earlier internal reminder is useful, but label it as a reminder rather than the statutory date.
A return completed before supply and before the backstop is different from a return after an invoice has already become necessary. The former closes the relevant pre-supply movement on supported facts. For later goods returns, examine the current credit-note and tax-adjustment provisions separately; do not delete the original invoice or assume a commercial credit automatically reverses reported tax. The cases below deliberately do not calculate such later adjustments.
Reconcile the register to returns without inventing a tax rate
At month-end, extract lots approved in the month, lots reaching the statutory backstop and returns supported by inward records. Resolve required invoices before closing the reporting period. The figures below show quantities and exclusive commercial values only. Classification, taxable value adjustments, place of supply and the actual GST rate require separate verification; no hypothetical product rate is presented as current law.
Worked illustrations
These illustrations use fictional facts and expressly stated assumptions. Amounts are Indian rupees unless a different currency or unit is specified. They are independent examples, not findings about any actual client.
Illustrative example 1: acceptance before the backstop
Goods are removed on 10 October 2026 and genuine acceptance completes supply on 2 November 2026. The six-month control date is 10 April 2027. The earlier invoice event is 2 November 2026, so the supplier must invoice before or at that supply. Waiting until April would disregard the actual supply event.
Illustrative example 2: still awaiting a decision
Assume goods removed on 15 October 2026 remain with the intended buyer, unreturned and without an earlier completed supply. The six-month invoice backstop is 15 April 2027. No customer decision or later payment is needed to make that backstop relevant. Investigate and action the outstanding lot rather than carrying the challan forward indefinitely.
Illustrative example 3: partial approvals and returns
Assume 1,000 identical units at an agreed exclusive ₹500 each are removed on 20 October 2026. On 5 November, 300 are accepted and supplied: invoice value is ₹1,50,000. Another 200 are physically returned on 10 November with evidence. Outstanding quantity is 500. If these remain unreturned without an earlier supply, their six-month control date is 20 April 2027 and exclusive value ₹2,50,000. Do not re-invoice the first 300 or the 200 genuinely returned before supply.
Illustrative example 4: complete return before supply
Assume 100 units at ₹1,000 each are sent on genuine approval on 12 October 2026. All 100 are physically returned on 20 November before any supply, with matching challan and inward records. Closing outstanding is zero and the ₹1,00,000 movement closes as returned stock on these facts. This is different from cancelling an already completed sale or an invoice that was already due.
Illustrative example 5: each dispatch keeps its own clock
Lot A is removed on 15 October 2026 and lot B on 15 November 2026 to the same customer. With no earlier supply or return, their six-month dates are 15 April and 15 May 2027 respectively. A customer-wise register using only B’s removal date would wrongly delay A’s control by one month.
Illustrative example 6: 180 days is a different calculation
For removal on 15 October 2026, adding 180 days gives 13 April 2027. Adding six calendar months gives 15 April 2027. A 180-day reminder would be two days earlier in this example, which can be a useful internal alert, but it should not be described as the statutory six-month calculation.
Ten-step verification table
| Step | Verification | Evidence to retain |
|---|---|---|
| 1 | Confirm genuine approval terms before supply. | Agreement and actual transaction facts. |
| 2 | Exclude independently taxable movements. | Distinct-person and supply assessment. |
| 3 | Capture the original removal date and lot. | Dispatch and delivery challan. |
| 4 | Check movement-document requirements. | Challan, transport and applicable e-way bill evidence. |
| 5 | Record each acceptance that completes supply. | Customer confirmation and supply evidence. |
| 6 | Match partial invoices to quantities. | Invoice-to-challan allocation. |
| 7 | Substantiate actual returns before clearing stock. | Transport and inward receipt records. |
| 8 | Calculate each lot’s six-calendar-month date. | Date formula and earlier-supply comparison. |
| 9 | Resolve overdue or missing items. | Exception list and invoice/corrective action. |
| 10 | Reconcile quantities, values and reported invoices. | Stock register, ledger and return bridge. |
Sixteen practitioner FAQs
1. Does “sale or return” wording alone defer an invoice?
No. Establish that removal genuinely occurs before supply.
2. Can the supplier always wait six months after removal?
No. An earlier supply requires an earlier invoice.
3. Does awaiting payment extend the limit?
No. Payment delay does not rewrite section 31(7).
4. Is the period always 180 days?
No. The text specifies six months.
5. Which removal date controls multiple lots?
Keep the original date of each lot rather than the last dispatch date for that customer.
6. Can genuine approval movement use a delivery challan?
The circular explains that route with applicable movement documentation.
7. Does a challan remove e-way bill obligations?
No. Check whether an e-way bill is applicable to the movement.
8. Does this guide exempt branch transfers from GST?
No. Independently taxable distinct-person movements need separate treatment.
9. Must all units be invoiced when only some are supplied?
Allocate the actual partial supply and separately monitor the remainder’s backstop.
10. Is a buyer’s rejection email sufficient proof of physical return?
No. Retain evidence that the rejected goods actually returned.
11. Should a supported full pre-supply return stay outstanding?
No. Close the matched movement and preserve the evidence.
12. Can later deliveries reset older outstanding stock?
No. Retain lot-level dates and quantities.
13. Are post-invoice returns the same as pre-supply approval returns?
No. Examine the current credit-note and adjustment rules for the former.
14. Can an original invoice simply be deleted after a later return?
Do not erase the transaction trail; use the legally appropriate correction process.
15. Do the exclusive values establish a GST rate?
No. Rate, valuation adjustments and place of supply must be determined separately.
16. What is the strongest monthly control?
Reconcile every dispatched unit to an invoice, evidenced pre-supply return or dated outstanding exception.
Working-paper organisation
Keep the source documents, calculation and final conclusion together for the same entity and period. If using assureTax or other assureOffice tools, use only confirmed available functions and retain this evidence with the output.
Conclusion
Run the approval register as a lot and quantity reconciliation. Invoice actual supplies promptly, evidence physical returns and act on the original six-month dates for remaining goods; a challan should never become an undated holding place for unresolved stock.