Size exchange and credit notes under GST
The most common transaction after a sale in a shoe shop. Here is how to record it so that stock, cash and GST all stay right.
In short: an exchange is two things — the first pair coming back, and a second pair going out. Record the return with a credit note linked to the original bill, at that bill's GST rate, and bill the new pair at today's rate. Do not edit or delete the original bill.
Step by step
- Find the original bill — by its number, the customer's mobile or the pair's barcode. Check it is within your exchange period.
- Take the pair back and decide where it goes: back to sellable stock, to damaged, or to seconds.
- Issue a credit note for the returned pair. It carries its own number and date, the original bill's number and date, and the value and GST of that pair exactly as they were billed.
- Bill the new pair on a fresh invoice. Its GST is worked out on its own sale value, by today's rule.
- Settle the difference: the customer pays more, gets a refund, or keeps the balance as credit for the next visit.
Worked example
A customer bought a size 8 at ₹1,999 (GST included, 5%) and returns to change it for a size 9 of another article at ₹2,299.
| Document | Amount | Sale value | GST 5% |
|---|---|---|---|
| Credit note for the size 8 | − ₹1,999.00 | − ₹1,903.80 | − ₹95.20 |
| New bill for the size 9 | ₹2,299.00 | ₹2,189.52 | ₹109.48 |
| Customer pays | ₹300.00 |
When the GST rate has changed in between
The credit note must reverse the tax that was actually charged. If the first pair was billed before 22 September 2025 at 12% and comes back after that date, the credit note is at 12%; the replacement pair is billed at today's rate. Mixing the two — refunding at the new rate — leaves your return short or over.
Same article, same price
Even when only the size changes and no money moves, the stock has changed: one variant came in and another went out. Record it as an exchange so that the size-wise stock stays correct. A shop that swaps pairs without recording them ends up with a stock count that does not match the shelf.
Credit notes in your GST return
- A credit note reduces your tax liability in the month you issue it.
- Credit notes to registered buyers (B2B) are reported separately in GSTR-1; for unregistered customers (B2C) they reduce the B2C sales figure for the period.
- The law sets a time limit: a credit note for a sale must be declared by 30 November after the end of the financial year of that sale, or the date of the annual return if that is earlier. After that you can still refund the customer, but not reduce the tax.
Shop policy on the bill
Print your exchange terms on every bill — for example the number of days, “with bill only”, and that pairs must be unworn. It saves arguments at the counter. Defective pairs are a separate matter: treat them as a warranty claim and raise the claim on your supplier.
In Padam
The exchange is one flow: find the bill, pick the line, pick the new size, colour or article. Padam makes the credit note at the original rate, bills the new pair, works out the difference, and prints the exchange on the new bill, linked to the original. An exchange outside your window needs the owner's approval.
General information, not tax or legal advice. Last reviewed 16 November 2026. Rates and rules change — confirm with your chartered accountant before you act on it.
One tap, both documents
Padam records the return and the new sale together, at the right rates, with stock moved for both sizes.