Delivery Challan: Meaning, Uses and Format

By Team TranZact | Published on Jun 11, 2023

A delivery challan is important in the ongoing communication between the buyer and the vendor under GST regulations.

As per Section 31 of the CGST Act of 2017, everyone registered to provide or transport taxable goods or products must provide an invoice with the amount and other relevant information. Likewise, a delivery challan is also necessary for the shipping and transportation of products.

Let's understand what is delivery challan, the delivery challan format under GST, the procedure for issuing a delivery challan, and more information about this crucial document.

What Is Delivery Challan?

In simple terms, a delivery challan, also known as a dispatch challan or a delivery slip, is a record that lists the description, state, and quantity of goods delivered.

This challan's primary functions are to recognize the delivery of the items to the customer. The document also contains information like the goods' recipient, locations, and delivery date. As per the rules, creating a tax invoice is required for most supplies of goods and services.

However, a delivery challan under GST may be generated in some circumstances where no actual sale of goods or services occurs. An invoice for taxes, for instance, is not required when moving items between warehouses, but still, a delivery challan is sent with the shipped goods.

Now that you know what is delivery challan, let's see when it's issued. If you're wondering, is delivery challan mandatory, you will find an answer here.

When Is Delivery Challan Issued?

In the following circumstances, a delivery challan may be issued under the GST law:

When you need to calculate the number of products to be sent.
When the recipient of the goods is unaware of the supplier's business location.
If items are being provided after approval.
Whenever items are transported for work.
You may send a delivery challan in cases where the Central Board of Excise and Customs (CBEC) has made it mandatory.
Where the vendor is unable to provide a tax invoice at the moment the goods are moved from the warehouse. For example when goods are sent for reasons other than supply, or when the quantity of goods is unknown.

Note - The provider must produce a tax invoice on the products after delivering them to the recipient using a delivery challan.

Delivery Challan Format

The delivery challan format may vary from business to business, but here are some mandatory aspects to include in the document:

The delivery challan format under GST must consist of a predetermined serial number.
The date of issuance of the delivery challan.
The consignor's logo, name, address, GSTIN, and CIN (Challan Identification Number) should all be included in the delivery challan's header.
The challan format should also consist of the consignee's name, address, and GSTIN, or Unique Identity Number if registered.
The product description and the Harmonized System of Nomenclature (HSN) code.
Quantity (provisional, where it is unknown how much will be given).
The price per unit of the product, the overall sum (derived by dividing the price by the number of units), any discounts provided, and the total taxable value.
GST amount (CGST, IGST, and intrastate transaction values).
The supply location, in the event of an interstate movement.
The authorized person's signature.

So far, we have seen what is delivery challan, the important fields in the delivery challan format, and when it's supposed to be issued within a business. In the next section, we have highlighted the procedure for issuing delivery challan.

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Procedure for Issuing Delivery Challan

The delivery challan must be sent in three copies in accordance with section 55 (2) of the CGST Rules.

Usually, the delivery challan in GST needs to be printed at least in three copies, but sometimes a fourth copy might be required. These four copies fulfill the four tasks listed below:

The accounting department receives the first copy.
The sales division receives the second copy.
The purchaser receives the third copy.
The last, i.e., the store department, must keep the fourth copy for record-keeping purposes.

As we saw earlier, a challan is delivered with the shipped products, even though it may not always result in sales. Read the next section, which explains the rules of the delivery challan section under GST, to understand this scenario better.

GST Rules on Delivery Challan

According to the requirements of Section 31 of the CGST Act, it's important to provide a tax invoice when a registered taxpayer plans to transport goods from one place of supply to another.

The tax invoice includes information about the invoice value, the description of the delivered items, their quantities, rates, and amounts, as well as the GST that applies to them.

In some circumstances, the transportation does not result in a sale; hence no tax invoice is generated. In these certain circumstances, a delivery challan is issued in place of a tax invoice.

A delivery challan under GST or delivery slip is thus a document that authorizes the transfer of goods from one location to another. Delivery challans must be issued in three copies, as mentioned above.

On the other hand, businesses may also issue a document known as a ‘returnable challan'. These are typically used when goods or assets are not sold but loaned, rented, or temporarily transferred. These documents help ensure proper tracking and accountability for the return process.

Retention Rules of Delivery Challan Section Under GST

Every registered person is expected to retain and maintain books of account. This includes retaining delivery challans, for a period of 72 months following the due date of submitting an annual return for the relevant year, in accordance with section 36 of the CGST Act.

Difference Between Delivery Challan and Tax Invoice

The key difference between a delivery challan and a tax invoice lies in their purpose and legal implications.

Here's a detailed overview of the differences between a delivery challan and a tax invoice:

Delivery Challan	Tax Invoice
A delivery challan in GST does not include documentation of ownership or obligations under the law.	A tax invoice contains documentation of ownership and legal obligations.
Demonstrates that the client has acknowledged receiving the products.	Displays the goods' true value.
Could perhaps lead to a sale or not.	It demonstrates that a sale transaction actually took place.
Displays the price of a certain product but not the total sale amount.	Shows the items' true value, including any relevant taxes.
A delivery challan cannot be used as the foundation for an input tax credit claim.	A tax invoice can be used as the basis for an input tax credit claim.
QR Code and e-invoicing features will not be applicable.	The provisions for e-invoicing and QR codes shall be applicable.

TranZact Can Help You With Creating and Maintaining Delivery Challans

It's now crucial that every successful organization cultivates a culture of record-keeping. Books of accounts and other concerned documents must be kept up to date when keeping records. Delivery challan is one example of such a document.

It's also important to keep in mind that a delivery challan needs to have a serial number. This is done so that a challan's serial number can be used to identify and locate it quickly. In cases where the recipient of the merchandise is not registered, the delivery challan should also include the company's address.

Where Rule 55A of CGST Rules inserted with effect from 23-1-2018 does not require a person to carry an e-way bill, and where a tax invoice or Bill of Supply is not required, a delivery challan should be included.

You can create a delivery challan in GST using TranZact's automated solution. You can also create several other important documents with professional formats on TranZact's cloud-based and GST-compliant platform.

Automated document creation helps you to save time and improve supplier relationships significantly. TranZact is an expert business digitization software that focuses on streamlining transactions, production, inventory, and material requirements planning for SME businesses.

FAQs on Delivery Challan-

1. What is the difference between an e-way bill and a delivery challan?

An e-way bill is a digital document generated for the movement of goods worth a certain value, serving as evidence of tax compliance. On the other hand, a delivery challan is a document used to record the transfer of goods from one place to another and serves as proof of delivery without tax-related information.

2. What is a delivery challan?

A delivery challan is a document created when goods are required to be transported from one location to another for various reasons. The outcome of this transfer may or may not lead to sales.

3. Is delivery challan mandatory?

In certain cases, such as for the movement of goods without the issuance of a tax invoice, a delivery challan may be mandatory to serve as proof of delivery and for compliance with transportation regulations.

4. What is written on a delivery challan?

A delivery challan typically includes details such as the quantity, description, and value of the goods being transported, but does not contain tax-related information. The format of a delivery challan, may, however, vary from business to business.

5. How to generate an e-way bill for delivery challan?

The GST portal allows any registered transporter or taxpayer to create an e-way bill. You are required to go to the GST portal or an Invoice Registration Portal (IRP), enter the required details and generate an e-way bill. Documents like a tax invoice, a bill of sale, and a delivery challan, can be included when generating an e-way bill.

6. How is an e-way bill different from a delivery challan?

The delivery challan is provided by the supplier or sender of the goods, but the e-way Bill number (EBN) is automatically generated when a GST invoice is created. The EBN will then be listed on the delivery challan, and the transporter can use this EBN to follow the progress of the goods using it.

7. What is the difference between a delivery challan and an invoice?

The invoice serves as the official record of the transfer of ownership of the products or services, together with all the associated risks and liabilities; it also documents the true market value of the commodities. The delivery challan only demonstrates that the consumer has acknowledged receiving the items; it does not demonstrate their legal obligations or ownership.

8. What is the difference between a delivery note and a delivery challan?

A delivery note is only a piece of paper that comes with a package of goods. Contrarily, delivery challans are issued when delivering items to a customer, internal staff, or vendor and may have an effect on inventory levels because they reduce inventory stock.