Delivery Challan vs Invoice in India: When to Use Each
In India, a tax invoice bills a taxable supply and supports GST and the buyer's input tax credit. A delivery challan is used when goods move without a tax invoice, in cases permitted under CGST Rule 55, such as job work or movement otherwise than by way of supply. A later supply still requires a tax invoice.
A delivery challan is an Indian GST concept. Outside India, businesses often send goods with a delivery note, which does a similar job of describing the goods moving, but the rules below apply only to India. If you're not in India, the delivery-note comparison near the end is the part for you.
What a tax invoice does under GST
A tax invoice is the supplier's formal bill for a taxable supply. Under GST it records the value of the supply and the tax charged on it, and it's the document the buyer generally relies on to claim input tax credit.
When a tax invoice is due depends on the transaction. For goods, the CGST Act generally ties it to the removal or delivery of the goods for supply (CGST Act, section 31). So in an ordinary sale, the tax invoice travels with the goods.
For a plain-language comparison of invoices with quotations and proforma invoices, see quotation vs proforma invoice vs invoice.
What a delivery challan is
A delivery challan is a document that accompanies goods when they move without a tax invoice. It identifies the sender (consigner), the receiver (consignee), the goods and their quantity and value, but it doesn't bill anyone.
Rule 55 of the CGST Rules, 2017 sets out when a consigner may issue a delivery challan "in lieu of invoice" at the time goods are removed for transport, and what it must contain (CGST Rules, rule 55, CBIC).
When a delivery challan may be used
Rule 55(1) lists four situations where a delivery challan may be issued instead of an invoice:
- Liquid gas where the quantity isn't known at removal. The exact quantity supplied is only known later.
- Goods sent for job work. For example, sending parts to another business for plating, machining or assembly, with the goods coming back to you.
- Movement for reasons other than by way of supply. The goods move, but they aren't being sold, such as goods sent for repair or to an exhibition. Be careful with transfers between your own GST registrations in different states, which can count as a supply. Check with your adviser.
- Other supplies notified by the Board. The Central Board of Indirect Taxes and Customs (CBIC) can add cases by notification.
There's also a fifth practical case. Rule 55(4) covers goods moved for supply to the recipient where the tax invoice couldn't be issued at the time of removal. The supplier must then issue a tax invoice after delivery.
Delivery challan vs tax invoice: comparison
| Point | Delivery challan | Tax invoice |
|---|---|---|
| Purpose | Accompanies goods moving without an invoice | Bills a taxable supply |
| Typical situations | Job work, movement not by way of supply, liquid gas of unknown quantity, notified cases | An ordinary sale of goods or services |
| Who receives it | The consignee, such as a job worker, branch or customer | The buyer |
| Requests payment? | No | Yes |
| GST and input tax credit | Shows tax details only where the movement is for supply. It doesn't support an input tax credit claim the way a tax invoice does | Records the GST charged and is the buyer's basis for claiming input tax credit |
| When issued | At removal of goods, in the cases Rule 55 allows | At the time the CGST Act sets for the supply |
Delivery challan vs e-way bill
They aren't substitutes. A delivery challan is the document that travels with the goods. The e-way bill is a separate declaration on the GST system. Rule 55(3) says that where goods are transported on a delivery challan in lieu of an invoice, the movement must be declared as specified in rule 138, the e-way bill rule. Whether an e-way bill is needed for a particular movement depends on rule 138 itself, so check it for your case.
What to include on a delivery challan
Rule 55(1) requires a delivery challan to be serially numbered, with no more than 16 characters, in one or more series. It must contain:
- Date and number of the delivery challan
- Name, address and GSTIN of the consigner, if registered
- Name, address and GSTIN or Unique Identity Number of the consignee, if registered
- HSN code and description of the goods
- Quantity (provisional, where the exact quantity isn't known)
- Taxable value
- Tax rate and tax amount (central tax, State tax, integrated tax, Union territory tax or cess), where the transportation is for supply to the consignee
- Place of supply, for inter-State movement
- Signature
Rule 55(2) adds that for a supply of goods, the challan is prepared in triplicate: original for consignee, duplicate for transporter and triplicate for consigner.
After delivery: when a tax invoice is still needed
A challan doesn't replace the invoice when there's a sale. Under Rule 55(4), if goods were moved for supply but the tax invoice couldn't be issued at removal, the supplier issues the tax invoice after delivery.
Rule 55(5) covers goods sent in semi knocked down (SKD) or completely knocked down (CKD) condition, or in batches or lots. The "batches or lots" wording was inserted from 4 September 2018 by Notification No. 39/2018-Central Tax. In those cases:
- The supplier issues the complete invoice before the first consignment.
- Each later consignment goes with a delivery challan referencing that invoice, plus a certified copy of the invoice.
- The original invoice goes with the last consignment.
A fictional example
The businesses here are fictional, and so are the two movements.
Northfield Components is a GST-registered manufacturer in India. It sends 500 unfinished mounting brackets (Part No. NB-200) to a fictional job worker for plating. The brackets will come back to Northfield, so this is job work. Northfield issues a delivery challan listing the brackets, their HSN code, quantity and value. No tax invoice is raised for this movement.
When the plated brackets come back, Northfield sells 200 of them to Harbor Line Fabrication, the buyer from our purchase order vs invoice example. That's a supply, so the brackets travel with a tax invoice that Harbor Line can use for its input tax credit.
Same product, two different movements, two different documents.
Delivery challan vs packing list
A packing list describes what's inside each package: items, quantities and weights. It helps the receiver and the transporter check a shipment. It doesn't replace a delivery challan or a tax invoice. A shipment can carry a packing list alongside whichever of those the movement needs.
Outside India, a delivery note plays a role close to a delivery challan's. It confirms what was dispatched and delivered, while the invoice does the billing.
How to create these documents in eazmybiz
eazmybiz is a web app for business documents. It isn't accounting software. It covers each document in this guide:
- Delivery challans: create one with the delivery challan generator when goods move without an invoice. Add Bill to and Ship to addresses, item lines with HSN codes, and optional transporter, LR and vehicle details on the print. GST-regular companies in India see GST % on lines. Other companies see a tax percent. See create and issue a delivery challan.
- Gate passes: record the challan number on a material gate pass when the goods leave your premises.
- Tax invoices: issue GST tax invoices with GSTIN, HSN or SAC and place of supply using the GST invoice generator. Businesses outside India can use the invoice generator.
- Packing lists: list items, packages and weights with the packing list generator. See create and issue a packing list.
A delivery challan in eazmybiz is a separate document. It isn't converted into an invoice. Create the tax invoice separately when the supply happens.
Related reading: how to convert a quotation to an invoice, proforma invoice for export and advance payment and how to write a quotation for a client.
FAQs
Can I send goods in India without a tax invoice?
Yes, in the cases CGST Rule 55 allows: liquid gas where the quantity isn't known at removal, goods sent for job work, movement for reasons other than supply, and other cases notified by the Board. The goods then move on a delivery challan. If the goods are for supply and the invoice couldn't be issued at removal, a tax invoice is issued after delivery.
Is a delivery challan a substitute for a tax invoice?
No. A delivery challan accompanies goods that move without an invoice. When there's a taxable supply, a tax invoice is still required, and the challan doesn't support an input tax credit claim the way a tax invoice does.
When should I issue a delivery challan under GST?
At the time goods are removed for transport, in the situations listed in Rule 55, such as job work or movement that isn't a supply. Check the rule and your adviser for movements that don't fit these cases neatly.
What details must a delivery challan include?
Rule 55 lists them: challan number and date, consigner and consignee details with GSTIN if registered, HSN code and description, quantity, taxable value, tax rate and amount where the movement is for supply, place of supply for inter-State movement, and a signature.
What is the difference between a delivery challan and an e-way bill?
A delivery challan is the document travelling with the goods. An e-way bill is a declaration on the GST system under rule 138. Rule 55(3) requires goods moving on a delivery challan in lieu of an invoice to be declared as rule 138 specifies.
What is the difference between a delivery challan and a packing list?
A packing list describes what's in each package. A delivery challan documents a movement of goods without an invoice under GST. A packing list doesn't replace a challan or a tax invoice.
This guide is general information, not tax or legal advice. GST rules change; check the current CGST Rules and speak to your tax adviser before relying on them.