What is a delivery challan?
A delivery challan is a document that goes with goods when they are moved. Under GST it's used instead of a tax invoice when the movement isn't a sale yet, such as goods sent for job work. In everyday use it also means the dispatch note a supplier sends with a delivery, which the buyer's stores team checks the goods against.
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Walk up to any factory gate in India and you'll see drivers handing over a delivery challan, often called the DC. It lists what's on the truck, where it came from and where it's going. The word has two meanings in practice: a specific document under GST rules, and the general dispatch note that comes with most deliveries. Both are worth understanding.
Delivery challan under GST
Normally, when goods are sold, the tax invoice has to travel with them. GST rules (Rule 55 of the CGST Rules) allow a delivery challan instead of an invoice in a few cases where there's no sale at the moment the goods leave:
- Goods sent for job work. A Ludhiana knitwear unit sends yarn to a dyer down the road and gets it back dyed. No sale happens, so the yarn moves on a challan.
- Liquid gas where the exact quantity isn't known when it leaves the premises.
- Goods moved for reasons other than a sale, such as sending a machine for repair, sending samples, or taking stock to an exhibition.
- Goods sent on approval, where the customer may keep them or send them back.
The challan is usually made in three copies: the original for the consignee, the duplicate for the transporter and the triplicate kept by the sender. If the goods are later sold, a tax invoice is issued at that point.
What goes on a delivery challan
- Challan number and date.
- Name, address and GSTIN of the sender.
- Name, address and GSTIN (if registered) of the receiver.
- Description of goods, HSN code, quantity and unit.
- Value of the goods, and tax rate and amount where the movement is for a supply.
- Place of supply, for inter-state movement.
- Signature of the sender or their authorised person.
Most suppliers also add the buyer's PO number, the vehicle number and the number of packages. None of that is in the rule, but it makes the receiving side much easier.
Challan vs invoice vs e-way bill
| Document | What it proves | Who needs it |
|---|---|---|
| Delivery challan | What goods were moved, from whom, to whom | Stores, transporter, GST officers on the road |
| Tax invoice | A sale happened and tax is due | Accounts, for payment and input tax credit |
| E-way bill | The movement has been declared on the GST portal | Transporter, for consignments above the value limit |
An e-way bill isn't a replacement for either. It's generated against a document, which can be an invoice or a challan. For most consignments worth more than ₹50,000 you'll need one, though some states set different limits for movement within the state, so check the rules for your route.
How stores uses the challan
For a buyer, the challan is the first document that touches the goods. When the truck arrives, the stores team:
- Finds the purchase order using the PO number on the challan.
- Counts and inspects what actually came off the truck.
- Notes shortages or damage on the challan copy and gets the driver to sign.
- Records a goods receipt note for the quantity accepted.
Say a Chennai plant orders 500 bags of cement and the challan says 500, but 12 bags have split in transit. Stores writes "12 bags damaged" on the challan, the driver signs it, and the GRN shows 488. When the invoice for 500 arrives, accounts has proof of why they're paying for 488. Skip the note on the challan and that argument becomes much harder to win.
Don't treat the challan as a receipt
Signing a challan only confirms the truck arrived. If your team signs "received in good condition" before counting, you've given up your best evidence. Sign for the number of packages, and record the count on the GRN after inspection.
Frequently asked questions
Is a delivery challan mandatory under GST?
In the cases covered by Rule 55, such as job work or goods moved without a sale, yes, a challan is needed in place of an invoice. For a normal sale, the tax invoice travels with the goods, though many suppliers send a challan as well.
Can I claim input tax credit on a delivery challan?
No. Input tax credit is claimed on the tax invoice. The challan only records the movement of goods.
What is the difference between a delivery challan and a GRN?
The supplier prepares the delivery challan when goods leave. The buyer prepares the goods receipt note after checking what arrived. The GRN is what accounts relies on when matching the invoice.