Generate Debit Note (Purchase Return) in TallyPrime 7.1 with GST

You post a purchase return, the stock comes down, and the supplier ledger still shows the full bill as unpaid. Next to it sits a separate debit balance with no bill against it. That is the most common debit note problem in TallyPrime, and it comes from one field: the bill-wise reference type. Get that field right and the entry posts cleanly. Get it wrong and someone spends an afternoon untangling the supplier's outstanding report at year end.

What is a Debit Note Against a Purchase Bill?

A debit note is the document you raise when you send goods back to a supplier or claim a reduction on a bill you have already booked. In TallyPrime it debits the supplier, so your payable falls, and credits purchase and input GST. Linking it to the original bill matters. Think of it as stapling the return slip to the invoice it belongs to, instead of filing it loose in a drawer where nobody can match it later.

How to Generate a Debit Note for a Purchase Return in TallyPrime 7.1 — Step by Step

1. Check the voucher is active. Go to Gateway of Tally > Alter > Voucher Type > Debit Note and confirm Activate this Voucher Type is Yes, then save with Ctrl+A. Tally tip: on new companies this is often switched off, which is why Alt+F5 seems to do nothing. In Tally ERP 9 the equivalent switch is F11 > Accounting Features > Use Debit/Credit Notes.
2. Open the voucher from Gateway of Tally > Vouchers and press Alt+F5. If you do not see it on the button bar, press F10 (Other Vouchers) and pick Debit Note. If you have created more than one debit note voucher type, such as a separate one for rate differences, Tally asks you to pick. Choose the purchase return type.
3. Press Ctrl+H (Change Mode) and select Item Invoice when goods are physically going back. Use Accounting Invoice only for a rate difference or discount where no stock moves. Tally tip: Item Invoice is the only mode that reduces stock quantity, so a return entered in Accounting Invoice leaves your closing stock overstated.
4. Enter the supplier in Party A/c name and the same purchase ledger used on the original bill in Purchase Ledger. Then select the stock item, quantity and rate being returned. Use the exact rate from the original bill, not today's price. A different rate leaves a small difference sitting in the supplier ledger forever.
5. Select the input CGST and SGST ledgers, or input IGST for an inter-state supplier. TallyPrime 7.1 calculates the tax from the item's GST rate. Tally tip: if the tax line shows zero, the stock item or purchase ledger has no GST rate set. Fix it in the master, not by typing the amount by hand.
6. Fill in the original invoice number and date in the GST or party details section of the voucher (press Ctrl+I for More Details if the fields are hidden). Then, at the bill-wise allocation screen for the supplier, choose Against Ref and pick the original bill from the list. Choosing New Ref here is the mistake described in the intro. It creates a fresh open debit instead of reducing the bill.
7. Add a narration with the reason, for example "12 cartons returned, seal damaged, ref supplier GRN 448", and save with Ctrl+A. Print it with Ctrl+P to send with the goods. Then open the supplier ledger with Alt+F2 set to the bill date and confirm the original bill now shows the reduced pending amount.

Mistakes That Cost Indian CAs Hours

• Using New Ref instead of Against Ref: the supplier shows an unpaid bill plus a separate debit balance, and the ageing report treats the bill as overdue. Fix: alter the debit note, change the bill-wise type to Against Ref and select the original bill. Both items then net off.
• Passing the return as a Journal voucher: the ledger balances look right, but the return does not flow into purchase return analysis or reduce stock. Fix: delete the journal and re-enter it as a Debit Note in Item Invoice mode.
• Booking the return to a different purchase ledger with another GST rate: the 18% purchase ledger gets credited for goods bought at 12%, and the tax split goes wrong. Fix: always pick the same purchase ledger and stock item that appear on the original bill.
• Not checking the supplier's credit note in GSTR-2B: you reduce ITC in your books, the supplier never issues a credit note, and your books stop matching the GST portal. Fix: after posting, track the debit note until the matching supplier credit note appears in GSTR-2B, and follow up with the supplier if it does not.
• Dating the debit note before the purchase bill date: Tally accepts it, but the Against Ref list will not show the bill properly and the return looks illogical to an auditor. Fix: date the debit note on or after the original bill and on the day goods actually left your premises.

Pro Tips for 2026

Create a separate voucher type under Debit Note, named something like Purchase Return, with its own numbering. Rate difference claims then sit in a different series, and your auditor can scan returns alone. Second, keep an eye on the calendar this year. A supplier credit note for a FY 2025-26 supply can only be issued up to 30 November 2026 under Section 34(2), so any open returns from last year need settling with suppliers now, as of 24 October 2026. Third, before closing a month, run Display More Reports > Statements of Accounts > Outstandings > Payables and look for unadjusted debit balances. Every one of those is usually a debit note posted with New Ref.