Delivery Challan Under GST Rule 55: When You Need One

A truck leaves a Pune plant at 6 p.m. with 1,200 machined blanks for a heat-treatment shop in Vapi. Stores printed a "challan" from a spreadsheet, nobody raised an e-way bill because "it is not a sale", and the officer at the Gujarat border sees an inter-State job-work movement with no e-way bill at all. The goods sit for two days while the plant learns that the paper it trusted was missing half of what the rules ask for.

The delivery challan is a short document with a long tail. Issued correctly under Rule 55 of the Central Goods and Services Tax Rules, 2017, it lets goods travel lawfully before any sale exists, keeps tax out of the picture until a supply happens, and gives the tax team a numbered trail to close later. Issued loosely, it becomes the weakest page in the cab.

• What this guide covers: the four situations Rule 55 permits, the nine particulars, job-work endorsements and return deadlines, approval and line sales, staged shipments, and pairing with the e-way bill.
• What it adds: a worked job-work cycle in rupees, a US contrast on title and risk in dollars, a register query that finds overdue challans, and a rollout checklist.

Four movements Rule 55 lets you send without a tax invoice

Rule 55(1) allows a delivery challan in place of an invoice in four cases, and only those four. If the movement is a completed supply to a known buyer at a known price, it needs a tax invoice, whatever the dispatch desk prefers to print.

The rule lists them in clauses (a) to (d): liquid gas where the quantity at removal is not known; goods sent for job work; goods moved for reasons other than by way of supply; and other supplies the Board notifies. The third clause carries most of the traffic, because it covers branch moves within one registration, goods taken out on approval, line sales from a van and exhibition stock.

Nine particulars a challan must carry and the 16-character number

A compliant challan is defined by Rule 55(1) itself: a serial number of at most sixteen characters, in one or more series, plus nine listed particulars. Anything missing from the list is a gap an officer can point to, and a gap your own reconciliation will trip over months later.

1. Date and number: the date of the challan and its serial number, unique within the series.
2. Consignor details: name, address and GSTIN of the consigner, if registered.
3. Consignee details: name, address and GSTIN or Unique Identity Number of the consignee, if registered.
4. Goods description: HSN code and a description that matches what is physically loaded.
5. Quantity: actual quantity, or provisional quantity where the exact figure is not known at removal.
6. Taxable value: a value is required even though no tax is charged on a non-supply movement.
7. Tax rate and amount: central, State, integrated or Union territory tax and cess, only where the movement is for supply to the consignee.
8. Place of supply: required for inter-State movement.
9. Signature: of the consigner or an authorised person.

Rule 55(2) adds the copy discipline for movements that are supplies: the original is marked for the consignee, the duplicate for the transporter and the triplicate for the consigner. Many plants print three copies for every challan regardless, which costs little and removes a decision from the loading bay.

Delivery challans issued under CGST Rule 55(1) must carry a serial number of no more than sixteen characters and nine particulars, including HSN code, taxable value and, for inter-State movement, place of supply; the challan register in the ERP should reject any print where one of those nine fields is blank.

The value field causes the most arguments. Stores teams ask why a value is needed when no tax is paid. The answer is practical as well as legal: the value drives whether an e-way bill is required, it is the figure at which a deemed supply is taxed if job-work goods never return, and it is what the insurer will ask for if the truck is lost.

Job work challans: Rule 45 endorsements and the one-year return clock

For job work, the challan is the start of a clock, not just a transport document. Section 143 of the CGST Act lets a principal send inputs or capital goods to a job worker without paying tax, but only if they come back or are supplied onward within fixed periods.

Inputs must return within one year and capital goods within three years of being sent out. Moulds and dies, jigs and fixtures, and tools are carved out of those deadlines. The Commissioner can extend the periods by up to one more year for inputs and two more for capital goods on sufficient cause. If the deadline passes, Section 143(3) and (4) treat the goods as supplied on the day they were first sent out.

• Who issues it: Rule 45(1) puts the challan in the principal's name, including where goods go directly from a supplier to the job worker.
• Onward to a second job worker: the challan may be issued by the principal or by the job worker sending the goods on.
• Endorsement on the way back: the job worker may endorse the principal's challan with the quantity and description being returned or forwarded, and a later job worker may endorse it again.
• Return to the tax system: Rule 45(3) requires challan details in FORM GST ITC-04, half-yearly for principals with aggregate turnover above ₹5 crore in the previous year and annually for others, by the 25th of the following month.
• Scrap: under Section 143(5), waste and scrap from the job may be supplied by a registered job worker directly on payment of tax.

Goods on approval and line sales: invoice at the point the sale happens

When goods leave before anyone knows which of them will be sold, the challan carries them and the invoice follows the sale. CBIC Circular No. 10/10/2017-GST of 18 October 2017 says so directly, by reading Rule 55(1)(c) and Rule 55(4) together.

The circular was written for jewellers who carry stock to buyers in other States, but its paragraph 5 applies the same reading to all goods supplied in similar situations. That covers a van that loads 400 cartons in the morning and sells to whichever retailers place orders on the route. The salesperson can carry an invoice book and raise each invoice once the sale is made.

• Inter-State approval sales: paragraph 4 of the circular treats a sale made in a State other than the supplier's as an inter-State supply, so integrated tax applies.
• Outer time limit: Section 31(7) of the CGST Act requires the invoice before or at the time of supply, or six months from removal, whichever is earlier.
• Unsold stock: cartons that come back are received against the outbound challan, so the opening load, invoices raised and returns reconcile to zero.
• E-way bill reason: the notified FORM GST EWB-01 lists "Line Sales" and "Recipient not known" among the reasons for transportation, which is how the portal records these movements.

The six-month limit in Section 31(7) is the control most teams miss. A demonstration unit left with a prospect "until they decide" becomes a supply by operation of law on day 183 if it is still there, and the invoice is then overdue rather than optional.

Batches and knocked-down units: one invoice, many numbered challans

Large equipment that cannot travel in one vehicle uses a hybrid: the invoice goes first, and each truck carries a challan that points back to it. Rule 55(5) sets the sequence, and it applies to goods sent in semi knocked down or completely knocked down condition, or in batches or lots.

The supplier issues the complete invoice before the first consignment leaves. Each subsequent consignment travels on its own delivery challan referencing that invoice, with a certified copy of the invoice. The original invoice travels with the last consignment. The e-way bill portal's own FAQ applies the same logic when one invoice moves in several vehicles: one e-way bill per vehicle, generated from that vehicle's challan.

Knocked-down shipments under CGST Rule 55(5) follow a fixed order: complete tax invoice before the first truck, one delivery challan per later truck citing that invoice, and the original invoice on the final truck; the dispatch plan should hold the last vehicle until every earlier challan shows a delivered status.

Sequence errors are the usual failure. If the original invoice rides on truck 2 of 6 because it was "ready", the consignee receives the original before most of the goods, and the last truck travels with only a certified copy. Build the lot plan in the dispatch system so the original's print is released only against the final lot number.

Pairing the challan with an e-way bill under Rule 138 and Rule 138A

A challan and an e-way bill are partners, not alternatives. Rule 55(3) says goods moving on a challan must be declared under Rule 138, and Rule 138A(1) requires the person in charge of the conveyance to carry the challan and the e-way bill or its number.

The general trigger is consignment value above ₹50,000, measured on the value in the invoice, bill of supply or challan. Two provisos remove the threshold entirely. Inter-State job-work movements need an e-way bill irrespective of value, generated by the principal or by a registered job worker. Inter-State handicraft movements by persons exempt from registration also need one at any value.

• Part A from the challan: the document type is the challan, the document number is its serial, and the reason for transportation is chosen from the notified list, such as job work, SKD or CKD, line sales or exhibition or fairs.
• Part B for the vehicle: under Rule 138(2), a consignor moving goods in its own or hired road vehicle completes Part B; otherwise the transporter does.
• Weighbridge exemption: Rule 138(14)(n) waives the e-way bill for trips up to 20 km to a weighbridge and back, but only if a Rule 55 challan accompanies the goods.
• Cancellation window: Rule 138(9) allows cancellation within 24 hours of generation if the goods do not move as declared, unless the e-way bill was verified in transit.

Where no e-way bill is required, Rule 55A asks for a tax invoice or bill of supply in the vehicle. For movements that are not supplies, the challan is the practical document to carry, and Rule 138A(5) lets the Commissioner notify the challan as the document to carry instead of the e-way bill in specified circumstances. Detention risk when the pairing fails is covered in our guide to e-way bill penalties under Section 129.

Where title and risk sit while goods travel on a challan

A challan records that no sale has happened yet, which also means ownership has not moved. That matters for insurance and loss claims as much as for tax. The US has no delivery challan, but its commercial law draws the same line for approval sales, and the contrast is useful for teams that ship in both markets.

Under the Uniform Commercial Code, Section 2-326 calls a returnable delivery a "sale on approval" when the goods are delivered mainly for the buyer's use, and a "sale or return" when they are delivered mainly for resale. Section 2-327 then allocates risk. On approval, risk of loss and title stay with the seller until acceptance, and a return after due notice is at the seller's risk and expense. On sale or return, the return is at the buyer's risk and expense.

For an Indian shipper, the practical point is that a challan-based movement leaves the goods on your balance sheet and usually under your insurance. A transit policy that covers "sales dispatches" may not cover goods with a job worker or a van salesperson unless the schedule says so. Confirm cover for each challan category before the first loss, not after it.

A worked job-work cycle in rupees, with the US tolling contrast in dollars

The numbers below follow one batch through a full job-work cycle and show what changes if part of it is never returned. All figures are illustrative; the tax rate used for the deemed supply is an assumption, and the current rate for the actual HSN should be checked, since many GST rates changed from 22 September 2025.

The last row shows why the return clock deserves an owner. The tax on 40 missing pieces is small, but it is payable from the dispatch date, so interest runs for the whole period, and the paperwork to prove the pieces were scrapped rather than supplied gets harder every month.

Job-work challan registers that track inputs against the one-year limit in CGST Section 143(1)(a) should flag every open line at day 300, leaving 65 days to chase returns, document scrap or request an extension before Section 143(3) treats the balance as supplied on the original dispatch date.

Challan checks a system should enforce and calls a person should make

Most challan errors are mechanical and a dispatch system can block them outright. The judgement calls are fewer but more expensive: whether a movement is a supply at all, and whether goods still sitting with a third party have become one.

Two of these blocks would have prevented the Vapi detention in the opening. The trace below shows how the same movement fails without them and what the controlled version looks like.

1. 18:05, gate-out: challan PJW/26/0412 printed from a spreadsheet with no HSN or value; ERP movement type posted as an internal transfer, so no e-way bill prompt appears.
2. 23:40, State border: officer finds an inter-State job-work load of about ₹4.2 lakh with no e-way bill and a challan missing two Rule 55 particulars; the vehicle is detained.
3. Next day, 11:20: plant raises e-way bill 3412 8890 5521 after the fact and emails a corrected challan; the officer proceeds under Section 129.
4. Controlled version, 17:50: the challan module requires HSN 7326 and value, detects consignee State 24 against consignor State 27, and refuses gate-out until Part A and Part B are complete.
5. Controlled version, 18:10: the vehicle leaves with the challan in triplicate and the e-way bill number mapped to the challan record; the ITC-04 line is created at the same time.

Setting up a challan register that closes every open movement

A challan register is a ledger of open obligations, and it is only useful if every outbound line eventually reaches zero. Build it as a table keyed on challan number and line, with receipts, invoices and scrap entries posting against it, then query it daily.

-- Open job-work challan lines approaching the Section 143 limits
SELECT c.challan_no,
       c.line_no,
       c.goods_class,                      -- 'INPUT' or 'CAPITAL'
       c.dispatch_date,
       c.qty_sent - COALESCE(SUM(m.qty), 0) AS qty_open,
       CURRENT_DATE - c.dispatch_date      AS days_out,
       CASE c.goods_class
         WHEN 'INPUT'   THEN 365  - (CURRENT_DATE - c.dispatch_date)
         WHEN 'CAPITAL' THEN 1095 - (CURRENT_DATE - c.dispatch_date)
       END                                 AS days_left
FROM   challan_line c
LEFT JOIN challan_match m                  -- returns, onward supplies, scrap
       ON m.challan_no = c.challan_no AND m.line_no = c.line_no
WHERE  c.purpose = 'JOB_WORK'
  AND  c.excluded_tooling = FALSE          -- moulds, dies, jigs, fixtures, tools
GROUP BY c.challan_no, c.line_no, c.goods_class, c.dispatch_date, c.qty_sent
HAVING c.qty_sent - COALESCE(SUM(m.qty), 0) > 0
   AND (CURRENT_DATE - c.dispatch_date) >= CASE c.goods_class
                                               WHEN 'INPUT' THEN 300 ELSE 1000 END;

The 365 and 1,095 day figures approximate one and three years for alerting only; the legal test runs from the date of being sent out. Moulds, dies, jigs, fixtures and tools are excluded because Section 143 does not apply the return deadlines to them. Any extension granted by the Commissioner should be stored on the line so the query uses the extended date.

Ownership of the register is split, and writing it down prevents the usual standoff between stores and finance. The table below is a starting allocation that most plants adjust only slightly.

Getting challans right is mostly configuration and habit, not new software. The rollout checklist below is ordered so that the cheapest controls go live first and the register is trustworthy before anyone relies on its alerts.

For how the challan's e-way bill is raised and corrected when vehicles change mid-route, see our e-way bill vehicle change workflow, which deals with the Part B update this article only touches. Where the challan sits alongside an e-invoice on mixed loads, our explainer on IRN and e-way bill sequencing covers the invoice side. More shipping and tax documentation guides sit in the logistics and supply chain library.

If you are replacing spreadsheet challans with a register tied to dispatch, receiving and the e-way bill system, and want the controls above specified as requirements, you can describe your plant and movement types in an RFP and we will map them to a build plan.