Returns and RTO in GSTR-1: Stop Paying GST on Orders That Came Back

When an order comes back, the GST you paid comes back too. For consumer orders, subtract the returned value from that month's sales in Table 7, by state and rate. For buyers with a GSTIN, report a credit note in Table 9B. Do it in the month of the return, and by 30 November after the financial year ends.

Return, RTO or cancellation: what is the difference?

Your marketplace report uses all three words. For GST they fall into two groups: the order was invoiced and shipped, or it was not.

Why does GST allow the subtraction? Because the tax is on a supply, and here the supply was undone. Section 34 says that when goods are returned, the seller may issue a credit note and bring the tax down. A credit note is the document that reverses an invoice, in full or in part. On a marketplace it is raised in your name when the return is processed. You will find it in the return rows of your report.

How do consumer returns go into Table 7?

GSTR-1 is your statement of sales. Table 7 holds sales to consumers (B2C) as totals for each state and tax rate. The portal's own FAQ says these are reported net of credit notes. So there is no separate place to type consumer returns. You net them.

1. Take the month's sales rows and total the taxable value and tax by delivery state and rate.
2. Take the month's return and RTO rows and total them the same way.
3. Subtract the second from the first, line by line. A return to Kerala at 5% comes off the Kerala 5% line and nowhere else.
4. Enter the result in Table 7. The tax must carry the same sign as the value.

Match the state and the rate of the original sale. If you sold at 12% and the rate later changed, the return still comes off at the rate on the original invoice.

What about buyers with a GSTIN?

Sales to registered businesses (B2B) sit in Table 4 invoice by invoice, so their returns are also reported one by one. Each credit note goes in Table 9B with the buyer's GSTIN, the note number, its date and value. The buyer sees it on their side and must reduce the input tax credit they claimed.

That last part now matters to you. Since 1 October 2025, section 34 says your tax does not come down if a registered buyer has claimed credit on the invoice and not reversed it. For consumer orders the condition is simpler: you must not have kept the tax. A marketplace refund of the full price, GST included, takes care of that.

What if the return comes in a later month?

This is the normal case, not the odd one. An order shipped on 28 November comes back on 9 December. November's return stays as filed. The return is subtracted in December.

So do not try to match each return to its sale month. Your report for a month already lists the returns processed in that month. Use it as it is.

Can a figure be negative?

Yes. After a big sale month, a slow month can bring more returns than sales for one state. That line shows a negative taxable value and negative tax. It is a true figure. Report it. Do not force it to zero and do not push it to another state.

What you cannot have is opposite signs: a negative value with positive tax, or the reverse. Tax follows the value. If you see that, one of the two numbers has been keyed wrongly.

What happens to Tables 12, 13 and 14?

Your TCS, the 0.5% the marketplace holds back, is also worked out on sales minus returns. So a correct Table 14 should sit close to what the operator reported. See how TCS works.

A worked example

You sell from Bengaluru at 5% GST and file monthly. Your December report shows:

Your GSTR-1 for December shows:

• Table 7: Rs 2,10,000 and Rs 10,500 of tax, split by state. Kerala had sales of Rs 5,000 and returns of Rs 8,000, so its line is minus Rs 3,000 with IGST of minus Rs 150.
• Table 9B: one credit note, Rs 10,000 with Rs 500 of tax.
• Table 12: Rs 2,10,000 in the B2C tab. Minus Rs 10,000 in the B2B tab, since there was no B2B sale this month to set it against.
• Table 13: the invoice series, with cancelled numbers counted, and the credit note series.
• Table 14: Rs 2,00,000 and Rs 10,000 of tax against the marketplace's GSTIN.

Tax for the month is Rs 10,000. A seller who reports only the shipped figure pays Rs 15,000. That is Rs 5,000 extra in one month and about Rs 60,000 over a year.

Is there a time limit?

Yes, and it is strict. Section 34(2) says a credit note must be declared in the return for the month in which it is issued, and not later than 30 November following the end of the financial year in which the sale was made, or the date you file the annual return for that year, whichever comes first.

In practice: for a sale made any time in April 2025 to March 2026, the return must be in a GSTR-1 filed by 30 November 2026. Filing GSTR-9 earlier closes the window earlier. After that you can still refund the customer, but the GST on that order stays paid. The rule exists so that a year's figures can be closed. For you it means one thing: clear your returns backlog every month, and never carry it past October.

The mistake sellers usually make

The biggest is skipping the return file and paying on shipped sales. The second is treating RTO as a courier matter and leaving it out, when it is often the larger share on cash-on-delivery orders. Three more:

• Subtracting cancellations. They were never added, so taking them off understates your sales.
• Going back to amend the sale month. Not needed, and it breaks the match with your marketplace's figures.
• Zeroing a negative line. You pay tax you do not owe, and Tables 7, 12 and 14 stop agreeing.

Can you do this yourself? Yes, if you use both the sales and the return rows every month. Get help when returns from an earlier financial year are still unadjusted and November is close. Platform steps are in our guides for Meesho and for several marketplaces in one return.

Frequently asked questions

Read next