Vendor Debit Note Management
Four debit note types — rejection, under-receipt, damage, and price excess — each with correct GST treatment, approval workflow, and compliant PDF generation.
The Challenge
Debit notes are created manually in Word or Excel, often weeks after the issue is discovered. By then, the vendor disputes the claim. There is no link between the debit note and the original receipt or inspection record.
GST treatment on debit notes is frequently incorrect — wrong split between CGST/SGST/IGST, missing HSN codes, or incorrect GSTIN. This leads to ITC mismatches during GST return filing.
Once a debit note is issued, there is no tracking of whether it was approved, sent to the vendor, or resolved. Outstanding claims accumulate without visibility.
How We Address This
Five VDN Types
REJECTION (goods rejected at gate or GRN), UNDER_RECEIVED (quantity shortfall vs invoice), DAMAGE (goods received damaged), PRICE_EXCESS (invoice rate exceeds PO rate), and SHORT_LANDED (import shipment short-landed at port — captures debit_foreign_amount, fx_rate_at_grn and debit_duty_amount so recovery is denominated in the vendor's billing currency). Each calculates debit amount with correct GST split; SHORT_LANDED additionally carries inline forex so the journal posts against the foreign-currency vendor balance natively.
GST-Compliant PDF
Titled "Tax Debit Note" when GSTIN is configured, "Debit Note" otherwise. Includes: organisation identity block, vendor block with GSTIN, item table with HSN, CGST/SGST/IGST breakdown, amount in words, approval stamps, reverse charge footer where applicable.
Approval Workflow
Submit, approve, or reject VDNs through a structured workflow. Approval clears the corresponding PO quality flags (pending rejection, pending damage, pending price mismatch).
PO Flag Integration
When a mismatch or quality issue is detected at GRN, the parent PO is flagged. These flags appear in exports, dashboards, and CSV downloads. VDN approval automatically clears the relevant flags.
Tally Journal Posting
VDN posting enqueues the corresponding Tally journal entry. The debit note flows through the same queue-based sync as all other document types — with retry, skip, and dead letter handling.
Linked to Source
Every VDN traces back to the specific GRN line, gate entry line, or mismatch resolution that created it. The full chain — PO, GRN, gate entry, VDN — is visible in one view.
SHORT_LANDED — short-landing recovery on imports
When an import shipment lands short of the invoiced quantity at port, the recovery counterparty depends on the cause: customs (where a drawback applies), the cargo insurer (where insurance covers transit loss), the vendor (where the contract places transit risk on the seller), the transporter, or the customs house agent (CHA). For the vendor-recovery case, ProcureTrail raises a SHORT_LANDED Vendor Debit Note.
Foreign-currency vendor recovery
The SHORT_LANDED VDN carries three import-specific fields on top of the standard VDN payload:
| Field | Captures |
|---|---|
debit_foreign_amount | Basic recovery in the vendor's billing currency |
fx_rate_at_grn | Exchange rate locked at GRN — the rate the original purchase posted at |
debit_duty_amount | Customs duty share recoverable from the vendor (used when the contract is DDP or includes a landed-cost warranty) |
The PDF mirrors the four other types but adds a "Short-landing details" block citing the Bill of Entry number, port code and shortfall quantity. The Tally journal carries the forex trio inline so the debit posts against the foreign-currency vendor balance directly.
Insurer recovery
Where the cargo insurance policy covers short-landing, the recovery routes to the insurer instead of (or alongside) the vendor. The shortfall posts to a Cargo Insurance Receivable ledger; the customs duty share routes per the insurance_covers_duty flag on the linked Bill of Entry. See Import accounting for the recovery-path matrix.
Transporter and CHA recovery
Recovery from the inland transporter or the customs house agent is recognised in the design as a distinct counterparty path — for example, where the loss occurred on the inland leg under the transporter's bailment, or where the CHA's error caused the assessment shortfall. The implementation of dedicated transporter / CHA recovery counterparties is deferred to v2.2 of Import Accounting and needs a counterparty-taxonomy design session before it ships; today these cases are accommodated by routing through the vendor or insurer path with a free-text note.
Compliance Mapping
GST Act Section 34
Credit and Debit Notes
Credit and debit notes issued per statutory format. GSTIN, HSN/SAC, and tax component split included in every PDF.
Companies Act 2013
Section 128
Debit notes maintained as books of account. Immutable audit trail with 8-year retention.
CARO 2020
Fixed Asset Records
Debit notes linked to goods receipt records. Quantitative details match the original PO and GRN. Auditors can trace from debit note to purchase order.
Assess How This Applies to Your Organisation
Share a brief overview of your vendor dispute volumes and we will evaluate how structured debit note management may apply to your setup.