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July 31, 2026

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Delivery challan for samples, approval and demonstration goods

There are many instances where businessmen ship goods but do not make any sales out of them. These include shipping product samples to prospects, shipping goods for approval from the prospects, or applying equipment for demonstration purposes. In all of these cases, the issuance of a tax invoice would not be appropriate since there has not been any transfer of goods in terms of ownership.

In such situations, the delivery challan is the ideal instrument to be used. The delivery challan assists businesses in maintaining their stock records, meeting the GST guidelines, and making sure that everything is tracked until the goods are either returned or sold. This guide discusses the right time to use a delivery challan, what details need to be mentioned on it, and the right approach towards samples, approval, and demonstration goods.

What is a delivery challan?

A delivery challan is the document that is employed in the movement of goods when there is no issuance of a tax invoice due to some reasons at the time of shipment of goods.

In the GST system, the delivery challan acts as a help for the business to maintain its documentation system and simultaneously to maintain inventory. After acceptance of goods by the customer and the closure of the transaction, a GST tax invoice can be issued.

Also Read: Delivery Challan Under GST: A Complete Guide

When should you use a delivery challan?

A delivery challan may be used in various business scenarios in which the transport of goods occurs without making a sale.

Examples include:

Transporting complimentary product samples to clients or distributors
Dispatching goods for customer approval before purchase
Providing products for demonstrations or exhibitions
Transporting goods for job work

Among these, sending samples, approval goods, and demonstration products is one of the most common reasons businesses issue delivery challans.

Delivery challan for sample goods

Sample products are distributed by businesses in various sectors for the purpose of introducing new products, attracting potential buyers, or enabling customers to assess the quality of the product before purchasing. As these products are distributed free of charge, they are normally delivered through delivery challans instead of invoices.

Some common examples include:

FMCG product samples
Trial kits for cosmetics
Samples of pharmaceuticals
Food and beverage samples

Using a delivery challan for sample goods offers several advantages:

Maintains proper records of goods dispatched
Improves inventory visibility
Provides supporting documentation during transportation
Simplifies GST compliance for non-sale movements

Once a customer decides to purchase the product, a tax invoice can be generated for the actual sale.

Challan of delivery of goods sent on approval

Several organizations have the practice of delivering goods on approval to the customers for examination of quality or suitability of features before making the purchase. The delivery challan will be raised in place of a tax invoice, as the transaction has not been made as yet, and the GST invoice will be raised after approval of the goods by the customer.

The following are the sectors where goods on approval are quite prevalent:

Jewellery
Furniture
Industrial machinery
Home decor
Premium electronics
Textile and garment industries

The use of delivery challans by both parties will help reduce any problems of disputes on the amount of goods delivered since both parties will have the document.

Advantages of delivery challan on approved goods

A properly prepared delivery challan offers several operational and compliance benefits.

Inventory tracking system

Items that have been dispatched to be approved by the client are part of the seller’s inventory until the approval is received from the client. A delivery challan enables firms to know the precise amount and whereabouts of each item.

Easier customer approvals

As all the items dispatched are registered in the delivery challan, customers find it easy to check on the items received.

Supports GST compliance

Transporting goods without appropriate documentation can lead to compliance issues. A delivery challan is valid supporting documentation for the movement of goods where a tax invoice has not yet been issued.

Easier returns

In case the client does not buy the goods, the delivery challan acts as a guide in returning the goods, hence facilitating reconciliation.

Delivery challan for demonstration goods

Firms deliver goods to their clients for demonstration and usage before the sale of the goods. Such goods are only delivered temporarily and not sold; therefore, they are delivered through a delivery challan and not a tax invoice.

Some common examples include:

Medical equipment demonstrations
Industrial machinery trials
Office automation devices
POS machines

Why is a delivery challan important for demonstration goods?

Using a delivery challan provides several advantages beyond GST compliance.

Better asset management

Businesses always know where their demonstration units are located and when they are expected to be returned.

Prevent loss of inventory

Retention of the challan helps to prevent loss of products because of their misplacement and by the buyer without any valid reason.

Smooth audit process

Every movement of goods is properly documented, making internal audits and inventory verification much simpler.

Easy conversion to sale

In case the buyer wants to buy the demonstration product, then the supplier can provide a GST tax invoice for making a sale without any problem with inventory records.

What information should be included in the delivery challan?

The delivery challan must have all information that does not lead to any problems in the future related to transportation or inventory.

Particular	Description
Delivery Challan Number	Unique serial number for identification
Date of Issue	Date on which the challan is generated
Supplier Details	Name of business, address, and GSTIN (if any)
Recipient Details	Customer's name and delivery address
Description of Goods	Complete product details
Quantity	Number of units being dispatched
HSN Code	Applicable HSN code, where required
Reason for Dispatch	Sample, approval, demonstration, job work, etc.
Transport Details	Vehicle number or transporter details
Signature	Authorized signatory of the supplier

HSN code table for dlivery challan

Although a delivery challan does not have an HSN code of its own, businessmen must specify the HSN code of the goods that are being transported.

Document	HSN Code Requirement
Delivery Challan	HSN code of the goods being transported (if any)
GST Tax Invoice	HSN code is mandatory as per GST requirements based on turnover and transaction type

Including the correct HSN code helps ensure consistency between the delivery challan and the eventual tax invoice, making GST reporting and reconciliation easier.

GST rules for delivery challan

The GST Delivery Challan Act permits a business organization to move its goods based on a delivery challan without having to provide a tax invoice in certain cases in which no immediate sale takes place. Such situations include cases of movement of goods for sampling, approval, demonstration, job work, etc.

For the business organization, it is important to know the requirements in order to facilitate easy movement of goods under GST regulations.

Also Read: E-Way Bill Verification: Process, Required Documents & GST Compliance Rules

When can you issue a delivery challan?

A delivery challan can generally be issued when:

Goods are sent as free samples.
Goods are dispatched on an approval basis.
Products are transported for demonstrations or exhibitions.
Goods are sent for job work.

Once the customer accepts the goods and the transaction becomes a sale, a GST tax invoice should be issued within the applicable time limit.

Practices of handling delivery challans

The use of a delivery challan is only half of the process. The business must also follow certain practices to ensure that no problems arise regarding compliance.

1. Use of serial numbers on delivery challan forms.

Each delivery challan form must be given a unique serial number.

2. Clearly mention the purpose of dispatch

Always specify whether the goods are being sent for:

Sample
Approval
Demonstration
Job work
Repair

A purpose that is explicitly stated prevents any confusion during transportation and record verification.

3. Keep digital copies

Keeping the digital copies of delivery challans ensures easy access and minimizes paperwork. One can use cloud-based accounting or billing software for document management.

Also Read: How to create a delivery challan on the web

4. Track returned goods

A business needs to check frequently if the goods have either been accepted back or turned into sales.

Proper follow-ups are essential to avoid any inventory problems.

5. Generate tax invoice on time

After the customer has accepted the goods, make sure that the GST invoice is issued without any delay.

Common errors to be avoided by businesses

While it is relatively easy to prepare a delivery challan, many businesses commit errors leading to problems with the inventory.

These errors include:

Missing challan numbers

Without a unique serial number, tracking goods becomes difficult.

Incorrect product description

Incorrect descriptions of products can lead to conflicts when returning the goods or during audits.

Dispatching goods without documentation

Moving goods without a delivery challan where required may result in compliance issues during inspections.

Forgetting to track returns

Businesses sometimes lose visibility of demonstration or approval goods that remain with customers for long periods.

Delayed invoice generation

If the customer purchases the goods, businesses should promptly issue the corresponding GST tax invoice.

Delivery challan vs Tax invoice

Although both documents are used during the movement and sale of goods, they serve different purposes.

Feature	Delivery Challan	Tax Invoice
Purpose	Records movement of goods	Records sale of goods
Sale Completed	No	Yes
GST Liability	Generally not triggered immediately	GST becomes applicable
Used For	Samples, approval, demonstration, job work	Completed sales
Inventory Ownership	Remains with supplier	Transfers to buyer

FAQs

1. Can goods be transported without a tax invoice?

Yes. Goods can be transported using a delivery challan in situations where there is no immediate sale, such as samples, approval goods, demonstrations, or job work.

2. Is a delivery challan mandatory for free samples?

In most situations, businesses issue a delivery challan for free samples rather than a tax invoice when shipping the same.

3. Is it possible to convert a delivery challan to a tax invoice?

Yes, it is. Once the sale has been completed and the product has been accepted by the customer, the supplier can provide a tax invoice for GST.

4. Is GST charged on demonstration goods?

Demonstration goods are generally transported using a delivery challan since ownership does not transfer during the demonstration period. The effect of GST will vary based on the nature of the final transaction and the relevant GST laws.

5. Which details of a delivery challan are required?

Challan no., Challan date, supplier/receiver details, purpose of dispatching goods, product details, quantity, HSN Code (if applicable), and signature of an authorized person shall be included in the delivery challan.

Conclusion

The delivery challan issued for samples, approvals, and demonstrations is very important for companies that move goods without making any sales. It helps them keep a proper record of their inventory, facilitate the smooth movement of goods, and ensure that they comply with the GST rules by issuing the proper document till the transaction is made.

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