What approval (memo) goods are
In the jewellery trade, pieces often move before they are sold. A wholesaler hands a retailer a tray of chains to show at the counter. A retailer takes a few bridal sets from a manufacturer for a wedding family to choose from. A jeweller carries pieces to a party in another city. In each case the goods go out on approval: the other side can buy them, return them, or keep some and send the rest back.
The paper that goes with them is the memo (in some markets also called approval or jangad). It lists each piece with its tag, gross weight, purity, stones and the terms agreed: the rate or how it will be fixed, and the date it must come back.
Two things make approval goods different from a sale. A piece out on memo is still your stock, even in someone else’s showcase. And nobody knows yet how much will be sold, which is why GST treats these goods differently from a normal bill.
Many traders are on both sides at once: they take pieces in on memo from other jewellers and send pieces out on memo to parties, sometimes the very pieces that came in last week.
Approval is where stock quietly goes missing. Nothing is sold, so nothing shows in the sales register, and the only record is often a diary, a carbon copy and a few WhatsApp messages. These are the usual ways it goes wrong.
The risks with goods on approval
- Pieces nobody can trace. A tikka comes back and nobody remembers which supplier it came from.
- Dates that do not line up. The supplier gave you 30 days, you gave the party 15 and then extended it. Now the supplier wants it back while the party still has it.
- Weight that changes. A piece comes back lighter, or with a stone missing, and the memo never had the weight.
- Sales nobody billed. The party sold two pieces weeks ago and has not told you, so your stock and books are both wrong.
- Lost pieces with no agreed charge. If the memo never said how a loss is settled (in fine gold, at what rate), the argument starts after the loss.
- Missing tax paperwork. Goods moved without a proper delivery challan, or a sale never invoiced, can become a GST problem later.
Records to keep for every memo
You need the same details every time. Here is a simple checklist; your CA may ask for more.
| Record | What it should hold | Why it matters |
|---|---|---|
| Memo number and date | A running serial number and the date the goods left | Lets you match returns, bills and the challan to one memo |
| Party details | Name, address, phone, GSTIN if registered | Needed on the challan and the bill |
| Each piece | Tag, description, gross weight, purity, stones, HUID | Proves which piece went and its weight |
| Terms | Rate or how the rate will be fixed, and the return date | Avoids arguments about price and time |
| Where it came from | For pieces taken in on memo: supplier, their tag, their return date | Tells you whose piece it is |
| Returns | Date, pieces and weight checked, signed by both sides | Catches weight or stone loss |
| Sales | Pieces sold, bill number and date | Moves the piece into your sales |
| Losses | The agreed charge, usually in fine metal, and how it was settled | Keeps the party’s account honest |
GST on approval goods: the delivery challan
Approval goods are not sold when they leave your shop, so you can’t make a tax invoice yet. CBIC (then called CBEC) addressed this in Circular No. 10/10/2017-GST of 18 October 2017. It was written after requests “particularly from the suppliers of jewellery” who carry pieces to buyers for approval, inside their own state and to other states.
The circular reads three parts of rule 55 of the CGST Rules together. Rule 55(1)(c) lets a supplier issue a delivery challan instead of an invoice when goods move for reasons other than a supply. Rule 55(3) says the challan must be declared as rule 138 (the e-way bill rule) requires. Rule 55(4) says that when goods move for supply but the invoice could not be made at removal, the tax invoice is issued after delivery.
From this, CBIC clarified that goods taken for supply on approval can move from your place of business to another place in the same state, or to another state, on a delivery challan, along with the e-way bill wherever applicable, and the invoice may be issued when the supply happens. The person carrying the goods can carry the invoice book and issue the invoice once the sale is made. The circular says this applies to all goods moved in similar situations, not only jewellery. Source: Circular No. 10/10/2017-GST.
Whether you also need an e-way bill depends on the rules for jewellery and your state; the wholesale software guide explains it.
What the delivery challan must show
Rule 55(1) lists what the delivery challan must contain. It is serially numbered, with up to sixteen characters, in one or more series. For a supply of goods, rule 55(2) asks for three copies: original for the consignee, duplicate for the transporter and triplicate for the consigner. Source: CGST Rules, rule 55.
| Detail | What to fill in |
|---|---|
| Date and number | The challan date and its serial number |
| Sender | Your name, address and GSTIN |
| Receiver | The party’s name, address and GSTIN or UIN, if registered |
| Goods | HSN code and description of the pieces |
| Quantity | Provisional, where the exact quantity being supplied is not known |
| Value | The taxable value |
| Tax | Tax rate and amount (central, state, integrated or UT tax, or cess), where the goods move for supply to the consignee |
| Place of supply | For movement to another state |
| Signature | Signed by you or your authorised person |
When the invoice is due, and IGST across states
The six-month limit. Section 31(7) of the CGST Act says that where goods sent or taken on approval for sale or return are removed before the supply takes place, the invoice must be issued before or at the time of supply, or six months from the date of removal, whichever is earlier. So a piece cannot sit out on memo for a year with no decision: if it is still out six months after it left, ask your CA about the invoice. Source: CGST Act, section 31.
Sales in another state. The same circular says that when a supplier carries goods from one state and supplies them in a different state, it is an inter-state supply and attracts integrated tax (IGST) under section 5 of the IGST Act. Within your state, the bill carries CGST and SGST as usual. The rate and HSN codes for jewellery are in our HSN code guide, and the wider bill rules are in the GST billing guide.
This guide explains the official texts in plain words. It is not tax advice. Show your memo, challan and invoice format to your CA, especially if you carry goods to other states or the same pieces pass through more than one hand.
How CaratOS tracks approval inventory (Growth)
CaratOS, made by Izara Gems Pvt. Ltd. in Delhi, keeps pieces on approval in its Wholesale desk on the Growth plan.
In on memo and out on memo. Pieces come in through In on memo with the supplier’s tag and yours, so you don’t enter them twice. When you send pieces out on memo, CaratOS tracks every gram until it comes back or is billed.
Chain of custody. Open any piece to see its whole story: which jeweller gave it, each party it went to, the rate each one got, when it came back and how it ended: sold, returned, kept by you or missing.
Two due dates on every piece. The date the jeweller wants it back and the date you gave the party, side by side. If the party’s date runs past the jeweller’s, CaratOS warns you when you send the piece out. Overdue pieces turn red and show in Needs you.
Your rate for each party. The same piece can go to different parties at different rates, one party at a time, with the margin against your cost shown before you send it.
The paperwork, filled in. Returned pieces get a return voucher to each jeweller they came from. When a party keeps a piece, your invoice to the party and your purchase order to the jeweller come in one step. A lost piece can be marked missing and charged to the party in fine gold on an estimate. Gold and silver both work, in fine weight.
See it all on Approval inventory, and read the wholesale software guide for metal accounts and rate fixing.
Plans, and what CaratOS doesn’t do
Approval inventory comes with the Growth plan at ₹3,999 a month or ₹42,999 a year, GST included, along with trade accounts in cash and metal, B2B quotes, more than one branch with transfers, and Tally live sync. Starter covers the counter and does not include memo. See all plans on pricing.
CaratOS runs in the browser on a phone, tablet or computer, in English or Hindi. It doesn’t do girvi (gold loans), RFID or manufacturing BOM, and there is no Android app. CaratOS Desktop is coming soon, with no date yet. A 15-day Starter trial is available on request; it starts when CaratOS approves it, and no card is needed.
Book a demo and bring a real memo from last month: the pieces, the parties and the dates. We’ll run it in CaratOS in front of you. You can also write to hello@caratos.co.in or call +91 92208 22217.
Questions shop owners ask
What is an approval memo in jewellery?
It is a list of pieces handed to another jeweller or party on approval, before any sale. Each line carries the piece, its weight, purity, stones and the agreed terms. When the memo is settled, the sold pieces are billed and the rest come back.
Do I need a delivery challan for jewellery sent on approval?
CBIC Circular No. 10/10/2017-GST says goods taken for supply on approval can move on a delivery challan under rule 55 of the CGST Rules, with the e-way bill wherever applicable, and the tax invoice may be issued when the sale happens. Check the format with your CA.
How long can jewellery stay out on approval under GST?
Section 31(7) of the CGST Act says the invoice must be issued before or at the time of supply, or six months from the date the goods were removed, whichever is earlier. So keep an eye on anything that has been out for close to six months.
Is it IGST if I sell approval goods in another state?
Yes. CBIC’s circular says that when a supplier carries goods from one state and supplies them in another, it is an inter-state supply and attracts IGST under section 5 of the IGST Act.
Which CaratOS plan has approval memo?
Growth, at ₹3,999 a month or ₹42,999 a year, GST included. Approval inventory is part of its Wholesale desk. Starter does not include memo.