What is a GRN (goods receipt note) and how does it work?
The GRN is the store's record that goods actually arrived, in what quantity and in what condition. It is also the document finance relies on before paying a vendor or claiming GST credit.
By the GODOWN team · Updated
What is a GRN?
A GRN, or goods receipt note, is the document a buyer creates when goods arrive at its store against a purchase order. It confirms what came in, how much was accepted and who received it. The challan and the invoice come from the vendor; the GRN is yours.
In an ERP, the GRN is a goods receipt posted against the PO, and posting it increases stock. In a plant without one, it may be a numbered page in a GRN register. Either way, it is the point at which the company records that the goods are in its store and accounted for.
The GRN connects the purchase order before it with the invoice and payment after it. That makes it the middle document in three-way matching, and the evidence finance uses when it pays a vendor or claims GST credit.
What a GRN records
A GRN records the delivery against the PO line by line, with enough detail to match the invoice and trace the goods later. A complete GRN includes:
| Field | Why it matters |
|---|---|
| GRN number and date | The receipt date can start payment terms and, for MSME suppliers, the statutory payment period |
| PO number and line | Ties the receipt to what was ordered and approved |
| Vendor name and GSTIN | Must match the PO and the invoice |
| Invoice or challan number and date | Links the vendor's documents to the receipt |
| Item code and description | Confirms the right item came, not a substitute |
| Quantity ordered, received, accepted and rejected | The vendor is paid for the accepted quantity |
| Unit of measure | Prevents box-versus-piece errors |
| Batch, serial or heat number | Traceability for warranty claims and quality complaints |
| QC status and remarks | Records the inspection result and the reason for any rejection |
| Storage location | Shows where the goods were put away |
| Gate entry, vehicle and e-way bill numbers, where applicable | Links the receipt to the transport record |
| Received by | Accountability for the count |
Full GRN vs partial GRN
A full GRN closes a PO line because everything ordered was received. A partial GRN records only part of the quantity and leaves the balance open on the PO.
Partial deliveries are normal in MRO buying. A vendor has six of ten contactors in stock, ships them now and promises the rest next week. The store records a GRN for six, the PO shows four pending, and a second GRN closes the line when the rest arrive.
Three rules keep partial receipts clean:
- Record only what physically arrived. Never receive the full PO quantity to close it off while goods are still pending. Stock and payables will both be wrong.
- Match the invoice to what was received. If the vendor invoiced ten and shipped six, pay for six, and ask whether the balance will follow against the same invoice or be cancelled with a credit note.
- Short-close when the balance isn't needed. If the remaining quantity will never come, or is no longer required, purchase closes the PO line at the received quantity instead of leaving it open.
GRN vs delivery challan vs tax invoice
A delivery challan moves goods, a tax invoice charges for them, and a GRN confirms they arrived. The vendor issues the first two; the buyer creates the third.
| Question | Delivery challan | Tax invoice | GRN |
|---|---|---|---|
| Who issues it? | The sender of the goods | The supplier | The buyer's store |
| What is it for? | Moving goods without a sale, or in other cases the GST rules allow | Billing a taxable supply and showing the GST charged | Recording receipt, acceptance and rejection |
| What is its GST role? | None as a tax document; no tax is charged on it | The document on which the buyer claims input tax credit | Evidence that the goods were received, one condition for that credit |
| Typical uses | Job work, goods sent for repair, returnable movements | Every sale of goods | Every delivery against a PO |
Under GST, a supplier selling goods that have to be moved should issue the tax invoice before or at the time the goods are removed (Section 31 of the CGST Act). A delivery challan is meant for movements that aren't a sale, such as job work or goods sent for repair, and for the other cases listed in Rule 55 of the CGST Rules.
In practice many vendors also send a challan or packing list with an invoiced delivery. That's fine, but it doesn't replace the invoice, and a delivery that arrives with only a challan for goods you have bought should be queried before you post the GRN.
The receiving process, step by step
A good receiving process checks documents, counts and quality before the GRN is posted, so the GRN means what it says. A typical sequence:
- Gate entry. Security logs the vehicle, vendor, invoice or challan number and time of arrival. The gate entry number goes on the GRN.
- Document check. Stores confirm there is an open PO for this vendor and item, and that the invoice matches it on item, rate and GSTIN.
- Count and physical check. Unload, count against the invoice and look for transit damage. Note any shortage or damage on the vendor's copy before the driver leaves.
- Quality inspection. Items that need it go to quality: dimensions for a machined spare, a test certificate for a lifting sling, batch and expiry for an adhesive. Hold them in a quarantine area until cleared.
- GRN posting. Record the accepted and rejected quantities. Accepted goods go into stock; rejected goods are marked for return to the vendor.
- Put-away. Move accepted goods to their bin and record the location.
- Hand-off to accounts. Send the GRN with the invoice to accounts for matching and payment.
Not every item needs a formal quality check. Set QC checkpoints for critical spares, safety equipment and anything bought against a test certificate, and let routine consumables go straight from count to GRN.
Why the GRN gates payment and input tax credit
The GRN gates payment because it is the only document that proves, from your side, that goods arrived in the quantity and condition invoiced. Paying without it means paying on the vendor's word.
Payment
Accounts should release payment only after the invoice matches the PO on price and the GRN on quantity. A vendor who billed ten and delivered six is paid for six. Advance payments are the exception, and they should be tracked until a GRN clears them.
Input tax credit
Section 16(2) of the CGST Act sets the conditions for claiming input tax credit. Clause (b) requires that you have received the goods, and the GRN is your evidence of when that happened. Goods delivered on your instruction to another person, such as a job worker, count as received. The other conditions include holding the tax invoice, the supplier having reported it so that it appears in your GSTR-2B, the tax having been paid to the government, and your own return being filed.
MSME payment timelines
For micro and small suppliers, the MSMED Act requires payment by the agreed date, and the agreed period cannot exceed 45 days from the day of acceptance; without a written agreement, payment is due within 15 days. If you object to the goods in writing within 15 days of delivery, acceptance is the day the supplier resolves the objection. Otherwise the goods are treated as accepted on the delivery date. The income-tax deduction for these purchases also depends on paying on time: see our guide to the MSME 45-day payment rule.
How GODOWN helps with delivery and GRN
Every order placed through GODOWN comes with tracked delivery and a GST tax invoice, and receipts sit on the same PO trail as the order. Returns and replacements are handled for you, so your store team isn't chasing vendors. See the Delivery & GRN module.
Questions
Who prepares the GRN, the vendor or the buyer?
The buyer prepares the GRN. It is created by the buyer's store or receiving team when goods arrive against a purchase order, and it records what was received, accepted and rejected. The vendor supplies the tax invoice and, where needed, a delivery challan or e-way bill. The GRN is the buyer's own confirmation, used internally for stock, payment and audit.
Can a GRN be made without a purchase order?
It can, but it is a control gap. A GRN without a PO means goods arrived that nobody ordered through the approved route, so there is no agreed price to check the invoice against. Some plants allow it for free samples or returned goods under a separate receipt type. For purchased goods, raise or locate the PO first, then post the GRN against it.
What happens to rejected items on a GRN?
Rejected items are recorded on the GRN with a reason and kept out of usable stock. They are held in a rejection or quarantine area and sent back to the vendor with a return document. The vendor is paid only for the accepted quantity. If they have already invoiced the full quantity, they should issue a credit note for the rejected part so the GST is adjusted too.
Is a GRN mandatory under GST?
No, GST law does not prescribe a GRN. But Section 16(2)(b) of the CGST Act makes receipt of goods a condition for claiming input tax credit, and the GRN is the usual evidence of receipt and its date. Without a GRN or an equivalent receiving record, the credit is harder to support if it is questioned. Confirm your documentation with your chartered accountant.