What should I do if crackers arrive damaged from the lorry?

Count the cases against the LR before signing, open suspect cartons at the transport office, note damage or shortage on the LR copy, photograph everything and inform the supplier the same day. A claim noted on the LR is far stronger than one reported later from the shop.

How are breakage claims settled in the cracker trade?

By credit note against the original invoice, not by insurance claims. The supplier credits the value of the damaged or short goods, which reduces your party ledger, and your stock records only what arrived in saleable condition.

How are credit notes treated under GST?

Section 34 of the CGST Act lets a seller issue a credit note against a tax invoice, carrying GST at the same rate, and it is reported in GSTR-1 for the period. Each credit note should reference the original invoice number.

What reason codes should a credit note carry?

Four cover most of the trade: breakage, shortage, return and rate dispute. Recording one on every credit note explains the number months later and shows, over a season, which supplier or transporter is causing the losses.

Can I just adjust breakage against my next order?

Only with paper. Netting a claim off a future order with no credit note is the classic source of season-end disputes, because both sides remember different figures. Get the credit note first, then adjust the payment.

Breakage, shortage and credit notes: settling claims cleanly

Safety, Storage & Stock · 15 August 2026

A case of crackers is cardboard, paper and chemicals, loaded in Sivakasi, transferred at two transport offices and unloaded 500 km later by a boy in a hurry. Some of it will not survive the trip. Every wholesaler knows this, every retailer knows this, and yet every season the same consignments turn into the same phone arguments.

The trade already has a clean way to settle damage: the credit note. The arguments happen when nobody writes things down. Here is the paper trail that avoids them.

Breakage and shortage are routine, not exceptions

Treat a damage claim as a normal document in your season, like a purchase bill or an e-way bill, not as a fight. Fireworks travel only by licensed lorry, handled at parcel offices at both ends, and a certain percentage of crushed cartons and short cases is simply the cost of moving fragile goods in bulk. A supplier who ships fifty cases expects a claim or two. What he does not expect is a claim made three weeks later with no evidence.

Check at the transport office, note it on the LR

Your strongest position is at the moment of delivery. Count the cases against the LR (lorry receipt) before you sign it. Open anything that looks crushed or wet while you are still standing at the transport office. If a case is damaged or missing, write it on the LR copy before signing, take photos of the cartons with the LR visible in the frame, and phone the supplier the same day. A shortage noted on the LR is a fact; a shortage reported from your godown a week later is a negotiation. Shortage inside a sealed case, boxes missing against the packing slip, only shows up when you open it, so open cases within a day or two of arrival and report the same way: photos, invoice number, same-day call.

Credit notes, not insurance claims

In the retail and wholesale cracker trade, transit damage is almost never settled through cargo insurance. The working practice is simpler: the supplier issues a credit note against the original invoice for the value of the damaged or short goods. Your ledger with that party reduces by the credit amount, and the stock records reduce by the goods you never received in saleable condition. Formal freight-damage claims exist at the manufacturer and large-distributor level, but for a shop, the credit note is the whole mechanism. It works in the other direction too: when a retailer of yours reports crushed cases from the lorry you booked, you issue him a credit note the same way, with the same evidence expected.

Reason codes worth recording

A credit note with no reason is a number nobody can explain in January. Record one of a small set of reasons on every credit note, in both directions: the ones you receive from your Sivakasi supplier and the ones you issue to your own retail parties.

Breakage. Goods arrived crushed, wet or otherwise unsaleable.
Shortage. Cases or boxes short against the invoice quantity.
Return. Saleable goods sent back, for example unsold stock taken back against next season’s booking.
Rate dispute. Billed rate differed from the agreed net rate, settled by adjusting value, not quantity.

Four codes cover practically everything, and totalling them at season end tells you which supplier packs badly, which transporter loses cases and which party argues rates after the fact.

The GST side, kept simple

Under Section 34 of the CGST Act, a registered seller who has issued a tax invoice can issue a credit note against it, and those credit notes are reported in GSTR-1 for the period. If your Sivakasi supplier gives you a credit note, the tax on your purchase reduces accordingly, so pass it to whoever files your returns rather than leaving it in a drawer. If you are the one issuing credit notes to retailers, they go into your own GSTR-1. The rule of thumb: every credit note references its original invoice number, carries GST at the same rate as the invoice, and reaches your filing pile the day it is made.

A short worked example

You receive 10 cases of chakkars against an invoice of ₹80,000 plus GST. At the transport office, one case is crushed and one is short: you note both on the LR and send photos. The supplier agrees and issues a credit note for 2 cases, ₹16,000 plus GST, referencing the invoice number, reason “breakage/shortage”.

Party ledger: you now owe ₹64,000 plus GST, not ₹80,000.
Stock: opening stock records 8 cases, because only 8 arrived saleable.
GST: the supplier reports the credit note in his GSTR-1; your available credit reduces to match.

Three entries, one document, no argument in January. Software that links credit notes to the original invoice makes the ledger and stock sides move together automatically; that is how Crackers Billing Software models it, with the same four reason codes.

Disputes to avoid

The two habits that cause every season-end fight: verbal adjustments (“I will reduce it in the next bill”) that nobody wrote down, and netting a claim against a future order without any paper. Months later the two sides remember different numbers, and the relationship pays for it. If value moves, a document moves: no credit note, no adjustment.

Settled this way, breakage stops being a source of friction and becomes what it really is: a line item. The suppliers worth keeping settle claims within days, and the shops worth supplying make claims with photos and LR notes, not stories.

Frequently asked questions

What should I do if crackers arrive damaged from the lorry?: Count the cases against the LR before signing, open suspect cartons at the transport office, note damage or shortage on the LR copy, photograph everything and inform the supplier the same day. A claim noted on the LR is far stronger than one reported later from the shop.
How are breakage claims settled in the cracker trade?: By credit note against the original invoice, not by insurance claims. The supplier credits the value of the damaged or short goods, which reduces your party ledger, and your stock records only what arrived in saleable condition.
How are credit notes treated under GST?: Section 34 of the CGST Act lets a seller issue a credit note against a tax invoice, carrying GST at the same rate, and it is reported in GSTR-1 for the period. Each credit note should reference the original invoice number.
What reason codes should a credit note carry?: Four cover most of the trade: breakage, shortage, return and rate dispute. Recording one on every credit note explains the number months later and shows, over a season, which supplier or transporter is causing the losses.
Can I just adjust breakage against my next order?: Only with paper. Netting a claim off a future order with no credit note is the classic source of season-end disputes, because both sides remember different figures. Get the credit note first, then adjust the payment.

Sources

This guide is general information for the crackers trade, not legal, tax or safety advice. Rules change by state and by year; confirm the current position with your licensing authority or accountant.