Customers can return their products as per your business settings. If you accept return of item purchased and paid for and have set a limit in number of days upto which return will return of items will be accepted, the customers will have an option to request for return with stated reasons.
Return request will be subject to acceptance by you as the biz admin from the admin console. The console provides a consolidated list of return requests which can be filtered to show only the waiting requests. It is up to the owner of biz to accept a return request.
There is an option to refund the cash amount to the customer. This is an action the biz owner has to do on his own. However if the payment has been made through Razorpay, the paid amount can be requested to be refunded. Customer has to be informed of the refund.
As per your biz setting, if you choose to keep the amount as an outstanding credit against the customer, the amount can be used by the customer against any future purchase. The customer will be billed after adjusting his outstanding credit. The return accepting email will inform the customer of the outstanding credit balance.