I’ve never offered prepaid labels on handmade either. If it’s my fault, they can keep it. If it’s buyer’s fault, I have Amazon give an unpaid label.
I mostly use PirateShip. In manage returns you upload the label there and it has to be in .jpg format so you will have to convert the PDF to .jpg. The process allows you to enter the label cost, which if a buyer faulted return, this amount is in a deduction section by itself you can check mark and deduct. If you are just supplying a label in the message system, a PDF works fine.