Go to transaction SMARTFORMS, put in the name of the smartform you want to debug. Then on the menu go to Smart Forms->Test.
It will redirect to t-code SE37 with a function module name already filled in. This FM is the one which will call your smartform in the background. Display the code for the FM and you can have a break point in that function module.
You can run the transaction(example ME21N for creating a PO) for which the output is being generated via the smartform and it will stop at your break point.