E-commerce Accounting in India: A Complete Guide for Online Sellers

A marketplace pays you one number on a Tuesday. Inside that number sit a sale, a commission, a shipping charge, a storage fee, an advertising cost, two different taxes and possibly a refund from three weeks ago. Book the number as it arrives and every figure that matters afterwards is wrong: your turnover, your GST return, your input credit, your margin, and eventually your tax audit.

E-commerce accounting is the practice of recording online sales at their gross value and separately recording every deduction a marketplace or gateway takes out of them, so that revenue, tax and margin are each correct. Booking only the net payout understates all three.

This guide covers the whole system for Indian sellers, from the first GST question to the monthly report you should be reading. It is written for owners, not accountants, but the technical positions are stated precisely enough for your CA to work from.

Why e-commerce accounting is different

A traditional business raises an invoice and gets paid roughly that amount. An online seller does not. The gap between what the customer paid and what reached the bank is not a rounding difference, it is a stack of separate transactions that each need their own treatment.

The practical consequence is that a seller cannot run books from bank statements. The bank shows the residue. The accounting has to start from order and settlement data and end at the bank, not the other way round.

The one number that causes most of the damage

Here is a single illustrative order, using round numbers so the arithmetic is easy to follow. Assume a product with a taxable value of ₹1,000 at 18 per cent GST, sold through a marketplace.

Most sellers record ₹961.42 as sales. Six things then go wrong at once.

Turnover is understated by ₹218.58, which matters for GST thresholds, e-invoicing applicability, presumptive taxation limits and tax audit triggers. Output GST of ₹180 is not recorded, so the return will not match the operator’s filings. Input tax credit of ₹32.40 on platform fees is silently forfeited. The ₹5 of TCS, which is your money sitting in your electronic cash ledger, is treated as a cost. The ₹1.18 of TDS, which is prepaid income tax, disappears. And gross margin becomes unknowable, because ₹212.40 of genuine selling cost has been netted into revenue instead of sitting in the expense lines where it can be measured.

The correct treatment records revenue of ₹1,000, an output GST liability of ₹180, selling expenses of ₹180 with input credit of ₹32.40, a TCS receivable of ₹5, an advance tax asset of ₹1.18 and a bank receipt of ₹961.42. Same cash, six correct numbers instead of one wrong one.

If you want the detailed walk-through of an actual settlement file, we have written that separately in how to read a marketplace settlement.

Revenue recognition for online sellers

Revenue is recognised when control of the goods passes to the customer and the amount is measurable, not when the platform pays you. In practice, for goods sold online, that is dispatch or delivery depending on the terms you sell on. Be consistent, and document which one you use.

Three specific situations trip people up.

Cash on delivery

The sale happens on delivery. The money arrives days or weeks later from a courier or aggregator. Revenue and the receivable go into the books on delivery. The remittance clears the receivable later.

Orders in transit at month end

Dispatched but undelivered stock is neither sales nor closing inventory in the ordinary sense. It is goods in transit. Pick a policy, apply it every month, and make sure the same cut-off drives your GST return.

Shipping recovered from the customer

If you charge the customer for delivery, that recovery forms part of the value of your supply under Section 15 of the CGST Act and generally follows the GST rate of the goods themselves. It is not a separate service you are providing at 18 per cent.

GST for e-commerce sellers

Do you need to register

The starting position is Section 24(ix) of the CGST Act: a person supplying goods or services through an operator who is required to collect tax at source must register, whatever their turnover.

Since 1 October 2023 there is a carve-out for small sellers of goods, under Notification No. 34/2023-Central Tax. You can sell goods through a marketplace without regular GST registration only if all of the following hold:

• turnover stays below the registration threshold applicable in your state;
• you make no inter-state supplies at all;
• you sell through operators in one state or union territory only;
• you hold a PAN; and
• you obtain an enrolment number on the GST portal before your first supply.

That list is strict. One inter-state order breaks it. Most sellers with any ambition cross it in month one, which is why the practical answer for a serious seller is to register. Our guide on who must register for GST works through the thresholds, which differ by state and between goods and services.

Suppliers of services through an operator have a different rule again, and for certain notified services under Section 9(5), such as passenger transport, hotel accommodation, restaurant supplies through platforms and, following the changes effective 22 September 2025, local delivery services, the operator pays the GST rather than the supplier.

TCS: the operator’s collection, and your money

Under Section 52, the operator collects tax at source on the net value of taxable supplies made through it. The rate has been 0.5 per cent since 10 July 2024, being 0.25 per cent CGST plus 0.25 per cent SGST on intra-state supplies, or 0.5 per cent IGST on inter-state supplies. It was 1 per cent before that, and a large amount of published guidance still says so.

Two things follow. TCS is calculated on the net value, that is, supplies less returns for the month. And it is not an expense. The operator files Form GSTR-8 by the 10th of the following month, and once you accept it in the TDS and TCS credit received statement, the amount lands in your electronic cash ledger where it pays your output tax.

Your returns

You still file GSTR-1 and GSTR-3B in the ordinary way. Two recent changes make the sequence matter more than it used to.

Since the July 2025 tax period, the outward liability auto-populated into GSTR-3B from GSTR-1 is hard-locked and cannot be edited on the portal. If the sales figure is wrong, the correction has to go through GSTR-1A before GSTR-3B is filed, or into a later period’s amendment. Reconciliation has moved upstream: it now belongs before the return, not after it.

Separately, returns more than three years past their due date are barred on the portal, a restriction enforced from October 2025. Old unfiled periods do not stay fixable forever.

Income tax: the second withholding

The same order carries income-tax TDS. An e-commerce operator deducts 0.1 per cent of the gross amount of sales facilitated through its platform. The rate fell from 1 per cent to 0.1 per cent with effect from 1 October 2024.

Two citations, because the law was renumbered. Under the Income-tax Act, 1961 this was Section 194-O. From 1 April 2026 the Income-tax Act, 2025 governs, and the same obligation sits at Section 393(1), Table Sl. No. 8(v). Any agreement, SOP or software configuration still referencing only 194-O should be updated.

No deduction applies where the seller is a resident individual or HUF whose gross sales through the platform do not exceed ₹5 lakh in the year and who has furnished PAN or Aadhaar. For a company, firm or LLP there is no threshold. Without PAN or Aadhaar, the rate rises to 5 per cent.

Operators differ in how they compute the gross amount, particularly on the GST component and on returns. Do not assume. Match the deduction shown in your settlement report against your annual tax statement and AIS every quarter, because that credit is only usable if it appears against your PAN.

Inventory

Inventory is valued at the lower of cost and net realisable value. Cost includes the purchase price net of recoverable taxes, inbound freight, customs duty and anything else spent bringing the stock to its present location and condition. It does not include selling costs, marketplace commission, advertising or storage of finished goods.

Three points specific to online sellers.

Stock in another state’s fulfilment centre is still yours

Placing goods in a fulfilment centre does not sell them. They stay in your closing stock until the customer buys them.

Moving your own stock across a state border is a supply

Where you hold separate registrations in two states, a transfer between them is a supply between distinct persons under Schedule I of the CGST Act. It needs a tax invoice and IGST, which you then take credit for at the receiving end. This is not optional and it is one of the most common errors we see in seller books.

The warehouse address has to be on your registration

Marketplaces will not accept stock into a fulfilment centre unless that address appears on your GST registration as an additional place of business. That is a REG-14 amendment, covered in adding a fulfilment centre to your GST registration.

Returns, refunds and credit notes

Returns are not a footnote in this industry, they are a line item that decides whether a category is viable.

A return reverses revenue and, where you issue a credit note with GST, reduces your output tax liability. That reduction is not available indefinitely: a credit note affecting tax has to be declared by the earlier of 30 November following the end of the financial year or the date you file that year’s annual return. Miss it and the commercial refund still happens but the tax stays paid.

Returns also fragment your costs. The forward shipping fee is usually gone. A return shipping fee is often charged. Commission may or may not be refunded, depending on the platform and the reason. The goods may come back saleable, damaged, or not at all. Book each of these where it belongs rather than netting the whole event into a single "returns" number, or you will never be able to answer why a product with a healthy gross margin loses money.

What your monthly close should produce

If your accountant hands you a trial balance and nothing else, you are paying for compliance, not information. A monthly e-commerce close should produce all of the following.

• Gross sales by channel, at invoice value, agreeing to the platform’s own reports.
• Deductions analysed by type: commission, fulfilment, shipping, storage, advertising, penalties.
• Returns and RTO, in units and value, with a rate per channel.
• Net realisation per order, and contribution margin by category or top SKUs.
• GST position: output tax, input credit, TCS credited to the cash ledger, and any mismatch against the operator’s GSTR-8.
• TDS deducted, agreed to the tax statement against your PAN.
• Inventory by location, including stock held at fulfilment centres, with a movement summary.
• Gateway, courier and COD balances still to be received.
• Cash: opening, movements, closing, and what is stuck in transit.

That is the difference between bookkeeping and an MIS report.

Eight mistakes that cost real money

• Booking the settlement amount as revenue.
• Treating TCS as an expense instead of a cash ledger credit.
• Never accepting the TCS credit on the portal, so it sits unused.
• Missing input tax credit on commission, fulfilment, advertising and gateway charges.
• Moving stock between your own state registrations without an invoice.
• Issuing credit notes for returns after the November cut-off.
• Reconciling after filing GSTR-3B, which no longer works now that the liability is locked.
• Measuring profit at company level only, so a loss-making category hides inside a profitable one.

When to bring in professional help

Not every seller needs a firm. A single-state proprietor doing a few lakh a year on one platform, with clean stock and few returns, can run this on a good cloud ledger with quarterly review.

The picture changes when any of these appear: a second sales channel, stock in more than one state, a return rate above roughly a tenth of orders, imported inventory, external funding or a lender asking for monthly numbers, or turnover approaching the e-invoicing or tax audit thresholds. At that point the reconciliation work is a monthly discipline rather than an occasional clean-up, and the cost of getting it wrong exceeds the cost of doing it properly.

If you are weighing that decision, we have set out what the work actually involves and what it costs in e-commerce accounting services: scope, cost and how to choose.

Where to go next

• Selling on marketplaces: Amazon and Flipkart seller accounting
• Own website or D2C: Shopify and D2C accounting in India
• Money going missing between platform and bank: e-commerce reconciliation
• Matching GST returns to the operator’s filings: marketplace GST reconciliation

Frequently asked questions