E-commerce Accounting in India: How to Read a Marketplace Settlement
A marketplace pays one number. Learn how to split commission, fees, TCS and TDS out of an Amazon or Flipkart settlement so your GST turnover and margins are correct.
Quick answers. A settlement contains gross sales less commission, fulfilment, shipping, storage, promotions, returns, TCS and TDS. The settlement figure is not your revenue — gross sales is. GST TCS is 0.5 per cent of net taxable supplies since 10 July 2024, and it lands in your electronic cash ledger, not in input tax credit. Income tax TDS under Section 194-O is 0.1 per cent of gross sales since 1 October 2024.
The single number that hides eight
You sold ten lakh rupees of goods on a marketplace last month and ₹7.4 lakh reached your bank. If ₹7.4 lakh is what your books call revenue, three things are now wrong at once: your GST turnover is understated by ₹2.6 lakh, your GSTR-1 will not agree with the operator’s GSTR-8, and you have no idea what your actual margin is.
E-commerce accounting in India is not difficult, but it is unforgiving. The work is taking one settlement number apart and putting eight lines back into the books, every month, before the return is filed rather than after.
What is e-commerce accounting?
E-commerce accounting is the practice of recording marketplace sales at gross value and separately recognising each operator deduction, so that turnover reported under the Central Goods and Services Tax Act 2017 reflects the supply made to the customer rather than the amount settled by the platform.
The distinction matters because GST attaches to the supply, not to the payout. When a customer pays ₹1,000 for goods on Amazon, the taxable supply is ₹1,000 made by you to that customer. Amazon’s commission is a separate supply made by Amazon to you.
Two businesses can have identical bank credits and completely different tax positions depending on whether that separation was made.
Key terms explained
- ECO (E-commerce Operator): defined in Section 2(45) of the CGST Act as any person who owns, operates or manages a digital platform for electronic commerce. Amazon, Flipkart, Meesho, Zomato and Urban Company are all ECOs.
- Net value of taxable supplies: total taxable supplies made through the platform in a month, reduced by supplies returned in that same month. This is the base on which TCS is collected.
- RTO (Return to Origin): an order dispatched but never delivered, which comes back to you. It reduces net value for TCS but often appears in a later month’s settlement than the original sale.
- Settlement report: the platform’s statement of what it sold on your behalf and what it deducted. It is source data for your books, not a substitute for them.
- Electronic cash ledger: the GST portal wallet holding tax you have already paid or that has been collected on your behalf. TCS lands here.
Who this applies to
If you sell goods through an e-commerce operator, Section 24(ix) of the CGST Act requires registration regardless of turnover. There is no ₹40 lakh cushion and no ₹20 lakh cushion. One listing on Meesho and you need a GSTIN. Our guide on who has to register for GST sets out the wider position.
If you supply services through an e-commerce operator, the position is different. Notification 65/2017 Central Tax exempts you from compulsory registration until aggregate turnover crosses ₹20 lakh (₹10 lakh in the special category states), provided the operator is not liable under Section 9(5).
If the operator is liable under Section 9(5), which covers restaurant supply through aggregators, passenger transport and certain accommodation and housekeeping services, the operator pays the GST and you do not charge it on those supplies at all.
The legal framework
- Section 52, CGST Act 2017. Every e-commerce operator must collect tax at source on the net value of taxable supplies made through its platform where it collects the consideration.
- Rate. 0.5 per cent, split as 0.25 per cent CGST and 0.25 per cent SGST for intra-state supplies, or 0.5 per cent IGST for inter-state supplies. The rate was halved from 1 per cent with effect from 10 July 2024 by Notification 15/2024 Central Tax and Notification 01/2024 Integrated Tax.
- Form GSTR-8. The operator files this by the 10th of the following month. Your credit does not exist until that filing happens.
- Section 194-O. A separate income tax deduction of 0.1 per cent on gross sales, reduced from 1 per cent with effect from 1 October 2024. It is deducted against your PAN, appears in Form 26AS and the Annual Information Statement, and offsets income tax. It has nothing to do with GST.
- Section 24(ix), CGST Act. Compulsory registration for persons supplying goods through an e-commerce operator.
The monthly process, step by step
Step 1: Download the settlement report at transaction level. Take the itemised report, not the summary. Amazon calls it the Transaction Report, Flipkart calls it the Sales Report, Meesho publishes a payment file. The summary view will not let you separate a commission from a shipping charge.
Step 2: Book gross sales, not net. Post the full invoice value of every order as revenue with the correct GST rate and place of supply. Where the customer is in your own state, charge CGST and SGST. Where the customer is elsewhere, charge IGST.
Step 3: Post each operator deduction as an expense in its own ledger. Commission, fulfilment fee, weight handling, storage, closing fee, advertising and promotional funding are all separate costs. Grouping them into one “marketplace charges” ledger destroys your ability to see which of them is eating the margin.
Step 4: Claim input tax credit on the operator’s tax invoice. Marketplace fees carry 18 per cent GST. That GST is creditable if the supply is used for business. Match it against GSTR-2B before claiming.
Step 5: Book TCS as a receivable. Debit a current asset ledger called TCS Receivable. Do not route it to an expense account. This is the single most common error and it quietly reduces your reported profit by money that is still yours.
Step 6: Book Section 194-O TDS separately. Debit a TDS Receivable ledger tagged to your PAN. Reconcile it to Form 26AS at the end of each quarter.
Step 7: Handle returns in the month they occur. A return reduces net value for TCS purposes only in the month it is processed. If a March order is returned in April, the April TCS base falls, and your books must mirror that timing rather than restating March.
Step 8: Accept the TCS credit on the portal. Log in to the GST portal, open Services then Returns then TDS and TCS Credit Received, verify the figures against your settlement report, and accept. Only accepted amounts reach your electronic cash ledger.
Step 9: Run the three-way reconciliation. Settlement report against GSTR-1 against GSTR-8. Investigate every difference before filing GSTR-3B.
Documents you need each month
- Transaction-level settlement report from each marketplace
- Monthly tax invoice issued by the operator for its fees
- GSTR-2B for the tax period
- GSTR-8 data as reflected in TDS and TCS Credit Received
- Bank statement covering every payout
- Returns and RTO report
- Form 26AS or AIS extract for Section 194-O credits (quarterly)
Rates and thresholds at a glance
| Item | Position for FY 2026-27 |
|---|---|
| GST TCS, Section 52 | 0.5 per cent of net taxable supplies (0.25 CGST + 0.25 SGST, or 0.5 IGST) |
| Effective from | 10 July 2024, Notification 15/2024 Central Tax |
| Income tax TDS, Section 194-O | 0.1 per cent of gross sales, from 1 October 2024 |
| Section 194-O where PAN not furnished | 5 per cent |
| GSTR-8 due date | 10th of the following month |
| GST on marketplace fees | 18 per cent, creditable |
| Registration threshold, goods via ECO | Nil. Registration compulsory under Section 24(ix) |
| Registration threshold, services via ECO | ₹20 lakh (₹10 lakh special category states) |
Five mistakes that show up in almost every seller file
- Booking the net payout as sales. Turnover is understated, GSTR-1 fails to match GSTR-8, and a system-generated notice follows. Post gross, then post deductions.
- Treating TCS as an expense. Profit is understated and a real asset disappears from the balance sheet. TCS Receivable is a current asset until it is accepted and used.
- Using the old 1 per cent TCS rate. Your expected credit never matches what the operator actually deposited, and every month starts with a phantom difference. It has been 0.5 per cent since 10 July 2024.
- Confusing Section 52 TCS with Section 194-O TDS. GST credit is claimed against income tax or the reverse, and both ledgers end the year wrong. TCS follows your GSTIN, TDS follows your PAN. Keep two ledgers.
- Never accepting TCS on the portal. Credit sits unclaimed indefinitely while you pay GST in cash. Make acceptance a fixed step in a monthly close routine.
Penalties and consequences
Failure to furnish GSTR-1 or GSTR-3B on time attracts late fee under Section 47 of the CGST Act along with interest at 18 per cent per annum under Section 50(1) on the tax paid late.
An e-commerce operator that fails to furnish GSTR-8 by the due date attracts a late fee of ₹200 per day, capped at ₹5,000, along with 18 per cent interest, and every seller on that platform waits for credit until it files.
Where the details furnished by the operator in GSTR-8 do not match the outward supplies declared by the supplier, Section 52(9) and Section 52(10) provide that the discrepancy is communicated to both parties, and if it is not rectified, the differential amount is added to the supplier’s output tax liability with interest.
Failure to deduct or deposit tax under Section 194-O attracts interest under the corresponding provisions of the Income-tax Act 2025 and disallowance of the related expenditure in the deductor’s hands.
How these provisions interact
Section 52 of the CGST Act collects tax against your GSTIN while Section 194-O of the income tax law deducts tax against your PAN, and neither credit can be used to discharge the other liability.
Section 24(ix) of the CGST Act overrides the ₹40 lakh and ₹20 lakh thresholds in Section 22 for any person supplying goods through an e-commerce operator, which is why a seller with ₹3 lakh of Meesho sales still needs a GSTIN.
Where Section 9(5) applies to a notified service, the e-commerce operator becomes the person liable to pay GST, which displaces both the supplier’s own liability on that supply and the operator’s TCS obligation under Section 52 in respect of it.
Own website versus marketplace
| Selling on your own site | Selling through a marketplace | |
|---|---|---|
| GST registration | Threshold of ₹40 lakh or ₹20 lakh applies | Compulsory from the first sale of goods, Section 24(ix) |
| TCS under Section 52 | Not applicable | 0.5 per cent collected by the operator |
| TDS under Section 194-O | Not applicable | 0.1 per cent on gross sales |
| Revenue recognition | Invoice value equals amount received, less payment gateway charges | Invoice value differs from settlement by seven or more deductions |
| Monthly reconciliation | Gateway report against bank | Settlement against GSTR-1 against GSTR-8 against bank |
| Stock location | Your premises | Fulfilment centre, which must appear on your registration |
Key takeaways
- E-commerce accounting requires sales to be recorded at gross invoice value under the CGST Act 2017, with every operator deduction posted separately, because GST attaches to the supply rather than to the settlement amount.
- Tax collected at source under Section 52 stands at 0.5 per cent of net taxable supplies with effect from 10 July 2024, and the credit reaches the seller’s electronic cash ledger only after the operator files Form GSTR-8 and the seller accepts the entry on the GST portal.
- Tax deducted under Section 194-O stands at 0.1 per cent of gross sales with effect from 1 October 2024 and is credited against income tax liability through Form 26AS, entirely separately from the GST route.
- Any person supplying goods through an e-commerce operator must register under Section 24(ix) of the CGST Act irrespective of turnover, while suppliers of services through an operator retain the ₹20 lakh threshold unless Section 9(5) applies.
Frequently asked questions
Q: How do you record e-commerce sales in accounting?
A: Record the full invoice value as revenue, then post each marketplace deduction to its own ledger. The settlement credit is the balancing figure, not the starting point.
Q: Is TCS an expense or an asset?
A: TCS is an asset. It is your own tax, already deposited with the government against your GSTIN, and it is recoverable through your electronic cash ledger.
Q: What is the TCS rate for e-commerce sellers in India?
A: 0.5 per cent of the net value of taxable supplies since 10 July 2024. It is split as 0.25 per cent CGST and 0.25 per cent SGST for intra-state sales, or charged as 0.5 per cent IGST for inter-state sales.
Q: Do I need GST registration to sell on Amazon?
A: Yes, if you sell goods. Section 24(ix) of the CGST Act makes registration compulsory for any person supplying goods through an e-commerce operator, whatever the turnover.
Q: What is the difference between Section 52 TCS and Section 194-O TDS?
A: Section 52 is a GST collection at 0.5 per cent against your GSTIN. Section 194-O is an income tax deduction at 0.1 per cent against your PAN. They appear on the same settlement statement and go to two different places.
Q: Why does my GST turnover not match my marketplace payout?
A: Because GST is charged on the price the customer paid, while the payout is that price less commission, fulfilment, shipping, storage, advertising, returns, TCS and TDS.
Q: Can I claim ITC on Amazon commission?
A: Yes. The operator issues a tax invoice carrying 18 per cent GST on its fees, and that credit is available if the supply is used in the course of business and appears in your GSTR-2B.
Q: How do I account for returns and RTO orders?
A: Reduce net value in the month the return is processed rather than restating the original month, and reverse the input tax credit on any goods that cannot be resold.
Q: Can I sell online under the composition scheme?
A: A composition dealer cannot make supplies through an e-commerce operator that is required to collect tax under Section 52, so in practice the composition route and marketplace selling do not sit together for goods.
Q: Do I need to register the Amazon warehouse address?
A: Yes. Stock held at a fulfilment centre requires that address to appear on your registration as an additional place of business. See our note on the fulfilment centre address on your GSTIN.
Q: Which software handles marketplace settlements best?
A: Any of the mainstream Indian products can, provided someone maps the settlement fields to ledgers once and keeps that mapping stable. Compare them on the practical differences rather than the feature list.
If you want this handled
Pulling a settlement apart correctly takes a couple of hours a month once, and a full year to unpick if it has been done wrong. If your books currently record the payout rather than the sale, our e-commerce accounting service rebuilds the mapping and closes each month against GSTR-8 before the return goes in.
If your stock is sitting in a fulfilment centre that is not on your registration, start with adding a fulfilment centre to your GST registration, because that one is time bound. Where the question is which package to run it all in, we have compared accounting software on the points that actually differ, and where your books are stored is now a statutory question in its own right.