Shopify and D2C Accounting in India: Gateways, COD, GST and Margins

Most accounting advice written for online sellers in India assumes a marketplace. It talks about settlement reports, commission and tax collected at source, and none of it quite fits a brand selling on its own domain.

A D2C brand selling on its own website is the supplier, not a marketplace participant. GST TCS under Section 52 does not usually apply, but the brand carries full responsibility for output GST, gateway reconciliation, COD remittances and the cost of returns.

That sounds simpler and is not. You are the supplier, the merchant of record and the person carrying every cost of getting a parcel to a customer and, often, back again. The money arrives in fragments from three or four sources, and the platform dashboard reports a revenue number that your books will never agree with.

This article covers what actually needs to happen. The general framework sits in the complete guide to e-commerce accounting in India; this is the D2C-specific layer.

First, the tax position is not the same as a marketplace seller’s

Two differences matter immediately.

Section 52 TCS generally does not apply to your own storefront

Tax collected at source under Section 52 is collected by an electronic commerce operator on supplies made through it by other suppliers. Selling your own goods on your own website is not that. Your payment gateway processes money, it does not facilitate a supply between you and a buyer on a platform it operates. So there is no 0.5 per cent TCS line and no operator GSTR-8 to reconcile against.

The exception is if you also sell on marketplaces, in which case that part of your business does carry TCS and needs the treatment set out in Amazon and Flipkart seller accounting. Most D2C brands eventually run both, and the two channels need separate ledgers.

Registration is driven by different rules

Because Section 24(ix) is not in play, a purely own-website seller is not automatically required to register. But Section 24(i) requires registration for any person making an inter-state taxable supply of goods, with no turnover threshold. A brand shipping pan-India from day one is therefore registrable from day one, regardless of revenue. Only a genuinely single-state operation gets to rely on the ordinary turnover thresholds, and those differ by state. The detail is in who must register for GST, or we can handle it through GST registration.

The money arrives in four streams

A single day’s orders on a D2C store typically split like this.

Each stream needs its own control account. If all four land in a single "sales" line against bank credits, no one can tell whether a payout is late, short, or missing, and by the time it is noticed the courier’s claim window has usually closed.

Gateway settlements

A gateway settles a batch of transactions net of its fee. Here is an illustrative day, using round numbers.

The entries are straightforward once the discipline is set. Revenue of ₹1,00,000 and output GST of ₹18,000 come from order data, not from the settlement. The refund reverses revenue and, with a credit note, the output tax. The gateway fee is a finance or selling cost of ₹2,218, and the ₹399 of GST on it is input tax credit you are entitled to, provided the gateway’s invoice appears in your GSTR-2B and you have acted on it in the Invoice Management System.

That last point is worth its own sentence. Gateway charges are one of the largest recurring costs a D2C brand carries, and the GST on them is fully creditable. Brands lose it every month by never booking the gateway’s tax invoice.

Cash on delivery, the slowest money in the business

COD creates three separate problems.

Timing

The sale happens on delivery. The cash reaches your bank when the courier remits, often on a weekly cycle and sometimes later for newer accounts. Between those two events you have a receivable, and it needs to be visible. Revenue and a COD receivable go into the books on delivery; the remittance clears the receivable.

Deductions

The remittance is net of shipping charges, COD handling fees and adjustments for weight discrepancies. Weight discrepancy charges in particular are levied after the fact and are frequently disputable. If your books show only the net remittance, you will never dispute anything, because you will never see it.

Failure

COD orders fail more often than prepaid ones. A refused delivery becomes an RTO, which is covered below.

For income tax, note that receipts are tested by how the money reaches you, not by how your customer paid. A COD order remitted to your bank account by a courier arrives through a banking channel. That matters when you are near the presumptive taxation limits under Section 58 of the Income-tax Act, 2025 or the audit thresholds under Section 63, both of which turn on the proportion of cash receipts and payments. Confirm the treatment with your CA before relying on it, because the composition of your receipts is a question of fact.

Return to origin is a cost, not a return

An RTO parcel never reached the customer. No supply took place, so there is no sale to reverse and no credit note to issue. What did happen is that you paid to send it and paid to get it back.

Book it as a distribution cost, and track two numbers every month: RTO as a percentage of dispatched orders, and average RTO cost per failed order. Split by payment method, because prepaid and COD behave very differently, and by top pin codes if the volume justifies it. This is one of the few operational metrics that comes straight out of properly maintained books and can be acted on the same week.

Discounts, coupons and how revenue should be presented

Presentation matters more than most founders expect, because it changes every ratio built on top of it.

A discount given at the time of sale and shown on the invoice reduces the value of the supply, so both revenue and GST are computed on the discounted amount. A post-sale discount only reduces the taxable value where the conditions in Section 15(3) of the CGST Act are met, including that it was agreed before or at the time of supply and is linked to the relevant invoices, with the credit reversed by the recipient where applicable. Loyalty credits, coupon burns and shipping subsidies each need a considered treatment rather than a default one.

For management reporting, keep gross sales, discounts and net sales as three visible lines. A brand that reports only net sales cannot see its own discount rate trending upward, which is usually the first sign that growth is being purchased rather than earned.

Marketing spend and the numbers investors ask about

Advertising is normally the largest controllable cost in a D2C profit and loss account, and the accounting for it is simple as long as two things are watched.

Input tax credit on ad spend

Where the platform bills you from an Indian entity with GST charged, the credit is available in the ordinary way. Where a service is billed from outside India, import of services rules and reverse charge may apply instead. Check how each of your platforms invoices you, because they do not all do it the same way, and the treatment follows the invoice, not the platform’s brand.

Accruals

Ad spend charged to a card on the 2nd for the last few days of the previous month belongs to the previous month. Without that cut-off, your customer acquisition cost bounces around for reasons that have nothing to do with performance.

Once the books are clean, three figures become computable and defensible: contribution margin per order after all variable costs, acquisition cost per new customer, and the ratio between them. Those are the numbers a lender or an investor will test, and they are only as good as the underlying ledger. If you are at the stage of being asked for them monthly, a fractional CFO is usually the right answer rather than a bigger accounting team.

Inventory for a D2C brand

Value stock at the lower of cost and net realisable value. Cost includes purchase price net of recoverable taxes, inbound freight, customs duty and any other cost of bringing goods to their present location and condition. It excludes selling costs, warehousing of finished goods, advertising and gateway fees.

Two D2C-specific points.

Third-party warehousing

If a 3PL holds your stock, it is still your inventory and still your closing stock. If the warehouse is in another state, you are likely to need registration there, and movement of your own goods between your own registrations is a supply under Schedule I.

Bundles and kits

Selling three products as a kit at a single price requires the cost of each component to move out of stock and the GST rate of the bundle to be considered. Where items are naturally bundled and supplied together, composite and mixed supply rules determine the rate. Set this up once, correctly, rather than after the first notice.

Subscriptions and prepaid revenue

If you sell a subscription box or an annual plan, the cash you collect in month one is not month one’s revenue. It is a liability that unwinds over the delivery period. The same logic that applies to software applies here, and we have set it out in SaaS revenue recognition in India. GST timing follows its own rules and can fall due ahead of revenue recognition, which is exactly the mismatch that produces a surprise liability in a growth month.

Gift cards and store credit sit in the same family. Money received, nothing supplied yet.

Selling internationally from your own site

If you ship abroad, the supply is an export and is zero-rated. You can either pay IGST and claim a refund, or supply under a Letter of Undertaking and charge nothing, which is almost always the better cash position. The LUT is an annual filing with no government fee, covered in GST on export of services and the LUT route and handled through LUT filing.

Collections through an international gateway bring foreign exchange into the picture, where the invoice date, the receipt date and the reporting date each carry a different rate. That is a genuine source of unexplained differences, and it is covered in multi-currency accounting.

A monthly close that takes about two days

• Import orders, refunds and RTOs from the storefront.
• Reconcile each gateway settlement batch to captured orders and to the bank.
• Reconcile courier remittances to delivered COD orders, and log deductions.
• Book gateway, courier, warehousing and advertising invoices, and claim the input credit.
• Update inventory by location, including any 3PL and any goods in transit.
• Compute RTO rate, discount rate, contribution margin and acquisition cost.
• Reconcile GST: output tax from orders, input credit from GSTR-2B after IMS action, before filing rather than after.
• Close the books and issue the management report.

Step seven has become non-negotiable. Since the July 2025 tax period the outward liability in GSTR-3B is locked to your GSTR-1, so an error has to be caught before filing and corrected through GSTR-1A, not patched afterwards. The full method is in e-commerce reconciliation.

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