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Startups · MSMEAccounting and GST compliance for D2C and online businesses
D2C brands sell through their own website, social media and marketplaces at once. That creates complex GST, inventory and reconciliation work. Here is a practical accounting and GST framework for online brands.
A D2C business typically sells through: its own website (Shopify, WooCommerce), marketplaces (Amazon, Flipkart, Myntra, Nykaa), and social commerce. Payments arrive through payment gateways, COD couriers and marketplace settlements. Each channel needs separate handling in GST and accounts.
GST framework
| Area | Treatment |
|---|---|
| Registration | Compulsory for inter-State goods sales; each State with a warehouse needs registration |
| Place of supply | Customer's delivery address – IGST for other States, CGST+SGST within your State |
| Invoices | B2C invoices with State of delivery; HSN in GSTR-1 summary |
| Shipping/packaging charged to customer | Part of value; taxed at goods' rate |
| Discounts/coupons | Shown on invoice reduce value |
| Returns | Credit notes in the month of return (within Section 34 time limits) |
| Marketplace sales | Report with operator's GSTIN; claim TCS credit |
| Payment gateway fees, ads, logistics | ITC at 18% |
| Influencer barter / free products | Possible supply; ITC on free samples blocked |
Accounting framework
- Sales register by channel – website, each marketplace, offline.
- Payment gateway clearing account – sales credited, gateway settlements debited; fees and GST on fees booked from settlement reports.
- COD clearing account – courier collections receivable; reconcile remittances, RTO (return to origin) and COD charges.
- Marketplace clearing account – per marketplace, reconciling settlements, commissions, TCS, TDS and reserves.
- Inventory – SKU-wise across warehouses; integrate with order management software.
- Returns and RTO – reverse sales and restock; write off damaged goods (reverse ITC).
Worked example
Example: "Leafy Skin", a Delhi skincare brand, in November 2026:
| Channel | Gross sales (excl. GST) | Notes |
|---|---|---|
| Own website (prepaid via gateway) | ₹18,00,000 | Gateway fee 2% + GST |
| Own website (COD) | ₹6,00,000 | RTO 15% |
| Marketplace A | ₹12,00,000 | Commission 18%, TCS 0.5% |
| Total | ₹36,00,000 | GST 18% on skincare |
Key numbers:
- Output GST: 18% × (₹36,00,000 – COD RTO ₹90,000 – marketplace returns ₹60,000) = 18% × ₹34,50,000 = ₹6,21,000.
- ITC: gateway fees (₹36,000 × 18% = ₹6,480), marketplace commission (₹2,16,000 × 18% = ₹38,880), ads ₹3,00,000 × 18% = ₹54,000, packaging and manufacturing inputs ₹2,10,000 (from 2B).
- TCS credit: 0.5% × ₹11,40,000 = ₹5,700 (marketplace only).
- Net GST: ₹6,21,000 – ₹3,09,360 – ₹5,700 = ₹3,05,940 payable.
Leafy Skin must also ensure its fulfilment centre in Haryana (marketplace warehouse) is registered as an additional place of business in a Haryana GSTIN.
Income tax points
- Revenue recognition on dispatch/delivery net of expected returns, consistently applied.
- TDS deducted by marketplaces (0.1%) appears in Form 26AS.
- Influencer payments: TDS under 194J/194R as applicable.
- Advertising on foreign platforms (Meta, Google): GST under RCM if billed from abroad (for B2B registered recipients, typically billed by Indian entities now – check invoices).
Common mistakes
- Booking net settlement as revenue.
- Not reconciling COD remittances and RTO.
- Missing registration for marketplace warehouses.
- Charging GST on the product but not on shipping.
- No SKU-level inventory, leading to stock mismatches in audit.
Key takeaway
D2C accounting works only with channel-wise clearing accounts and monthly reconciliation of gateways, couriers and marketplaces – feeding clean GST returns. Our accounting and GST teams set up D2C bookkeeping in Tally, Zoho or Busy with integrations.
Official references
Official sources to verify the current text, notifications and circulars:
Frequently asked questions
Is TCS collected on sales through my own website?
No. TCS under Section 52 applies only to sales through e-commerce operators that collect consideration on behalf of suppliers. Your own website with a payment gateway is not an e-commerce operator for your sales.
Is GST charged on shipping charges collected from customers?
Yes. Shipping charges collected as part of the sale are part of a composite supply and taxed at the rate of the goods.
How should cash-on-delivery sales be accounted?
Record the sale on dispatch/delivery as per policy, with the courier as a receivable for COD collections; reconcile courier remittances and deductions.
Do I need GST registration in other States where I sell online?
Not for selling to customers in other States; registration is needed only where you have a place of business, including warehouses (your own or a marketplace's fulfilment centre).
Do I need TCS registration for my own website?
No. TCS applies to e-commerce operators collecting payments on behalf of other sellers, not to your own store.
Is GST payable on gift cards sold on my website?
Vouchers are generally taxed at the time of redemption against goods, following the 2024 amendment and clarifications; check the voucher type.
How do I handle influencer payments?
Deduct TDS under the applicable provision (professional fees or business benefits) and obtain GST invoices from registered influencers.
This article is general information on the law as on 10 November 2026, written for educational purposes. It is not professional advice for your case. Section numbers under the Income-tax Act, 2025 should be confirmed with the official section mapping on the Income Tax Department website before use in filings.
Have a tax, GST or business question?
Call, WhatsApp or email CA Dilbagh Singh and team, from Delhi, anywhere in India or abroad.