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GST · Input tax creditITC for e-commerce businesses: reconciling marketplace transactions
Marketplace sellers deal with hundreds of orders, returns, fees and deductions every month. Getting GST right means reconciling settlement reports with sales, claiming ITC on platform fees and using TCS credit. Here is a practical approach.
Selling through marketplaces involves three money flows: the customer pays the platform, the platform deducts fees, TCS and TDS, and pays the balance to the seller. GST compliance needs all three reconciled.
Documents you need each month
| Document | Source | Use |
|---|---|---|
| Order-level sales report | Seller panel | GSTR-1 sales (B2C, by State) |
| Returns/cancellation report | Seller panel | Credit notes / sales adjustments |
| Settlement / payment report | Seller panel | Bank reconciliation |
| Commission and fee invoices | Platform | ITC |
| TCS report (GSTR-8 data) | Portal | TCS credit acceptance |
| TDS under income tax (0.1%) | Form 26AS | Income-tax credit |
GST on sales
- Output GST on gross value charged to customers, by State of delivery.
- Report through the e-commerce tables of GSTR-1 with the platform's GSTIN.
- Platform discounts funded by the seller reduce value; those funded by the platform do not reduce the seller's value (the platform's subvention may be consideration).
ITC on platform fees
Commission, closing fees, shipping/logistics, advertising, storage – all are B2B services to the seller, usually at 18%. Ensure:
- the platform has your correct GSTIN (each State registration);
- invoices appear in GSTR-2B;
- you match fee invoices with deductions in settlement reports.
TCS credit
- Platform collects 0.5% of net taxable supplies (from 10 July 2024).
- Accept the TCS entries on the portal (TCS/TDS credit received); the amount moves to the cash ledger.
- Mismatch between your GSTR-1 platform sales and the platform's GSTR-8 triggers notices – reconcile monthly.
Worked example
Example: "Urban Threads", a Delhi seller, has in September 2026:
| Item | Amount |
|---|---|
| Gross sales to customers (excl. GST) | ₹12,00,000 |
| Customer returns | ₹1,20,000 |
| Net taxable sales | ₹10,80,000 |
| Output GST @ 5% (apparel) | ₹54,000 |
| Platform commission + fees (excl. GST) | ₹2,40,000 |
| GST on fees @ 18% (ITC) | ₹43,200 |
| TCS @ 0.5% on ₹10,80,000 | ₹5,400 |
| Income-tax TDS @ 0.1% | ₹1,080 |
GST working: output ₹54,000 – ITC on fees ₹43,200 – ITC on purchases (fabric/stitching) ₹19,000 = excess ITC ₹8,200, plus TCS cash credit of ₹5,400.
Note the inverted structure: apparel at 5% output, fees at 18% input. Sellers often accumulate ITC. Refund of accumulated ITC due to inverted duty is available on goods (subject to the formula) but not for input services – a real cost to plan for.
Settlement reconciliation
Settlement amount should equal: gross sales + GST collected – returns – commission and fees – GST on fees – TCS – TDS – other deductions (penalties, ads) ± reserves. Differences reveal missing invoices, unrecorded penalties or reserves held by the platform.
Multi-State warehouses
If the platform stores your stock in other States, you need registration (or additional place of business) there. Stock transfers to those warehouses are taxable supplies between distinct persons (IGST), with ITC in the receiving State.
Common mistakes
- Reporting payout as turnover.
- Not accepting TCS credit.
- Fee invoices billed to a different GSTIN than the selling State.
- Ignoring seller-funded discounts.
- Not reconciling platform reserves and penalties.
Key takeaway
Marketplace GST works only with monthly three-way reconciliation – orders, settlements and portal data. Claim ITC on fees, accept TCS credit and watch for inverted-duty accumulation. Our GST team handles marketplace reconciliations for online sellers – see also registration rules for e-commerce sellers.
Official references
Provisions discussed (summaries in our Law Library):
- CGST Act, 2017 – Section 51 / 52: TDS and TCS under GST
Official sources to verify the current text, notifications and circulars:
Frequently asked questions
Can a seller claim ITC on marketplace commission?
Yes. Commission, fixed fees, shipping and other platform fees are services to the seller; GST charged on them is eligible ITC if the platform invoices the seller's GSTIN and the invoice appears in GSTR-2B.
How is TCS by the marketplace used?
TCS collected under Section 52 is credited to the seller's electronic cash ledger once accepted on the portal. It can be used to pay GST liability or claimed as refund.
Is GST payable on the gross sale value or on the payout?
On the gross sale value (the price charged to the customer), not on the net amount received after commission and other deductions.
How should customer returns be handled?
Issue credit notes (or report returns as per the platform's data) in the month of return, within the Section 34 time limit, and reduce output tax correspondingly.
Can a seller claim ITC on ads bought on the marketplace?
Yes, if invoiced to the seller's GSTIN and reflected in GSTR-2B.
Is GST payable on marketplace reimbursements for lost goods?
Compensation for lost inventory may be treated differently from consideration for supply; examine the arrangement and CBIC clarifications.
How should TDS under income tax by marketplaces be treated?
The 0.1% TDS under the e-commerce provision appears in Form 26AS and is claimed in the ITR; it is not a GST credit.
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.