Why your marketplace payout is not your revenue
Fees, returns, TCS and TDS sit between a sale and the cash that lands in your bank. Sellers who book payouts as sales understate revenue, lose tax credits, and fail reconciliations.
A seller does ₹10 lakh of sales on a marketplace in a month and sees perhaps ₹7.5 lakh hit the bank. The most common bookkeeping mistake in e-commerce is recording that ₹7.5 lakh as revenue. It feels harmless — the bank statement agrees, after all — but it quietly breaks GST returns, understates turnover, and forfeits tax credits you have already paid for.
What actually sits between sale and settlement
- Gross sales at customer price — your real revenue
- Less: returns and refunds settled in the cycle
- Less: commission / referral, closing, shipping and ad fees — plus 18% GST on each
- Less: GST TCS — 0.5% of taxable sales, collected under Section 52
- Less: income-tax TDS — 0.1% of gross sales under Section 194-O
- = Net payout, deposited on the settlement cycle
Each deduction has a different accounting home
Fees are expenses, not revenue reductions — and the 18% GST charged on them is input credit you can claim, which sellers booking net payouts silently forfeit. GST TCS (0.5%) is your money: the marketplace deposits it against your GSTIN, it appears on the portal after you accept it, and it offsets your output GST liability. TDS under Section 194-O at 0.1% (from tax year 2026-27, part of Section 393 of the Income-tax Act, 2025) is also your money — prepaid income tax visible in Form 26AS, adjustable against your final tax bill. Treat both as advances, not costs.
Why the mismatch matters to the tax department
Marketplaces report your gross sales to the government through their TCS and TDS filings. If your GSTR-1 or income-tax return shows turnover materially below what the marketplace reported, the mismatch surfaces automatically and invites scrutiny. Your GSTR-1 must carry gross taxable sales net of returns — never net of fees. This is also why sellers who cross into GST registration late (marketplace sellers need it from day one, as we explain in the GST registration guide) inherit a painful clean-up.
The reconciliation that keeps you honest
Monthly, three documents must tell one story: the marketplace's settlement or MTR report (gross sales, fees, taxes withheld), your books, and your GST returns. Reconcile gross sales to GSTR-1, fee invoices to input credit claimed, TCS accepted on the portal to the credit taken, and 194-O TDS to Form 26AS. Sellers on multiple marketplaces plus their own website should do this channel by channel — mixing them hides errors that surface only in a notice.
Getting the margin story right
Booking gross revenue and itemising fees does more than satisfy compliance — it shows you your real economics: referral fees eating 18% on one category, courier returns destroying another, ads profitable only above a price point. That visibility is what lets a seller fix pricing before the cash runs out — the same discipline behind the thirteen numbers every founder should see monthly.
Frequently asked questions
How should I record marketplace sales in my books?
At gross customer price as revenue, with returns, commission, shipping and ad fees booked separately as their own lines, and TCS/TDS parked as tax advances — never as a single net payout entry.
Is the GST TCS deducted by marketplaces a cost?
No. The 0.5% TCS is deposited against your GSTIN and, once accepted on the GST portal, offsets your output tax liability rupee for rupee.
What is the TDS rate for e-commerce sellers?
Marketplaces deduct 0.1% of gross sales under Section 194-O (reduced from 1% from October 2024). It appears in your Form 26AS and adjusts against your income-tax liability.
Can I claim GST input credit on marketplace fees?
Yes. Commission, closing, shipping and advertising fees all carry 18% GST, claimable as input credit if the marketplace's invoices appear in your GSTR-2B — one more reason to book fees gross.
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This guide is published for general information and does not constitute professional advice. Fees, thresholds and due dates change; please consult the firm before acting on anything you read here. Income-tax section references follow the Income-tax Act, 1961 (which governs income up to FY 2025-26) with the corresponding Income-tax Act, 2025 references indicated where relevant for tax year 2026-27 onwards.