GST on E-commerce

GST on E-commerce#

Who Counts as an "E-commerce Operator"?#

Under the CGST Act, an e-commerce operator is any person who owns, operates, or manages a digital or electronic facility for the sale of goods or services — think Amazon, Flipkart, Zomato, or Urban Company, not the individual sellers listing on those platforms. The operator sits between the buyer and the actual supplier, collects payment, and passes it on to the seller after deductions. Because the operator controls the payment flow and has visibility into every transaction happening on its platform, GST law places specific collection and reporting duties on it that don't apply to an ordinary business selling through its own website.

Mandatory Registration for Sellers on Marketplaces#

A seller supplying goods through an e-commerce operator must register for GST regardless of turnover — the usual ₹40 lakh (goods) or ₹20 lakh (services) threshold exemption does not apply here. So a small handicrafts seller doing ₹3 lakh a year in sales through Amazon still needs a GSTIN before listing, even though the same seller selling offline from a local shop could stay unregistered until crossing the threshold. This is one of the most common surprises for first-time online sellers. There is a limited exception for suppliers of services (not goods) through an e-commerce operator, and for certain notified categories of goods sellers using the operator's own composition-eligible mechanism, but as a general rule, treat marketplace selling of goods as registration-mandatory from day one.

TCS: Tax Collected at Source#

Section 52 of the CGST Act requires every e-commerce operator to collect Tax Collected at Source (TCS) on the net value of taxable supplies made through its platform, at 0.5% under CGST plus 0.5% under SGST for intra-state supplies (1% total), or 0.5% IGST for inter-state supplies. "Net value" means the aggregate value of taxable supplies made through the platform during the month, minus supplies returned during that month.

For example, if a seller does ₹5,00,000 of sales through Flipkart in a month and has ₹40,000 of returns, TCS is collected on the net ₹4,60,000 — working out to ₹4,600 (at 1% for intra-state supply). This amount is not an additional cost to the seller in the long run: it is deposited by the operator against the seller's GSTIN and reflects as a credit in the seller's electronic cash ledger, which the seller can then use to pay their own GST liability while filing GSTR-3B.

Compliance Steps for the Operator#

1. Collect TCS on net taxable supplies at the time of making payment to the supplier.
2. Deposit TCS with the government by the 10th of the following month.
3. File GSTR-8 by the 10th of the following month, reporting seller-wise details of supplies made and TCS collected — this is what populates the credit in each seller's electronic cash ledger.
4. Issue a TCS certificate so sellers can reconcile the credit against their own books.

Compliance Steps for the Seller#

Sellers should reconcile the TCS reflected in their electronic cash ledger against the GSTR-8 filed by the platform every month — mismatches do happen, especially around high-return categories like apparel, and are easier to fix close to the period than a year later. Beyond TCS reconciliation, marketplace sellers file the same returns as any regular taxpayer — GSTR-1 for outward supplies, GSTR-3B for summary payment, and GSTR-9 as the annual return once the applicable turnover threshold is crossed.

Place of Supply#

For goods sold online, the place of supply is generally the location where the goods are delivered, which determines whether the transaction is treated as intra-state (CGST + SGST) or inter-state (IGST). Because online sellers routinely ship across state lines, most marketplace transactions attract IGST — sellers should factor this into how they price and account for interstate sales compared to a local walk-in customer.

Conclusion#

Selling through an e-commerce marketplace comes with two obligations a purely offline business doesn't face: mandatory GST registration from the very first sale, and TCS deducted by the platform on every transaction. Neither is a real extra tax cost once you understand the mechanics — the TCS is a credit against your own liability, not a charge on top of it — but missing the registration requirement or failing to reconcile TCS credits every month is a common, avoidable compliance gap for small online sellers. Getting the GSTIN in place before listing, and reconciling GSTR-8 credits monthly, keeps this straightforward.