Selling on Amazon & Flipkart? Here's What You Must Know About GST, TDS & TCS!
The Indian e-commerce market has witnessed explosive growth over the past decade. Platforms like Amazon, Flipkart, Meesho, and Snapdeal have empowered millions of individuals and small businesses to sell products nationwide with ease. However, selling through these platforms brings a range of statutory obligations and tax compliances that e-commerce sellers must adhere to.
This article aims to provide a detailed overview of the registration requirements, income tax implications, GST compliance, and net cash flow mechanics for sellers transacting via online marketplaces.
1. Business and Statutory Registrations for E-commerce Sellers
Before beginning operations as an online seller on marketplaces like Amazon or Flipkart, a seller must ensure the following registrations are completed:
a. GST Registration
Under Section 24(ix) of the CGST Act, any person making taxable supplies through an e-commerce operator (ECO) is mandatorily required to register for GST, regardless of turnover. This means even if your turnover is below the usual threshold of Rs. 20 lakh (or Rs. 40 lakh for goods), you must obtain GST registration.
b. Income Tax PAN and Business Constitution
Depending on the nature of your business setup:
- Sole Proprietorship: Use PAN of the proprietor
- Partnership/LLP/Company: A separate PAN in the entity’s name is required
Further, registration with the Ministry of Corporate Affairs (MCA) is mandatory for companies and LLPs.
c. Current Bank Account and KYC Documents
Most platforms require:
- A current account in the business name
- Valid PAN, GSTIN, address proof, and bank proof
- Business registration certificate (if applicable)
2. GST Compliance for E-commerce Sellers
a. Raising Invoices
Sellers must raise GST-compliant tax invoices for every sale. Each invoice should include:
- Name and GSTIN of seller
- Invoice number and date
- HSN Code and description
- Taxable value, GST rate, and amount
b. TCS Deduction by E-commerce Operators
Under Section 52 of the CGST Act, ECOs are required to deduct TCS @0.5% (w.e.f 10th July, 2024; earlier 1%) on the net value of taxable supplies made through them and deposit the same with the government.
TCS deducted:
- Appears in the Cash ledger of the seller after filing TCS return on the GST Portal
- Can be used to pay GST liabilities
c. GST Return Filing
Sellers must file:
- GSTR-1 (monthly or quarterly) – Details of outward supplies
- GSTR-3B – Summary of tax liability and ITC claim
- TCS Return– For claiming the TCS
- Annual Return (GSTR-9) – Required if turnover > Rs. 2 crore
Regular reconciliation with platform reports and TCS credit is vital to avoid discrepancies. It is a best practice to reconcile sales from TCS reports.
3. Income Tax Provisions for E-commerce Sellers
a. Applicability of Section 194-O (TDS)
From 1st October 2020, Section 194-O mandates all e-commerce platforms to deduct TDS @0.1% (w.e.f 1st October, 2024; earlier 1%) on the gross amount of sale or service facilitated through their portal.
Exemption:
- If seller is individual or HUF
- Gross sales in a financial year < Rs. 5,00,000
- PAN/Aadhaar is provided
In such a case, no TDS will be deducted.
If TDS is deducted:
- Appears in Form 26AS of the seller
- Can be adjusted against income tax liability or claimed as refund
Note: Platforms generally deduct TDS from the first transaction, even before the Rs. 5 lakh limit is reached.
b. TDS Deduction by Sellers under Sections 194H and 194C
E-commerce sellers who are registered as business entities (especially companies, partnership firms, and LLPs) are also required to deduct TDS while making payments to service providers:
- Section 194H: TDS @2% on commission or brokerage paid to the e-commerce platform or aggregators if it exceeds Rs. 15,000 in a financial year.
- Section 194C: TDS @1% or 2% (depending on the recipient) on payments made to courier/logistics services, packaging vendors, or other contractors.
Sellers must ensure timely deduction, payment, and filing of TDS returns (Form 26Q) every quarter.
c. Impact on Return Filing
The seller must:
- Report gross sales in the Income Tax Return (ITR), not just net receipts
- Reconcile TDS reflected in Form 26AS and AIS
- Maintain proper books of account (required under Section 44AA for businesses exceeding threshold)
Eligible persons like Individuals and Partnership Firms may opt for Presumptive Taxation (Section 44AD) if turnover is below Rs. 2 crore.
4. Key Accounting & Reconciliation Challenges
- Mismatch of GST returns with platform reports
- Discrepancies in Form 26AS vs actual TDS
- Returned or damaged goods and impact on GST liability
- Advertisement and platform service charges complicate profit calculation
It is advisable to maintain:
- Category-wise sales ledger
- Marketplace reconciliation statement
- GST-TCS summary
- TDS certificates from platforms and vendors
5. Compliance Checklist for Online Sellers
6. Net Cash Flow Example from Platform
Let’s take a simple illustration to understand how net payouts are computed:
Note: The seller receives ₹844 in their bank account. The balance ₹156 goes towards commission, shipping, and taxes withheld (TCS/TDS) that are either deposited to the government or can be claimed. From this ₹844, seller have to deduct the cost price and pay the GST to government.
7. Final Thoughts
Selling on Flipkart and Amazon can be highly rewarding, but it demands rigorous financial discipline and statutory compliance. With multi-level deductions, complex fee structures, and evolving tax laws, staying compliant is not optional.
Hiring a qualified tax professional or CA Firm is highly recommended to ensure accurate filings, avoid penalties, and maximize profitability.
By understanding the compliance landscape, sellers can focus on scaling their business while ensuring they remain on the right side of the law.
This article written by our partner CA. Akhil Goyal and you can follow him for such update on LinkedIn
Pro Tip: Always download monthly settlement reports, TDS certificates, and TCS data from seller dashboards and maintain them securely for audit and return purposes.
Disclaimer: The information presented here is only meant to be informative. Although this article was carefully crafted, it should only be regarded as general advice because it has been expressed in general terms. You should not act on the information provided in this article or refrain from acting upon it without first seeking professional advice since it cannot be relied upon to address your unique situation
