GST and Tax Credit Limits for E-commerce Sellers in India

India’s electronic commerce market has grown at a remarkable pace and is expected to touch nearly ₹30 lakh crore by 2030. With more sellers choosing online marketplaces, GST registration has become an early checkpoint for anyone planning to build a stable e-commerce business.

Selling through an online platform is not treated the same way as running a small offline shop. Marketplaces operate under special GST rules that involve compulsory TCS, mandatory registration and tighter controls on input tax credit. These rules sit under Section 52 of the CGST Act and shape how tax is collected, how returns are filed and what platforms must report for each seller.

This guide explains the GST framework for online sellers. It covers registration conditions, how marketplace transactions are taxed, the ITC limits that apply and the reporting duties that sellers need to keep up with.

How GST Defines E-Commerce and Marketplace Sellers

Under the CGST Act, e-commerce refers to the supply of goods or services through a digital platform. This includes large marketplaces such as Amazon, Flipkart, Swiggy and Zomato, as well as smaller online aggregators.

Who are e-sellers

E-sellers are individuals or businesses that list their products or services on an e-commerce platform. Once you sell through a marketplace, you fall within this category. The classification matters because e-sellers must register for GST regardless of turnover and follow specific rules on invoicing, tax collection and reporting.

Who are e-operators

E-operators are the companies that run these digital platforms. They provide the online space, manage the technology and connect buyers with independent sellers. GST gives them a distinct set of duties, including collecting TCS and filing separate returns, because they control the marketplace and handle the flow of transactions.

Sellers with their own websites

Businesses that sell only their own products through a website they manage are treated as e-commerce operators in a broad legal sense because they run the platform themselves. At the same time, they remain the seller of those goods. Since no third-party sellers operate on their site, the TCS rule does not apply. They simply collect payment for their own sales, charge GST at the applicable rate and file their regular returns.

These categories shape how each participant registers, charges tax and reports activity. With that foundation in place, we can move to what these rules mean for sellers in practice.

GST Applicability for E-Commerce Participants

Selling through an online marketplace changes how GST applies to traditional brick-and-mortar businesses. The table below summarises GST for different players in the online ecosystem, along with simple examples.

Category	Turnover Threshold	GST Requirement	Example
Sellers of Goods on Marketplaces	No threshold	Mandatory registration from the first sale	Seller listing products on Amazon, Flipkart, Meesho
Service Providers on Marketplaces	₹20 lakh, unless covered under Section 9(5)	Must register only if turnover crosses ₹20 lakh (unless 9(5) applies)	Tutor or designer offering services through an online service platform
Services under Section 9(5)	Threshold not relevant for seller	GST is paid by the operator, not the seller	Uber/Ola for rides, Oyo for accommodation, Urban Company for select services
E-commerce Operators (Platforms)	No threshold	Mandatory registration regardless of turnover	Amazon, Flipkart, Swiggy, Zomato
Sellers Using Their Own Website (Selling only their own products)	Regular thresholds apply (₹40 lakh for goods, ₹20 lakh for services)	Treated as both operator and seller, but TCS not applicable; register only if turnover crosses threshold	A brand selling on its own Shopify or WooCommerce site
Platforms Allowing Third-Party Sellers (Marketplace Operators)	No threshold	Mandatory registration and responsible for TCS under Section 52	Any multi-seller marketplace like Meesho or Amazon

• Goods sellers on marketplaces must register from the first sale because TCS applies to their transactions.
• Service providers follow the ₹20 lakh limit since TCS does not apply, except for services notified under Section 9(5).
• Marketplace sales count as inter-state supplies, so compulsory registration remains for goods sellers to enable TCS and platform reporting.

For those still evaluating GST eligibility, our guide on Understanding Eligibility for GST Registration provides detailed insights.

Marketplace compliance requires both sellers and platforms to align on invoicing, tax collection and reporting.

Types of GST in E-Commerce Transactions

The tax charged on an online order depends on the place of supply, which decides whether the transaction is treated as intra-state or inter-state.

Intra-State Sales

When the buyer and the point of supply are in the same state, the invoice includes:

• CGST
• SGST

Example: A seller in Maharashtra supplying to a customer in Maharashtra charges both taxes.

Inter-State Sales

When the buyer and the point of supply are in different states, IGST applies. The Centre collects IGST and later transfers the appropriate share to the states.

Example: A seller in Delhi supplying to a buyer in Karnataka charges IGST.

How This Works for Marketplace Sales

• Marketplace sellers are treated as inter-state suppliers for registration, which is why goods sellers must register from the first sale.
• For invoicing, tax depends on where the goods are shipped from. If a marketplace fulfils an order from its warehouse, the supply is considered from that warehouse state, not the seller’s home state.

Example: If Amazon ships from its Karnataka warehouse, the supply is treated as made from Karnataka.

Take a more detailed look at how inter-state and intra-state supplies work under GST and how they affect your business in this blog: Inter State Supply and Intra State Supply Under GST

Tax Collection at Source (TCS) Under GST for Online Seller

Section 52 of the CGST Act requires e-commerce operators to deduct Tax Collected at Source on payments made to sellers. This keeps marketplace transactions traceable and easier to match during GST filings.

Key Points

• TCS applies only on taxable supplies, not exempt or non-GST items
• TCS does not replace GST. It is only an advance collection that appears in the seller’s ledger and can be claimed later
• Rate: 1 percent of net taxable supplies (0.5% CGST + 0.5% SGST or 1% IGST)
• Collected by: The e-commerce operator
• Deposited to: The government
• Benefit to seller: The deducted amount appears in GSTR-2A and can be claimed as ITC in GSTR-3B

Example

If your monthly taxable sales on Amazon total ₹1,00,000:

• Amazon deducts ₹1,000 as TCS
• You receive ₹99,000
• The ₹1,000 reflects in your GSTR-2A as TCS
• You claim it as ITC in GSTR-3B

Impact on Sellers

• Mild cash-flow reduction due to TCS deduction
• Higher working capital needs during high-volume sales periods

Need for regular reconciliation of platform statements, especially if the seller’s GSTIN is incorrect or mismatched on the operator’s records, which can delay TCS credit appearing in GSTR-2A.

GST Registration Process for E-Commerce Sellers

Marketplace sellers must complete GST registration before onboarding, since platforms cannot activate listings without a valid GSTIN. The steps below outline how the registration works and what documents marketplaces typically request.

For a detailed walkthrough of the GST registration process, you can head straight to our full guide: GST Registration – Process, Rules, Forms and Documents Required

1. Start the application on the GST Portal

Choose the “New Registration” option and enter basic details such as PAN, state, mobile number and email.

2. Fill in business information

Provide trade name, business structure, additional places of business (including marketplace fulfilment centres, if any) and authorised signatory details.

3. Upload required documents

Common documents include:

• PAN
• Aadhaar
• Address proof of business place
• Bank statement or cancelled cheque
• Photographs of the proprietor or authorised signatory

Entity-specific documents:

• Partnership firm: Partnership deed
• Company/LLP: Certificate of incorporation, board resolution or authorisation letter
• Individual seller: No deed or resolution required

Documents marketplaces often ask for during onboarding:

Marketplaces carry out their own KYC checks, so sellers must share basic ID, bank and brand details to activate their accounts.

• GSTIN certificate
• PAN card
• Bank proof
• Signature specimen
• Address proof
• Brand authorisation (if selling branded goods)
• Additional KYC depending on platform policies

4. Submit the application

Once the form and documents are uploaded, an ARN is generated for tracking.

5. Department verification and approval

If all details match, the GSTIN is usually issued within 3 to 7 working days. Clarifications may extend the timeline.

Once registered, you can access ITC and comply with regular GST filings like GSTR-1, GSTR-3B, and GSTR-9. If you need help locating your GST certificate after approval, this quick guide explains how to download it from the portal: How to Download GST Registration Certificate Online

GST Return Filing Requirements for eCommerce Sellers

E-commerce sellers handle frequent transactions, so regular GST return filing becomes part of daily operations. To keep track of due dates through the year, you can also refer to this GST compliance calendar: GST Compliance Calendar for FY 2026-27: Filing Schedule & Due Dates

1. GSTR-1

A statement of outward supplies.

• Filed monthly by the 11th
• If using the QRMP scheme, filed quarterly by the 13th
• QRMP filers may upload invoices through IFF for the first two months

Eligibility: Turnover below ₹5 crore in the previous financial year.

2. GSTR-3B

A summary of tax liability.

• Filed monthly for sellers above ₹5 crore
• Filed quarterly for QRMP users
• Due on the 20th, or the 22nd/24th depending on the state

3. GSTR-9

An annual return for sellers with turnover above ₹2 crore as per the current government notifications.

Due every year on 31 December.

4. GSTR-9C

A self-certified reconciliation statement.

Required when turnover exceeds ₹5 crore, due on the same date as GSTR-9.

Accurate books remain essential. Reconciliation reduces errors across GSTR-1, GSTR-3B, and sales registers.

Just like sellers, e-commerce operators also need to stay compliant with their GST filing duties. You can read a detailed breakdown of their return process here: GSTR filing: Returns and due dates for e-commerce operators

How TCS reflects in GST returns

• TCS deducted by marketplaces appears automatically in GSTR-2A and 2B
• Sellers must claim it in GSTR-3B, similar to other credits
• If the GSTIN on the marketplace is incorrect or mismatched, the TCS entry may not appear, leading to reconciliation delays

Reconciliation duties for marketplace sellers

To stay compliant, sellers should routinely match:

• Invoices generated on the marketplace dashboard
• GSTR-1 outward supplies
• GSTR-3B tax payments
• TCS credits in GSTR-2A/2B
• Sales registers in their books

This avoids differences caused by cancellations, returns, shipping fees, commissions or incorrect GSTIN mapping.

Input Tax Credit (ITC) for Marketplace Sellers

ITC helps reduce the tax you pay, but online sellers face more hurdles than traditional businesses.

What you can claim

• Goods purchased for resale
• Packaging and shipping supplies
• Marketplace fees (commission, shipping, ads, payment charges)
• Software and business tools

ITC is allowed only when the purchase relates to business use and is backed by a valid GST invoice.

Why e-commerce sellers struggle with ITC

• High returns: ITC must be reversed when goods come back unless resold
• Logistics fee mismatches: Marketplace invoices and seller books often differ
• Multiple fulfilment states: Warehouse-based selling may require state-wise GSTINs, splitting credits
• Vendor non-compliance: If suppliers don’t file GSTR-1, ITC won’t show in GSTR-2B

Returned goods (a common confusion)

• Reverse ITC on returned goods
• Reclaim it only if the goods are sold again
• No ITC allowed if goods are lost, damaged or written off

Tax Credit Limits for E-Commerce Sellers

“Limits” refer to how much ITC you can actually use despite paying GST.

What truly limits your ITC

• You can claim ITC only if it appears in GSTR-2B
• ITC blocked under Section 17(5) cannot be claimed at all
• ITC must be claimed before the statutory deadline or it lapses
• Credits tied to unfiled supplier invoices remain unusable

Eligible vs Ineligible ITC for Online Sellers

Eligible ITC	Ineligible/Blocked ITC
Goods for resale	Lost, damaged or written-off goods
Packaging, shipping supplies	Gifts or free samples
Marketplace fees with GST invoice	Motor vehicles (except transport business)
Software and business tools	Employee-related costs unless legally required
Advertising	Expenses partly for personal use
Resold returned goods	Returned goods not resold

Why GST Compliance Matters for Online Sellers

Digital commerce offers enormous opportunities, but it also brings sharper scrutiny. Filing your GST returns builds financial discipline and credibility. It protects your cash flow, supports loan applications, and keeps your store running without regulatory stress.

Now, let’s take a look at the habits and systems that make compliance easier in day-to-day work.

How Sellers Can Improve GST Compliance

Practical steps help reduce errors and improve working capital:

• Use automated GST tools for return filing
• Track all amendments and notifications
• Maintain clean, dated records
• Reconcile sales with GSTR-1, GSTR-3B, and platform reports
• Review TCS statements regularly to prevent mismatch issues in GSTR-2A and 2B
• Maintain clean SKU-level mapping to avoid incorrect GST rate classifications
• Seek expert help for classification and tax planning
• Train accounting teams to manage marketplace-specific issues

Strong systems protect sellers from disputes, interest, and late fees. This is why it helps to understand the common GST filing mistakes and avoid them.

Conclusion

The GST framework for eCommerce is detailed and evolving. Sellers must understand registration rules, return deadlines, TCS and ITC claims to keep their business compliant. With the right systems in place, GST becomes manageable and far less stressful.

If you need help with registration of your GST, return filing, or reconciliation for marketplace sales, our experts at LegalWiz.in offer simple and reliable assistance tailored to online businesses.