GST for Amazon and Flipkart sellers, explained
Why the Rs 40 lakh threshold does not protect you, how TCS works, and the reconciliation that decides whether you get your money back.
Selling on a marketplace changes your GST position more than almost any other business decision. The rules are different from ordinary retail, and the first one catches nearly everybody.
The ₹40 lakh threshold does not protect you
An ordinary shop selling goods can trade without GST registration until turnover reaches ₹40 lakh. A seller supplying through an e-commerce operator generally cannot. Section 24(ix) of the CGST Act requires compulsory registration for persons who supply goods through an operator required to collect tax at source, and the threshold does not apply.
In practice this is settled at onboarding: Amazon, Flipkart and Meesho all ask for a GSTIN before your first listing goes live. People discover the rule when they try to register as a seller, not afterwards.
How TCS works
Under Section 52 the marketplace collects 1% tax at source — 0.5% CGST plus 0.5% SGST for intra-state supplies, or 1% IGST for inter-state — on the net taxable value of your sales.
Two things about that word net are worth pinning down. TCS is charged on the value of goods, excluding GST itself, and it is computed net of returns during the month. So a month with ₹5,00,000 of sales and ₹50,000 of returns attracts TCS on ₹4,50,000, which is ₹4,500.
TCS is not a tax on you. It is a prepayment. The marketplace deposits it against your GSTIN, it appears in your electronic cash ledger, and you use it to pay your own output liability. Money is not lost — but it is only recovered if you reconcile properly, which is where sellers actually lose out.
The reconciliation that decides whether you get your money
Every month the operator files GSTR-8 declaring what it collected against each seller's GSTIN. That flows into your GSTR-2X, and you accept it to move the credit into your cash ledger.
The failure mode is mundane and expensive: the sales in your books do not match what the platform reported, so part of the TCS never lands where you can use it. The usual causes are returns recorded in a different month from the platform's, cancelled orders that were still reported, and multi-state fulfilment where stock sits in a warehouse in a state you are not registered in.
That last one deserves emphasis. If you use a fulfilment service that stores your stock in another state, you are generally making supplies from that state and need registration there. A seller with stock in three fulfilment centres may need three GST registrations, each with its own returns. This is the single largest hidden compliance cost of marketplace selling, and it is rarely explained upfront.
Which rate applies to your product
The marketplace does not decide your rate; you do, by classifying your product. Get the HSN code wrong and you either overcharge customers or underpay tax, and the platform's reporting makes the mismatch visible.
| Common marketplace category | Rate | Detail |
|---|---|---|
| Clothing up to ₹2,500 a piece | 5% | Above ₹2,500 it is 18% |
| Footwear up to ₹2,500 a pair | 5% | Parts are 18% at any price |
| Mobile phones, laptops | 18% | HSN 8517 / 8471 |
| Furniture | 18% | Bamboo and cane are 5% |
| Candles, home fragrance | 5% | HSN 3406 |
| Printed books | Nil | E-books of a printed title are 5% |
Platform fees come back to you as credit
Marketplaces charge referral fees, closing fees, shipping and storage, and add 18% GST to all of it. That 18% is input tax credit you can claim against your output liability, provided the invoice carries your GSTIN correctly.
It is worth checking that it does. A commission invoice issued to the wrong GSTIN — easy to happen if you registered in more than one state — is credit you simply cannot claim, and platforms are slow to reissue.
Returns, and why they need discipline
Apparel return rates routinely run above 30%, which makes credit-note discipline more important on a marketplace than almost anywhere else. A returned item is handled through a credit note that reverses the original supply and its GST, and it must be reported in the period the credit note is issued.
Two rules bound this. A credit note must be issued by 30 November following the end of the financial year of supply, or the date of the annual return, whichever is earlier — after that the GST on a return cannot be recovered. And the reduction only holds if the customer has not claimed input credit on the original supply, which for B2C sales is not an issue.
A working monthly routine
- Download the platform's tax report and reconcile it against your own sales register, including returns.
- Check GSTR-8 as filed by the operator, and accept the TCS in GSTR-2X so it reaches your cash ledger.
- File GSTR-1 with your outward supplies and credit notes.
- Claim input credit on platform fees, then file GSTR-3B and pay the balance.
- Confirm every fulfilment location where your stock sits is covered by a registration.
None of it is difficult. It is simply unforgiving of gaps, because the platform is independently reporting your numbers to the department every month.
Common questions
Yes, in almost all cases. Section 24(ix) requires compulsory registration for sellers supplying goods through an e-commerce operator that collects tax at source, so the ₹40 lakh threshold does not apply. Platforms ask for a GSTIN at onboarding.
The marketplace collects 1% of the net taxable value of your sales — 0.5% CGST plus 0.5% SGST intra-state, or 1% IGST inter-state — and deposits it against your GSTIN. It is a prepayment you recover against your own liability, not an extra tax.
Generally yes, where your stock is stored in a state. Holding inventory in a fulfilment centre means you are supplying from that state, which requires registration there, with its own returns. It is the largest hidden compliance cost of marketplace selling.
Yes. Referral fees, closing fees, shipping and storage all carry 18% GST, and that is claimable as input tax credit provided the invoice shows your correct GSTIN.
Through a credit note that reverses the original supply and its GST, reported in the period the credit note is issued. Credit notes must be issued by 30 November following the financial year of supply, or the date of the annual return if earlier.