GST for online sellers

GST for online sellers turns on four questions: whether you must register, what your GST invoice must show, how marketplaces collect TCS from your payouts, and how you claim input tax credit. This guide answers each in general terms, with a monthly routine.

Do online sellers need GST registration?

Most sellers of goods on marketplaces do, but not all. Whether you must register depends on your turnover, what you sell, whether you sell into other states and how you sell; selling through marketplaces has its own rules, with some exceptions for small sellers.

The thresholds and exceptions change by notification, so this guide does not quote them. Settle the question with your tax adviser before your first listing, not after your first payout, and keep their answer in writing.

Getting it wrong is expensive in both directions. Selling without a registration you needed can bring tax, interest and penalties on past sales; registering when you did not need to brings returns to file every period, even when you sell nothing.

Registration is made online on the GST portal, with identity and address proof, proof of your place of business and bank details. Your GSTIN, the fifteen-character GST number, then goes on every invoice and every marketplace account.

Can you sell online without a GSTIN?

In some cases. Small sellers supplying within their own state may be able to sell through a marketplace without registering, under conditions that have changed over time, and some marketplaces onboard them. Selling to buyers in other states generally needs registration.

The rules are changing for small online sellers, so check the current position with your adviser.

Which state do you register in?

The state where your business is based, as your principal place of business. If your stock is also held in another state, for example by a marketplace that stores it for you, you may need a registration there too, so ask first.

Does the composition scheme work online?

The composition scheme lets a small business pay tax at a fixed rate on turnover, without charging GST on its invoices or claiming input tax credit. Its limits on selling through marketplaces have changed over time, so check the current position before you choose it.

What must a GST invoice show?

Who sold what, to whom, at what value and with how much GST. On every tax invoice, check for:

• The seller’s legal name, address and GSTIN.
• A unique, consecutive invoice number for the financial year, and the date.
• The buyer’s name and address, and their GSTIN where they are registered and want to claim credit.
• A description of each item with its HSN code, the classification number that decides its rate.
• Quantity, taxable value, any discount, the GST rate and the tax amount.
• The place of supply, which decides whether the tax is CGST and SGST or IGST.
• A signature or digital signature.

Within one state, GST is split equally into CGST and SGST, the central and state shares; to another state, it is charged as IGST, the integrated tax. For goods delivered to a buyer, the place of supply is generally where the delivery ends.

On most marketplaces, the invoice to the shopper is generated by the marketplace’s system in your name, from the tax details you set for each product. Check a sample every month: a wrong HSN code or rate in your catalogue repeats on every invoice.

Business buyers can enter their GSTIN when they order on many marketplaces, so the invoice lets them claim credit. That only works if the tax details in your catalogue are right, which is one more reason to check them before the first sale.

On your own storefront, you issue the invoice, usually through an invoicing app or plugin. Our page on D2C website development covers GST invoices on Shopify and WooCommerce. Suppliers above the e-invoicing turnover threshold must also issue e-invoices for sales to registered businesses.

Which GST rate applies to your products?

The rate set for each product’s HSN classification, which your adviser should confirm before the product is listed. Rates are set by government notification and change, and for some goods, such as readymade garments, the rate depends on the sale value of each piece.

At the time of writing, readymade garments carry 5% where the sale value is up to ₹ 2,500 a piece and 18% above it, from 22 Sep 2025. Our article on GST on readymade garments works through that split line by line.

• Your selling price decides. Where a rate depends on value, it is your price to the shopper that counts, after any discount shown on the invoice, not what you paid.
• Charges billed with the goods. Delivery or packing charges you collect from the buyer usually follow the rate of the goods they come with.
• HSN digits. How many digits of the HSN code your invoices must show depends on your turnover; your adviser will tell you which applies.
• Prices include GST. Retail prices shown to shoppers in India include GST, so work out your margin from the price net of GST.

How does TCS work on marketplace payouts?

The marketplace collects TCS, tax collected at source, under GST on the net value of the taxable sales you make through it, holds it back from your payouts, and deposits it. It is not an extra tax: it becomes a credit you can use.

1. The marketplace deducts TCS from your settlements, on sales net of returns.
2. It reports the amounts against your GSTIN in its own GST statement.
3. The amounts appear on the GST portal for you to accept, and then reach your electronic cash ledger.
4. You use the balance to pay GST you owe, or claim a refund of any excess under the refund rules.

Reconcile it monthly. The TCS your settlements show should match what the portal shows each marketplace reported; a gap usually means a GSTIN error or a late or wrong statement, and only the marketplace can correct its statement.

Marketplaces also deduct TDS under income tax from payouts. It is a separate deduction under a separate law, claimed in your income-tax return rather than against GST, so keep the two apart in your books.

TCS is not a cost. It is your money, held until you claim it.

How do online sellers claim input tax credit?

By holding a proper tax invoice in your name and GSTIN, receiving the goods or services, and seeing the invoice in your GSTR-2B, the monthly statement of credit the portal builds from your suppliers’ returns. Credit missing from GSTR-2B generally cannot be claimed.

Input tax credit (ITC) is the GST paid on business purchases, set against the GST charged on sales. For an online seller, the usual sources are:

• Stock bought from GST-registered suppliers.
• Packaging materials, labels and printing.
• Marketplace commission and fees, which the marketplace invoices with GST.
• Advertising on Google, Meta and the marketplaces, where the invoice carries your GSTIN.
• Software, storefront apps, courier services, and professional services such as accounting.

Some credits are blocked by law whatever the invoice says, credit can be reversed if a supplier is not paid within the period the law allows, and claims have time limits. Your adviser will know which apply; make sure every invoice carries your GSTIN.

How do returns and RTO affect GST?

A customer return, or an RTO (return to origin, an order that comes back undelivered), reverses the sale: the GST on it comes off your liability through a credit note against the original invoice.

On marketplaces the credit note is usually generated for you, and TCS is collected on sales net of returns. Credit notes have time limits under GST, so returns recorded late can leave you paying tax on sales that never completed.

Match the marketplace’s returns and RTO report to the credit notes in its tax report every month. Our guide on how to reduce RTO covers the operational side.

What paperwork moves with your stock?

An invoice or delivery challan, and an e-way bill where the consignment value requires one. Moving stock to another state, even to your own registration there, is generally treated as a supply under GST, with tax charged on it.

That tax is usually recovered as credit by your registration in the receiving state, but it ties up cash until it is. Agree the value to use on stock transfers with your adviser, and keep each document with the stock records.

Stock sent within your state still travels with a delivery challan and, where the value requires it, an e-way bill.

Who handles which part of your GST?

The marketplace handles some steps for you, your accountant files the returns, and the rest is yours. Knowing which is which stops each side assuming the other has done it.

What GST work is due each month?

Reconcile, then file. The returns themselves are for your accountant; the reconciliation behind them is where online sellers lose money, because marketplace reports, settlements and the portal each show part of the picture.

1. Download each marketplace’s tax report for the month, with its invoices and credit notes, and your storefront’s sales report.
2. Match sales and returns in those reports to your settlements, order by order.
3. Check the TCS in your settlements against what the portal shows each marketplace reported.
4. Check your GSTR-2B for purchase invoices, marketplace fee invoices and advertising invoices, and chase any that are missing.
5. Give your accountant the reconciled figures for your returns, such as GSTR-1 for sales and GSTR-3B for the summary and payment, monthly or quarterly as your scheme requires.
6. File the reconciliation with the month’s papers, so any notice can be answered from one folder.

Keep invoices, credit notes, e-way bills, settlement reports and stock records for as long as GST law requires, in a form you can produce on request. A notice about a sale made long ago is answered from these papers, not from memory.

GST mistakes online sellers make

• Listing before the registration question is settled, then discovering an obligation after the first payout.
• One HSN code and rate applied to a whole catalogue, whatever each product is.
• Treating TCS as a cost and never claiming it.
• Confusing TCS under GST with TDS under income tax.
• Buying stock on invoices without your GSTIN, so the credit is lost.
• Sending stock to another state without checking whether you need a registration there.
• Price points set just above a rate line, such as ₹ 2,500 a piece for garments, without a decision behind them.
• Returns and RTO left out of the month’s figures, so GST is paid on sales that came back.

Where we fit in your GST work

We reconcile every marketplace settlement against the order report, including the TCS and TDS deducted, and send your accountant a monthly summary by marketplace. We do not file returns or give tax advice; the summary lets whoever does work from reconciled figures.

That work sits within our marketplace account management. Our own invoices are issued by Kavita Enterprises, GST-registered in Delhi under GSTIN 07CBUPK4786Q1ZD, with GST on our services at 18% on its own line.

If you are still deciding where to sell, our comparison of marketplace vs D2C sets out what each route costs, and our guide to Legal Metrology rules for online sellers covers the declarations your packs and listings need.

The terms used here, from RTO to TCS, are defined in plain English in our ecommerce glossary.