GST on Marketplace Sales: TCS, Place of Supply and ITC

Selling through an e-commerce marketplace under GST is not the same as selling directly. The marketplace operator has its own obligations, and those obligations translate into specific entries in your books — most importantly Tax Collected at Source (TCS) and the place-of-supply rules for B2C orders shipped across states. Here is what every marketplace seller needs to know.

TCS — what the marketplace deducts

Under Section 52 of the CGST Act, every "Electronic Commerce Operator" (Amazon, Flipkart, Meesho, etc.) is required to collect 1% TCS on the net value of taxable supplies made through it. "Net value" means gross supplies minus returns, both at the marketplace level.

What this means for you:

• The marketplace deducts 1% of your net sales through that platform and deposits it with the government against your GSTIN
• The deducted amount appears in your GSTR-2X / 2A / 2B for the relevant period (depending on the report format current that period)
• You claim the TCS as a credit when filing your GSTR-3B — reducing your cash GST liability for that period

It is your money, withheld and deposited on your behalf. Don't leave it unclaimed.

How TCS reconciles in your books

Each marketplace settlement shows the TCS deducted. Set up a TCS Receivable account in your books, debited at each settlement. The balance is what's claimable.

Monthly:

• Total TCS deducted across marketplaces for the period = the figure you claim in GSTR-3B
• Reconcile against the TCS visible on the GST portal (your GSTR-2X / 2A entries)
• Match by marketplace — if Amazon shows ₹40,000 TCS in your books but the portal shows ₹38,500, investigate the timing or the missing settlement

Discrepancies are usually timing — settlement and TCS filing happen on slightly different cycles — but they should resolve within a month or two.

Place of supply for B2C orders

For B2C orders (no GSTIN of the buyer), the place of supply is the delivery address — specifically, the state to which the goods are shipped. This determines whether:

• The transaction is intra-state (your state = ship-to state) → CGST + SGST applies
• The transaction is inter-state (your state ≠ ship-to state) → IGST applies

The total GST is the same either way; only the split changes. But the split matters because:

• State-wise reporting in GSTR-1 requires Place of Supply codes
• State-wise SGST flows to the destination state's accounting
• B2C inter-state supplies above ₹2.5 lakh to any single state require additional disclosure

For most marketplace orders, the marketplace's settlement statement gives you the ship-to state per order. Your books capture this and apply the right tax. Missing or wrong place-of-supply is a common cause of GSTR-1 / GSTR-3B mismatches.

Place of supply for B2B orders

For B2B orders (buyer provides GSTIN), the place of supply is the buyer's registered place of business — usually the state of the GSTIN. Marketplaces have a B2B flag on orders where the buyer has provided a GSTIN; these need separate handling for full ITC pass-through.

The B2B portion is small for most consumer-facing marketplaces but meaningful for some categories (B2B office supplies, industrial goods).

Single GSTIN vs multi-state GSTIN

If your inventory and operations sit in one state, one GSTIN handles everything. Sales to other states are inter-state (IGST) and that's that.

If you stock inventory in multiple states — typically via FBA / fulfilment-by-marketplace warehouses across states — you generally need a GSTIN per state where you hold stock. This is because the dispatch from each state is a supply from that state, requiring a registered presence.

For sellers on FBA-style services, this is usually mandatory once your FBA inventory is held in a state you don't otherwise operate in. Marketplaces will tell you which states they're holding stock for you in.

Multi-state GSTIN adds complexity:

• Separate GST returns per GSTIN
• Inter-state branch transfers (see our multi-location inventory post)
• More TCS accounts and reconciliations

It is worth the complexity if the sales volume justifies it.

Compulsory registration regardless of turnover

Important: selling through a marketplace requires GST registration regardless of turnover. The usual ₹20 lakh / ₹40 lakh threshold for compulsory GST registration does not apply to marketplace sellers. From the first order, you need to be registered and filing.

The Composition Scheme is also generally not available to marketplace sellers (with some narrow exceptions).

Returns and the TCS adjustment

When a customer returns a marketplace order, the gross sales for that period reduces — and so does the TCS that should have been deducted. Marketplaces handle this in two ways:

• Adjust the current period's TCS (reduce TCS deducted on current sales by TCS on returns)
• Reflect as a separate refund in the settlement statement

Either way, your books and the GST portal will reconcile if you're tracking returns correctly. If there's a chronic mismatch, the most common cause is returns not being booked or being booked under the wrong period.

Output GST on marketplace sales

Beyond TCS, you still owe full output GST on the gross sale to the customer. The marketplace doesn't collect GST on your behalf — only the 1% TCS. Your GSTR-3B reflects:

• Output GST = the full 18% (or applicable rate) on all marketplace sales
• Input GST credit = on your purchases (raw materials, services, etc.)
• TCS credit = the 1% deducted by marketplaces
• Net cash GST payable = Output − Input GST − TCS

The TCS credit reduces your cash outflow but does not reduce the GST liability itself.

How Booksmor helps

Booksmor captures marketplace-specific GST flows: per-order place of supply detection from the settlement statement, automatic CGST/SGST vs IGST split, TCS tracking per marketplace with reconciliation against the GST portal, returns adjustments handled correctly, and multi-state GSTIN support for FBA sellers. Start a 30-day free trial and put marketplace GST on solid footing.