E-Commerce Compliance in India: GST, TDS & TCS

E-commerce compliance in India is essential, especially with the complexities of GST, TDS, and TCS. This blog breaks down the key regulations you need to follow to ensure your business remains compliant with these crucial tax laws. Dive in to safeguard your e-commerce operations today!

e-Commerce Landscape in India

e-commerce has been defined in the u/s. 2(44) of CGST Act, 2017. Short for electronic commerce, it involves buying and selling goods or services online. 

It’s the process of conducting transactions over the internet, whether you're buying a product, subscribing to a service, or downloading digital content. The convenience of shopping from anywhere, anytime, has fueled the rapid growth of e-commerce in India.

In India, e-Commerce businesses operate on two distinct models:

Model 1: Direct Sales 

In the first model, the supplier sells goods or services directly through their own website. There’s no third party involved, just a simple transaction between buyer and seller. For example, a brand like Fabindia sells products directly through its own online store. GST laws apply as they would for any regular sale.

Model 2: Marketplace Model

The second model involves a third-party e-Commerce operator (ECO), known as a marketplace or aggregator. This operator connects buyers and sellers, providing a platform for transactions. For example, if Fabindia sells its products on Amazon, Amazon acts as the operator, linking customers with the seller. In this blog, we will dive into compliances under this model.  

Understanding ECO, the Buyer and Seller

e-Commerce Operators (ECO)

An E-commerce Operator is defined under Section 2(45) of the CGST Act, 2017. It refers to any person or entity that owns, operates, or manages a digital platform where e-commerce activities occur. 

This could be a platform like Amazon or Flipkart or even a small business managing its online store. Essentially, if you facilitate buying and selling online, you are an e-commerce operator.

Buyers

In the e-commerce ecosystem, a buyer is the consumer who purchases goods or services online. Buyers benefit from shopping at home, choosing from a wide range of products, and often finding better deal/ s than in stores.

Sellers

A seller is the individual or business offering products or services for sale on an e-commerce platform. Sellers range from large corporations to small businesses and even individual entrepreneurs. 

They rely on e-commerce platforms to reach a broader audience and increase sales without needing a physical storefront.

GST Registration for Ecommerce Businesses in India

GST Registration for Ecommerce Operators (ECOs)

As per Section 24(x) of the CGST Act, 2017, every ecommerce operator is liable for GST registration irrespective of their turnover. 

GST Registration for Sellers

GST registration is not mandatory for every seller supplying goods through an e-commerce platform. From 1 October 2023, sellers whose aggregate turnover in both the preceding and current financial years remains within the applicable registration threshold can qualify for an exemption. They must not make interstate supplies of goods, must sell through e-commerce operators in only one State or Union Territory, and must have a valid PAN and obtain an enrolment number on the GST portal before making such supplies.

Service providers selling through e-commerce platforms may also qualify for exemption from compulsory GST registration. Under Notification No. 65/2017–Central Tax, as amended, suppliers of services other than those covered under Section 9(5) can claim this exemption where their aggregate turnover on an all-India basis does not exceed ₹20 lakh in a financial year, or ₹10 lakh in applicable special-category states, provided no other mandatory registration requirement applies. Services covered under Section 9(5) follow separate rules, under which the e-commerce operator pays GST on notified supplies.

Important Note: An e-commerce operator must register under GST in every state where it supplies goods or services.

GST Liability on e-Commerce Transactions

In an e-commerce transaction, three main parties are involved: the supplier, the buyer, and the e-commerce operator. When it comes to GST, two distinct transactions are subject to tax:

1. The transaction between the supplier and the buyer for the supply of goods or services.
2. The transaction between the supplier and the e-commerce operator for the commission charged for using the platform.

Case I: GST on Sale of Goods/Services Between Buyer & Seller

The first transaction is straightforward. The supplier provides goods or services to the buyer, and GST is charged on this sale (except cases covered u/s 9(5) of GST Act). The buyer pays the GST along with the purchase price, and the supplier remits this tax to the government.

Case II: GST on Commission Charged by ECO

The second transaction involves the e-commerce operator. The operator charges a commission to the supplier for using the platform. GST is also applicable on this commission. The supplier pays this GST to the e-commerce operator, who then remits it to the government.

Selling through your own website or an online marketplace? Our GST Registration services help you check your requirement and complete the registration process without avoidable errors.

Tax Collected on Source (TCS) for e-Commerce Operators

According to the provision of Section 52 of CGST Act, TCS, or Tax Collected at Source, is a tax collected by e-commerce operators. It’s deducted from the amount they receive on behalf of sellers who make sales through their platform. 

Let’s look at some important consideration for TCS for e-Commerce transactions: 

• Rate: As of July 10, 2024, TCS is charged at 0.5% on the net value of taxable supplies. For intra-state supplies, 0.25% goes to CGST and 0.25% to SGST. For inter-state transactions, 0.5% is collected under the IGST Act.
• Due Date: TCS collected by an e-commerce operator must generally be deposited with the government within 10 days after the end of the month in which it was collected, subject to any notified extension.
• Calculation: To calculate the net value for TCS, subtract returned taxable supplies from the total taxable supplies. For example, if you had total supplies of ₹55 lakh and ₹5 lakh in returns, TCS would be calculated on ₹50 lakh.
• Form: You must file GSTR-8 by the 10th of the next month in which TCS was collected. This return should be filed only after depositing the collected tax to the government. For instance, TCS collected in December 2024 should be reported by January 10, 2025.

Tax Deducted at Source (TDS) on e-Commerce Transactions

Let’s now cover various TDS compliances relevant for e-Commerce transactions. 

TDS on Gross Sale Value

Deducted by: e-Commerce Operator (ECO)

E-commerce operators must generally deduct TDS at 0.1% of the gross amount of sales or services facilitated through their platforms. Tax is deducted at the time of credit to the seller’s account or payment, whichever is earlier. Direct payments from customers to sellers are also included when the platform facilitates the transaction. For transactions governed by the Income-tax Act, 2025, effective from 1 April 2026, the relevant provision falls under Section 393, corresponding to Section 194-O of the earlier Act.

Exemptions:

1. Resident individual or HUF sellers are exempt from e-commerce TDS where their gross sales or services through the operator do not exceed ₹5 lakh during the year, provided they furnish PAN or Aadhaar to the operator.

2. Non-resident sellers fall outside this specific e-commerce TDS provision. However, other withholding provisions may apply depending on the transaction 

TDS on Commision

Deducted by: Seller

Where commission TDS applies, the rate is 2%. The annual threshold increased from ₹15,000 to ₹20,000 from 1 April 2025. No deduction is required under this provision where the total commission paid or credited to the payee during the year does not exceed ₹20,000.

Companies, firms and other covered payers must comply with this requirement. Individuals and HUFs are also covered where their business turnover exceeded ₹1 crore or professional receipts exceeded ₹50 lakh in the immediately preceding year.

However, separate TDS on marketplace commission should not be assumed in every case. The e-commerce TDS provisions contain protection against duplicate deduction on covered transactions. Applicability depends on whether the commission relates to the underlying sale covered by those provisions.

For transactions governed by the Income-tax Act, 2025, the relevant commission TDS provision falls under Section 393, corresponding to Section 194H of the earlier Act.

TDS on Advertisement

Deducted by: Seller

TDS on advertising charges depends on the payer’s eligibility, the nature of the payment and its connection with the underlying e-commerce transaction. Advertising payments should not automatically be treated as requiring a separate deduction where the e-commerce provisions prevent duplicate TDS. Separately chargeable advertising services outside that protection must be assessed under the applicable withholding provision. For transactions governed by the Income-tax Act, 2025, use the relevant entry under Section 393 rather than the earlier Section 194C reference.

Conclusion

Staying compliant with e-commerce tax laws in India is crucial for smooth operations and building trust. From GST to TDS and TCS, understanding these regulations ensures your business thrives in a dynamic market. 

Want to keep your online business GST-compliant from day one? Connect with Startup Movers and let our experts handle your GST registration accurately and smoothly.