With e-commerce on the
rise in India, e-commerce platforms like Amazon, Flipkart,
Meesho, and more have made it possible
for sellers across the country to run successful
businesses. But along with this liberty comes
the responsibility of maintaining proper accounting records
and staying compliant with India's Goods and Services Tax
(GST) legislation. Whether you are a budding seller
or growing your business,
this guidebook will help you understand the core accounting
and GST rules that you must follow so that you
don't have to pay penalties and can enjoy long-term
growth.
Why GST Registration is a Must for Online Sellers
One of the earliest regulatory requirements for anyone selling on an e-commerce
platform is GST registration. In contrast to traditional commerce, where small
companies can be exempt if turnover is below ?20 lakh, sellers on platforms
such as Amazon or Flipkart need to register for GST irrespective of turnover.
The reason for this stems from the structure of e-commerce marketplaces under
GST law.
Key Points:
GST is mandatory, although your
turnover may be below the limit.
You may have several GST registrations
in the event that your products are stockpiled in
godowns in different states.
GSTIN must be updated on the
e-commerce platform to start selling.
Explanation of TCS (Tax Collected at Source) for E-Commerce
E-commerce platforms are required to deduct TCS under
Section 52 of CGST
Act. The tax is deducted at the time of payment settlement and
is credited to the seller's GST account.
Important Points:
TCS is collected at 1% of net taxable sales (returns not
included).
Amazon, Flipkart, and Meesho report GSTR-8 for this.
The amount can be availed by the sellers in their GSTR-3B
return from the Electronic Cash Ledger.
GST Returns Online Sellers Must File
Online sellers must be cautious while filing
their GST returns every month. Late filing or missing returns
will attract humongous late fees and interest, even if
you made zero sales for the month.
Returns to File:
GSTR-1: All outward supplies (sales). File monthly or quarterly.
GSTR-3B: Monthly summary for tax payment and ITC claim.
GSTR-9: Annual return (mandatory if turnover > ?2 crore).
Nil returns are still required if there are no
sales during a period.
Claiming Input Tax Credit (ITC) for Online Businesses
Input Tax Credit enables you to recover the tax paid on
business expenses against the
GST collected on sales. Nevertheless,
this advantage is subject to a number of conditions.
You can claim ITC on:
Courier and shipping fees
Packaging material (tapes, boxes, bubble wrap)
Online advertising (Google Ads, Facebook Ads)
Warehousing and storage
Professional services (accountants, legal consultants)
Note: You must have a valid GST invoice, and the
supplier must have filed their GSTR-1. Regular reconciliation must be done to avoid ITC
mismatches.
Invoicing and E-Way Bills for Online Orders
All the e-commerce sellers must issue GST-compliant
invoices for each sale. Invoices
should include essential details such as GSTIN,
HSN/SAC code, tax breakup, and address of the buyer.
Points to Remember
The invoices must be serially numbered
and kept for at least 6 years.
E-Way Bill is compulsory for
goods over ?50,000 being transported.
If the turnover is over ?5
crore, then e-invoicing is compulsory.
Common Accounting Challenges faced by E-Commerce
Sellers
Selling online differs from selling offline because there
are multiple levels of deductions and
adjustments, thus accounting becomes complex.
Some of the common problems are:
Multiple commissions that are levied by platforms
Refunds and returns that reverse earlier sales
Delays in payment settlement between gateways
Platform-based fee structures and GST implications
Professional accounting software handles these records better.
Reconcile books every month.
Best Practices for GST & Accounting Compliance
To avoid GST penalties and keep your
business audit-ready, adopt these practices:
Maintain the purchase and sales ledger clean
and current.
Reconcile the GSTR-2B on a regular
basis with records of purchases to
claim proper ITCs.
File on time — even zero returns.
Use cloud-based accounting software to view data in real-time.
Hire a Chartered Accountant for filings, audit readiness, and tax
planning.
What a CA Can Do for E-Commerce Sellers
A Chartered Accountant is not merely a tax filer — they are your
compliance and business growth strategic partner. Here's what a CA can do:
GST registration and renewal for multiple states
Correct return filing (GSTR-1, 3B, 9) with reconciliation
Optimization of ITC and tax savings
Preparation of P&L, balance sheet, and audit reports
Representation in case of GST notices or audits
By hiring a CA, you avoid risks of penalties
and ensure long-term sustainability of your online business.
Penalties for Non-Compliance
Non-compliance with GST can attract severe penalties that
can hurt your cash flow and reputation.
Penalty Highlights:
?50 per day for late return filing (?25 CGST + ?25 SGST)
18% interest on late payments
Blocking of Input Tax Credit (ITC)
Suspension or blacklisting by online marketplaces
GST officer notices and audit
FAQs: GST & Accounting for E-Commerce Sellers
Q1. Do I need to pay GST while selling on Amazon or Flipkart?
Yes. Sellers on all e-commerce platforms are supposed to have a valid
GST registration.
Q2. What is TCS and how do I recover it?
TCS is 1% tax which is collected by the e-commerce marketplace.
You can recover it in your GST return (GSTR-3B).
Q3. Can I claim GST on advertisement or courier charges?
Yes, if you have valid GST invoices and your supplier
has filed returns.
Q4. How often should I file GST returns?
Monthly (GSTR-3B and GSTR-1). Yearly return (GSTR-9) is
also required if turnover exceeds ?2 crore.
Q5. Do I need a CA for my online business?
Yes, especially if you're growing or you have
multi-state operations. A CA enables accurate filings
and puts you audit-ready.
Conclusion: Stay Compliant, Stay Profitable
E-commerce has made it easy to
start and grow a business, but
it comes with the additional burden
of complying with complex GST laws and
accounting. Accurate accounting and timely GST filing are
not only compliance requ