Selling on Amazon, Flipkart, or Meesho is the easy part. Accounting for it is where Indian e-commerce sellers struggle. Unlike traditional retail, e-commerce accounting involves mandatory GST from Day 1 (no threshold exemption), TCS deducted by every platform, TDS under Section 194O, multi-platform settlement reconciliation, high return volumes, and complex fee structures (commissions, FBA fees, shipping charges, advertising deductions) - all of which must be accurately recorded, reconciled, and reported.
This guide covers the complete accounting framework for Indian e-commerce sellers - from registration through monthly compliance. For the Zoho Books-specific setup, see our Zoho Books e-commerce guide. For the bookkeeping foundation, see our bookkeeping guide.
Step 1: GST Registration - Mandatory from Day One
Under Section 24(ix) of the CGST Act 2017, every person supplying goods through an e-commerce operator must register for GST - regardless of turnover. The standard Rs 40 lakh (Rs 20 lakh for special category states) threshold exemption does not apply. You cannot even list products on Amazon, Flipkart, or Meesho without a GSTIN.
Registration process: Apply on the GST portal (gst.gov.in) → Select 'Supplier of Goods' → Under reason for registration, select 'Liability under Section 24' → Submit documents (PAN, Aadhaar, bank statement, address proof) → Receive GSTIN within 7-10 working days.
Multi-state selling: If you sell from one state but ship to customers across India, you need only one GSTIN (in your state). IGST applies to inter-state sales. If you have warehouses or FBA inventory in multiple states, you may need GSTIN in each state where goods are stored.
Step 2: Understand TCS and TDS - Money Deducted Before You Receive It
TCS Under GST (Section 52)
| Parameter | Details |
|---|---|
| Rate | 1% (0.5% CGST + 0.5% SGST/UT GST) on net taxable value |
| Deducted By | Amazon, Flipkart, Meesho, Myntra - every e-commerce operator |
| On What | Net taxable value of supplies (gross sales − returns) |
| Where It Goes | Deposited by platform to government. Appears in your Electronic Cash Ledger on GST portal |
| How to Claim | Accept TCS credit in GSTR-2A → flows to Cash Ledger → offset against your GST liability in GSTR-3B |
| Platform Files | GSTR-8 (monthly, by 10th of following month) |
| You Must | Accept TCS credit on GST portal every month. Not automatic - you must click 'Accept' |
TDS Under Income Tax (Section 194O)
Rate: 0.1% on gross sales amount (reduced from 1% effective October 2024). Deducted by the e-commerce operator from every payment.
How to Claim: This TDS appears in your Form 26AS and AIS (Annual Information Statement). Claim as credit when filing your annual Income Tax Return (ITR). If TDS exceeds your tax liability, the excess is refunded.
Key Point: TCS (GST) and TDS (Income Tax) are two separate deductions by the same platform. Do not confuse them. TCS is claimed monthly in GSTR-3B. TDS is claimed annually in ITR.
Step 3: Understand the Settlement Report - What the Platform Pays You
The settlement report is the single most important document in e-commerce accounting. It shows what the platform pays you - and why it is less than your gross sales.
Anatomy of a typical Amazon/Flipkart settlement:
| Line Item | Example (Rs) |
|---|---|
| Gross Sales (including GST) | 1,18,000 |
| Less: Returns/Refunds (including GST) | (11,800) |
| Net Sales (including GST) | 1,06,200 |
| Less: Platform Commission + GST on commission | (12,744) |
| Less: Shipping/Logistics Charges | (5,000) |
| Less: FBA/Storage Fees (Amazon) | (3,000) |
| Less: Advertising Deductions | (2,000) |
| Less: TCS @ 1% on net taxable value | (900) |
| Less: TDS @ 0.1% on gross sales | (106) |
| Settlement Amount (what hits your bank) | 82,450 |
Critical Accounting Rule: Revenue = Net Sales excluding GST = Rs 90,000 (not Rs 82,450 settlement, and not Rs 1,18,000 gross). The settlement amount is not revenue - it is what remains after commissions, fees, TCS, and TDS. Each deduction must be recorded separately in your books. For GST invoicing compliance, see our GST invoicing guide.
Step 4: Set Up Your E-Commerce Chart of Accounts
Your chart of accounts needs e-commerce-specific categories:
- Income: Sales - Amazon, Sales - Flipkart, Sales - Meesho, Sales - Own Website (separate accounts per platform for tracking)
- COGS: Purchase of Goods, Packaging Materials, Inward Shipping (to your warehouse)
- Expenses - Platform: Amazon Commission, Flipkart Commission, Meesho Commission, FBA Fees, Storage Charges, Platform Advertising
- Expenses - Logistics: Outward Shipping (delivery to customer), Return Shipping Charges
- Expenses - Operations: Salaries, Rent, Utilities, Software Subscriptions, Professional Fees
- Assets: Inventory (opening/closing), TCS Receivable, TDS Receivable, GST Input Credit
- Liabilities: GST Payable (CGST, SGST, IGST), TDS Payable (if you deduct TDS on vendor payments)
Step 5: Calculate True Cost of Goods Sold (COGS)
E-commerce COGS is more complex than traditional retail because platform fees are a significant cost layer:
Narrow COGS (for gross margin): Purchase cost + packaging + inward shipping. This tells you if your sourcing is profitable.
Broad COGS (for net margin per order): Purchase cost + packaging + inward shipping + platform commission + outward shipping + FBA fees + return costs. This tells you if each order actually makes money after all marketplace costs.
Example: You sell a product for Rs 1,000 (ex-GST). Purchase cost: Rs 400. Packaging: Rs 30. Commission (15%): Rs 150. Shipping: Rs 80. FBA fee: Rs 40. Total cost per order: Rs 700. Profit per order: Rs 300 (30% margin). Add a return rate of 20%, and your effective margin drops to 24% because you bear return shipping on returned orders.
Step 6: Account for Returns, Refunds, and Cancellations
E-commerce return rates in India average 15-30% (fashion/apparel can be 30-40%). Returns are not just lost sales - they are accounting events:
- When a return happens: Reverse the sale in your books (credit note). Reverse the GST (reduce output tax). Record the return shipping cost as an expense. Add the product back to inventory (if resaleable) or write it off (if damaged).
- For GST: Issue a credit note within the timeline (before November 30 of the following financial year). The credit note reduces your output GST liability in the month of the return.
- For income: Net Sales = Gross Sales − Returns. Your P&L should always show net sales. Do not ignore returns - they directly affect your revenue recognition and GST liability.
Meesho specifics: Meesho handles returns differently - the platform manages reverse logistics and deducts return-related charges from your settlement. Reconcile these charges line by line in the settlement report. For GST return filing across platforms, explore our GST return filing services.
Monthly Compliance Calendar for E-Commerce Sellers
| Date | Task | Action |
|---|---|---|
| 1st-5th | Settlement Reconciliation | Download Amazon MTR, Flipkart reports, Meesho reports. Reconcile with bank deposits. |
| 1st-5th | Bank Reconciliation | Reconcile all bank accounts including payment gateway settlements. |
| 7th | TDS Deposit | Deposit TDS on vendor payments (if applicable) via challan. |
| 10th | Accept TCS Credit | Log in to GST portal → TDS/TCS Credit Received → Accept all TCS entries from platforms. |
| 11th | File GSTR-1 | Report all outward supplies (sales across all platforms + own website). Match with settlement data. |
| 14th | GSTR-2B Available | Check ITC available from suppliers. Reconcile with purchase register. |
| 20th | File GSTR-3B + Pay GST | File summary return. Offset GST liability with ITC + TCS credit. Pay balance via challan. |
| Month-End | MIS Review | P&L per platform, gross/net margin per product, return rate analysis, inventory status. |
Key Takeaways
E-commerce sellers in India face mandatory GST registration from Day 1 (Section 24), 1% TCS on every sale (Section 52), 0.1% TDS on gross sales (Section 194O), and monthly GSTR filing - making their compliance burden significantly higher than offline sellers. Understanding and managing these deductions is essential for profitability.
The settlement amount is not revenue. Revenue = gross sales excluding GST. Every deduction by the platform (commission, shipping, FBA, TCS, TDS) must be recorded as a separate line item in your books. Recording the settlement amount as revenue understates your actual sales, loses ITC on commission GST, and corrupts your P&L.
True COGS for e-commerce includes product cost + packaging + platform commission + shipping + FBA fees + return costs. A product with 60% gross margin (purchase vs sale price) may have only 20-25% net margin after all platform costs and returns. Calculate per-order profitability to identify loss-making SKUs.
TCS credit must be manually accepted on the GST portal every month - it does not auto-credit. Missing this step means TCS deducted by platforms sits unclaimed in your cash ledger. Over 12 months, unclaimed TCS on Rs 50 lakh annual sales = Rs 50,000 of your money sitting unused.
The monthly compliance calendar (settlement reconciliation by 5th, TCS acceptance by 10th, GSTR-1 by 11th, GSTR-3B by 20th, MIS review by month-end) ensures nothing falls through the cracks. Automation through cloud accounting software reduces this from 15-20 hours/month to 4-6 hours/month.
Need Specialist E-Commerce Accounting?
E-commerce accounting is not generic bookkeeping - it requires platform-specific knowledge, settlement report expertise, TCS/TDS reconciliation skills, and an understanding of high-volume return accounting. A CA who handles your neighbour's grocery store is not equipped for your Amazon seller account.
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