GST in E-commerce Business: Online Sellers

Day 3 – GST in eCommerce Business: Complete Guide for Online Sellers

By CA Devesh Thakur

Introduction

E-commerce has transformed the way India buys and sells products. With platforms like Amazon, Flipkart, and Myntra giving small sellers national reach, thousands of entrepreneurs have started online businesses. But along with opportunities comes the responsibility of GST compliance.

Many sellers find GST in eCommerce confusing – B2B vs B2C, intra vs inter-state, GSTR-1 and GSTR-3B filing, debit/credit notes, cancellations, FBA transfers, and the most critical step – reconciliation with TCS reports filed by marketplaces.

In this detailed guide for Day 3 of the 15 Days eCommerce Challenge, we will break down every aspect of GST in eCommerce business in simple language with practical examples.

1. Why GST is Critical for eCommerce Business

Unlike offline retail where sales are local, eCommerce involves:

• Sales across states (inter-state supply)
• Sales to both consumers (B2C) and businesses (B2B)
• Returns, cancellations, discounts, and stock transfers
• TCS deductions by eCommerce operators

These make GST compliance more complex. Wrong reporting can lead to mismatches with marketplace reports, and that results in notices and penalties.

2. B2B vs B2C Sales in eCommerce

B2C (Business to Consumer)

• Sale to end consumers (no GSTIN).
• Tax is applied based on the place of supply.
• Example: You sell a mobile cover worth ₹500 to a customer in Delhi. GST @18% is charged → CGST + SGST because it’s intra-state.

B2B (Business to Business)

• Sale to a GST-registered buyer.
• Invoice must include GSTIN of buyer.
• Buyer can claim Input Tax Credit (ITC).
• Example: You sell 100 phone covers worth ₹50,000 to a retailer in Gujarat. Since it’s inter-state, you charge IGST.

Key difference:

• B2B invoices are tracked by GSTIN and must match with buyer’s GSTR-2B.
• B2C invoices are reported in bulk without buyer details.

3. Intra-State vs Inter-State Sales

Intra-State

• Seller and buyer are in the same state.
• GST charged = CGST + SGST.
• Example: Delhi to Delhi sale of ₹10,000 @18% = ₹900 CGST + ₹900 SGST.

Inter-State

• Seller and buyer are in different states.
• GST charged = IGST.
• Example: Delhi to UP sale of ₹10,000 @18% = ₹1,800 IGST.

In eCommerce, inter-state sales dominate, since marketplaces deliver PAN India. Sellers must carefully report place of supply.

4. Handling Returns, Cancellations, Debit & Credit Notes

• Returns: If a customer returns goods, issue a Credit Note to reduce your tax liability.
• Cancellations: If cancelled before invoicing, no GST impact. If after invoicing, issue a credit note.
• Debit Note: Issued when you undercharge GST or value; increases liability.

Why important?
If you don’t issue debit/credit notes, your liability will mismatch with actual collections and marketplace reports.

5. GSTR-1 for eCommerce Sellers

GSTR-1 is the sales return filed monthly or quarterly.

Key reporting requirements for eCommerce sellers:

• B2B Sales: With GSTIN details.
• B2C Sales: State-wise reporting.
• Credit/Debit Notes: For adjustments.
• HSN Summary: Mandatory for turnover above ₹5 Cr.
• Documents Issued: Invoices, debit notes, credit notes, delivery challans.
• Supplies through E-commerce Operators: Must mention operator GSTIN (Amazon, Flipkart, etc.).

Reporting correctly ensures your sales match with eCommerce operator’s GSTR-8 TCS statement.

6. GSTR-3B for eCommerce Sellers

GSTR-3B is a summary return filed monthly.

It includes:

1. Total outward taxable supplies (sales).
2. Eligible ITC (packaging, courier, advertising, etc.).
3. Net tax payable after adjusting ITC.
4. Final payment of CGST, SGST, IGST.

📌 Think of GSTR-1 as detailed sales return and GSTR-3B as monthly payment return.

7. Special Scenarios in eCommerce

a) Inter-Branch Transfers

If you have warehouses in multiple states, stock transfers between states are treated as supply (with GST invoice).

b) FBA (Fulfilled by Amazon)

Goods are stored in Amazon warehouses. If Amazon shifts stock from one state to another, it is treated as a supply between your own GSTINs. GST invoice must be issued.

c) Discounts & Promotions

• Pre-supply discounts → adjusted in invoice.
• Post-supply discounts → require credit note.

8. The Most Important Step: TCS Reconciliation

E-commerce operators (Amazon, Flipkart, etc.) are required to:

• Deduct TCS on net taxable sales.
• Deposit it with the government.
• File GSTR-8, showing your state-wise sales.

📌 As a seller, you must reconcile your sales with these TCS figures.

Why state-wise reconciliation matters

Suppose your warehouse is in Delhi but you sell:

• ₹50,000 to customers in UP
• ₹70,000 to customers in Maharashtra
• ₹30,000 within Delhi

Amazon’s GSTR-8 will show these amounts state-wise. Your GSTR-1 must also reflect this exact breakup. Any mismatch leads to GST notices.

9. Payment of GST in eCommerce Business

Steps for payment:

1. Calculate liability in GSTR-3B.
2. Adjust available ITC.
3. Pay balance tax through GST portal.
4. Ensure reconciliation with TCS before finalizing.

10. Example – Complete Cycle of GST in eCommerce

Let’s say in June 2025, your sales were:

• B2C Delhi: ₹20,000 → CGST+SGST
• B2C Maharashtra: ₹30,000 → IGST
• B2B Gujarat: ₹50,000 → IGST
• Returns: ₹5,000 → Credit Note

Your Reporting:

• GSTR-1 → Sales & credit note, state-wise breakup, eCommerce operator GSTIN.
• GSTR-3B → Summary, ITC claim, payment.
• Reconciliation → Match Amazon’s TCS report with your declared sales.

If Amazon deducted ₹950 TCS, this should appear in your electronic cash ledger.

11. Common Mistakes Sellers Make

1. Reporting all sales under one state instead of state-wise.
2. Not issuing credit notes for returns.
3. Ignoring stock transfers between warehouses.
4. Failing to reconcile TCS report with GSTR-1.
5. Claiming ITC on ineligible expenses.

12. Best Practices for Smooth Compliance

• Maintain accurate records of B2B and B2C sales.
• Reconcile monthly with marketplace reports.
• File GSTR-1 and GSTR-3B on time.
• Keep debit/credit note entries updated.
• Review Amazon/Flipkart TCS reports carefully before filing.

FAQs on GST in eCommerce Business

Q1. Do I need separate GST registration for each state?
If you have warehouses or supply from multiple states, yes. Otherwise, one GSTIN in the home state is enough.

Q2. Is GST compulsory for all eCommerce sellers?
Yes. Even if turnover is below threshold, GST registration is mandatory for selling on marketplaces.

Q3. Can I claim ITC on packaging material?
Yes, ITC can be claimed on packaging, courier, and certain expenses used in business.

Q4. What happens if I don’t reconcile TCS?
Mismatch with operator’s GSTR-8 may lead to notices and tax demand.

Conclusion

GST compliance in eCommerce is not optional – it’s mandatory. Sellers must understand the difference between B2B and B2C, intra and inter-state, handle returns with debit/credit notes, and most importantly, reconcile sales state-wise with TCS reports filed by operators.

This discipline ensures smooth operations, avoids notices, and builds credibility for your business.

If you’re serious about building a successful eCommerce business, make GST compliance part of your monthly routine.