What Every Amazon And Flipkart Seller Should Know About GST

What Every Amazon and Flipkart Seller Should Know About GST

A friend of mine, Priya, started selling handmade jewellery on Amazon around eight months back. It began as something small, almost a side hustle she wasn't taking too seriously. Then orders started coming in faster than expected, Amazon began deducting little amounts before every settlement, and her seller dashboard filled up with words like TCS, HSN, GSTIN — none of which meant much to her at the time. If you're selling clothes, phone accessories, cosmetics, or home décor on Amazon or Flipkart and you've hit this same confusion, you're in good company.

Selling through a marketplace is not like selling from a shop counter. The platform stands between you and your buyer, deducts money on its own, reports what you sell to the tax department, and expects you to be GST-ready before you even list your first product. This piece covers what registration actually demands, how TCS works in practice, how invoicing and Input Tax Credit connect, and what your money really looks like once every deduction has come out.

Why GST Isn't Just Paperwork

GST, or Goods and Services Tax, applies to the sale of nearly everything you'd sell online. Say a customer pays ?1,000 for your product. Part of that is the value of the product itself; the rest is tax you've collected on the government's behalf. That tax portion was never really yours to keep — it has to be paid across, minus whatever credit you're eligible for.

This is where a lot of new sellers trip up. They see the full amount a buyer paid and assume that's what they've earned. It's not, not even close. Take a product priced at ?1,180, GST included at 18 percent. Roughly ?1,000 of that is your taxable value, and ?180 is tax passing through you. Then Amazon or Flipkart steps in and takes its cut — commission, shipping, maybe ad spend if you've been running promotions. So, what the customer paid isn't your revenue. What's left after platform fees isn't your profit either. Profit only shows up after your own cost of goods and running expenses come out. Once you start separating these amounts mentally, running the business gets a lot less confusing.

So, Does Every Seller Actually Need to Register?

This is probably the question people ask me most, and the answer needs a little context rather than a flat yes or no.

If you ran a regular shop, GST registration would kick in only after your turnover crossed a certain limit — usually ?40 lakh for goods. That exemption basically disappears once you start selling through Amazon or Flipkart. Section 24 of the CGST Act makes registration compulsory for anyone supplying goods through an e-commerce platform that collects TCS, no matter how tiny your turnover is. Sell three products a month and you'll still need a GSTIN before Amazon or Flipkart lets you go live, since both check for it at onboarding.

There's one exception worth mentioning, though it applies to very few people. If everything you sell is fully GST-exempt, a CBIC notification lets you skip compulsory registration in that narrow case — not something most sellers of clothing, gadgets, or beauty products will qualify for. Separately, if you're offering a service rather than a product, and your platform doesn't collect TCS on that service, the usual turnover exemption might still cover you. But for anyone selling goods, assume registration is required from your very first sale. One more detail: e-commerce sellers also can't opt into the Composition Scheme, so you'll be filing under the regular GST route.

Getting Registered

The actual process happens on the GST Portal, and it's fairly predictable once you know what's coming. You'll need your PAN, a phone number and email you can verify with OTP, details about how your business is structured, and proof of where you operate from. A rented flat works, so does a family home or a spare room used for storage, provided you can back it up with a rent agreement, an electricity bill, or a no-objection letter from the owner. Bank details get added too, sometimes later in the form. Once everything checks out — Aadhaar verification or, occasionally, a physical visit — you get your GSTIN, which then has to go into your Amazon Seller Central or Flipkart Seller Hub profile before you're allowed to list anything.

Understanding TCS

Tax Collected at Source, or TCS, is basically the marketplace deducting a slice of your sale before it pays you, and sending that slice straight to the government. Right now, the rate sits at 1 percent of your net taxable supplies — split as 0.5 percent CGST and 0.5 percent SGST for sales within your state, or 1 percent IGST if you're shipping across state lines.

People often assume TCS is some extra cost eating into their margin, the way commission does. It isn't, really — it's tax you owed anyway, just collected a bit earlier than usual. It lands in your electronic cash ledger and shows up in your GSTR-2B, and from there you use it as credit against whatever GST you owe when you file. What matters is checking, every month, that the TCS your marketplace reports lines up with your own records. Mismatches here are one of the more common reasons sellers end up getting a notice.

Getting Invoices Right

Every single sale needs a proper tax invoice — your GSTIN on it, an invoice number and date, what exactly was sold, the HSN code, quantity, taxable value, the GST rate applied, and the tax broken down correctly between CGST and SGST, or IGST when it's an inter-state sale. Selling to a regular customer, this is fairly routine. Selling to another GST-registered business is where you need to be careful — get their GSTIN wrong and they can't claim credit on what they bought from you, which is not a great way to keep a repeat B2B customer happy.

Where Input Tax Credit Fits In

Input Tax Credit, or ITC, is the GST you've already paid on things you bought for the business, offset against whatever GST you collect from customers. Buy stock, pay GST on it, later sell the finished item and collect GST from your buyer — you only hand over the difference to the government. That's why keeping purchase invoices matters; lose them, and that credit is gone too. The same applies to marketplace charges. Commission, ad spend, fulfilment or storage fees usually come with GST attached, and depending on the invoice, you may be able to claim credit on them as well. Not every charge works the same way, so it's worth actually reading the invoice instead of guessing.

Returns, Settlements, and Where the Confusion Really Lives

When something gets returned, the sale doesn't just vanish from your books — it needs a credit note, which reverses the GST you'd originally charged. Some sellers just delete the sale to keep things tidy, but that creates a mismatch between your books and what the marketplace has on record.

Which brings up probably the most misunderstood part of all this: the money that actually lands in your bank account is nowhere close to your gross sales. Say gross sales for a month were ?1,00,000. By the time Amazon or Flipkart deducts commission, referral fees, shipping and fulfilment charges, ad spend, TCS, and return adjustments, what hits your account could be ?70,000 or thereabouts. Real profit, after your own cost of goods, is smaller again. Gross sales, bank settlement, and profit are three separate numbers — treating any two as interchangeable is exactly how sellers lose track of how their business is really doing.

Mistakes That Keep Repeating

A handful of errors show up again and again. People assume small sales mean no registration is needed — wrong, as covered above. Others use the wrong HSN code, or copy whatever GST rate a competitor is charging without checking if it's correct for their own product. Many sellers treat the marketplace settlement figure as their entire sales number, which quietly understates revenue and makes reconciliation a nightmare. On the credit side, claiming ITC without a real purchase invoice, or accidentally claiming it twice, tends to get flagged during scrutiny. Then there's the usual list: ignoring TCS entries in GSTR-2B, filing late, mixing personal spending with business transactions, and forgetting credit notes when goods come back.

None of this requires expensive software, just a bit of monthly discipline. Keep a sales register, a purchase register, pull your settlement report from the marketplace, and match it against your invoices, credit notes, and TCS entries. Do this every month and you'll rarely be caught scrambling before a deadline — which is really the difference between sellers who stay clean and the ones dealing with penalty notices.

The Bigger Picture

Amazon and Flipkart have genuinely made it easier to reach customers across the country than ever before, but that ease comes with a responsibility attached — getting your GST right from day one, not after your first notice. The chain runs from the customer's order to your invoice, through GST and marketplace fees, TCS, whatever gets returned, your eligible ITC, your GST return, and finally the bank settlement that tells you what you actually made.

Good GST compliance isn't really about ticking off return deadlines. It's about knowing where every rupee — sales, tax, fee, credit, settlement — actually goes. And if your situation involves inter-state selling, tricky product categories, or a marketplace setup that doesn't quite fit the usual pattern, it's worth sitting down with a Chartered Accountant who can look at your actual numbers instead of general advice like this.