TCS and TDS for e-commerce sellers, in plain English

Two deductions, not two extra taxes

When a marketplace pays you, it often deducts two things. Both sound alarming, and neither is an extra tax. Here's how each one works.

TCS and TDS side by side

TCS under GST

TCS is Tax Collected at Source. The marketplace collects 0.5% of your net taxable sales - 0.25% as CGST and 0.25% as SGST, or 0.5% as IGST on a sale to another state - and deposits it against your GSTIN. It's not money lost. It sits in your electronic cash ledger, and you adjust it against the GST you owe when you file. You can only claim it if you're registered and filing.

Why the rate was cut to 0.5%

The rate used to be 1%. At its 53rd meeting on 22 June 2024, the GST Council agreed to halve it. The minutes give the reason. About half of all TCS collected was being refunded, because sellers could not use the cash sitting in their ledgers. That tied up their working capital and gave tax officers extra refund work. Notification 15/2024, dated 10 July 2024, then cut the central share from half a percent to 0.25%. With the state share cut to match, the total is 0.5%.

What counts as net taxable sales

TCS is worked out on the net value of your taxable sales through the marketplace in a month. That means your taxable sales, minus the goods returned to you that month. It is counted per GSTIN, so each registration stands on its own. If returns are bigger than sales in a month, the figure is not carried forward as a minus. And the marketplace does not collect TCS on exempt goods, or on sales where the buyer pays tax under reverse charge.

When TCS reaches your cash ledger

The marketplace pays the TCS to the government within 10 days after the month ends. It also files a monthly statement, GSTR-8, listing your sales, your returns and the TCS it collected. That statement is what puts the money in your electronic cash ledger. You can then use it to pay your GST. If the balance is more than you can use, you can claim a refund of the excess. So check the GSTR-8 figures against your own sales each month.

TDS under income tax

Separately, under the income-tax rules for e-commerce, the marketplace deducts a small percentage of your sales as TDS before paying you. This is an advance on your income tax, not GST. The rate has changed in recent years, so check the current figure. It shows up in your Form 26AS, and you adjust it in your income-tax return.

The TDS rate for 2026-27

The Income Tax Department's rate chart answers the rate question. For the tax year 2026-27, it lists 0.1% on a payment or credit by an e-commerce operator to a seller. That chart follows the new Income-tax Act, 2025, where the rule sits in section 393(1). Under the old Act it was section 194-O, and the chart for assessment year 2026-27 also shows 0.1%. You can see what was deducted in Form 26AS, which you can open through your bank's net banking.

What comes off ₹1 lakh of net sales

Why they feel like a squeeze

Both deductions come out before the money reaches you, so your payout looks smaller than your sales. That stings for cash flow. But the deducted amounts aren't gone - they're parked against your tax accounts. Once you file and claim, they balance out. The trick is to actually file and claim them.

No TCS on your own website

TCS is a marketplace rule. It applies when an e-commerce operator collects the payment for your sale. The GST Council's registration flyer says TCS does not apply when you sell your own product through your own website. So an order on your own store carries no TCS at all. Your payment gateway still takes its fee, but nobody holds back a share of your sales against your GST. That makes your own site simpler to reconcile.

Who is left out of TCS

Two groups sit outside TCS. First, a seller on the composition scheme cannot sell through a marketplace at all, so the question never comes up. Second, a small seller of services through a marketplace need not register while turnover stays within ₹20 lakh, or ₹10 lakh in some special category states. Since they are not registered, the marketplace does not collect TCS on those services. Sellers of goods do not get this second break.

How to reconcile them

Match what the marketplace reports against your own records every month. For TCS, check the GST portal statement. For TDS, check Form 26AS. Mismatches happen, and they're easiest to fix early. Reconciling monthly turns tax season from a panic into a formality.

Keep marketplace and website sales apart

In your books, keep marketplace sales and your own website's sales on separate lines. Only the marketplace lines carry TCS and TDS. If the two are mixed, every monthly match turns into a hunt for which order came from where. Separate lines also show you, at a glance, how much of your cash each channel holds back until you file. That helps you plan stock and ad spend around the payout, not the sale.

A monthly TCS and TDS check

1. Download the marketplace's monthly settlement report.
2. Match its sales and returns to your own order list.
3. Check the TCS credited to your electronic cash ledger.
4. Use that balance when you pay your GST.
5. Check the TDS against your Form 26AS.
6. Raise any gap with the marketplace before you file.

The catch that costs sellers money

You only get TCS and TDS back if you're registered and filing on time. Sellers who ignore returns leave this money stuck. It's your cash - claim it. That alone is a good reason to keep filing disciplined, even when your sales are still small.

Where clean records help

Reconciling TCS and TDS is far easier with tidy sales records. The Storemate keeps every order and its tax in one place, so matching against marketplace statements is a check, not a reconstruction. You can also export your sales in GSTR-1 and GSTR-3B buckets for your filing. This is a starting point, not tax advice - confirm current rates and your position with a professional.