selling online in india is easier now. amazon, flipkart, meesho take care of payments and shipping. but tax rules have become tougher. the government tracks marketplace transactions closely. platforms send seller data to gst and income tax authorities.
small sellers often make mistakes. these mistakes lead to notices, penalties, or frozen accounts. here are the common ones.
skipping gst registration
many small sellers think gst registration is optional. it is not.
any seller using an e-commerce platform must register for gst. turnover does not matter. an offline seller can wait until turnover crosses the limit. an online seller cannot. sellers on amazon, flipkart, shopify, or meesho need gst registration from day one.
the documents needed are pan card, aadhaar, business bank account, and address proof. registration takes about 5-7 working days.
wrong gst classification
different products have different gst rates. clothing below ₹1,000 is 5%. electronics and beauty products are 18%. wrong classification is a common reason for gst notices.
a seller who lists a product under the wrong rate can face demands for unpaid tax, interest, and penalties. checking the correct rate before listing is important.
failing to reconcile tcs
marketplaces deduct tcs on every sale. the rate is 1% of the net taxable value. this is 0.5% cgst plus 0.5% sgst or 1% igst.
sellers need to match tcs with their gst returns. tcs appears on the platform’s settlement report and on the gst portal under gstr-2a or gstr-8. a mismatch can lead to department notices.
sellers should verify that the tcs on the platform matches the credit on the gst portal. discrepancies must be fixed quickly.
ignoring tds under section 194o
e-commerce operators must deduct tds on payments to sellers. the rate is 0.1% on the gross amount of sales. shipping fees, convenience fees, packaging fees, and commissions are all included.
the deduction happens when the amount is credited to the seller’s account or at the time of payment. sellers see the tds in their form 26as.
tds is not an additional tax. it is an advance payment that can be claimed as a credit while filing the income tax return. sellers who do not reconcile their form 26as with platform reports often fail to claim the credit they are entitled to.
small individual and huf sellers with annual sales below ₹5 lakh are exempt from tds. exceeding this limit triggers the deduction.
filing the wrong itr form
e-commerce income is business income. it belongs in itr-3 or itr-4. not itr-1 or itr-2.
if turnover is up to ₹3 crore and cash receipts are under 5%, a seller can use presumptive taxation under itr-4. 6% on digital receipts. 8% on cash receipts. no books of account are required.
if turnover exceeds ₹3 crore, or if actual expenses make regular computation more beneficial, the seller must use itr-3. proper books and actual profit are required.
choosing the wrong form or declaring income that is too low can trigger scrutiny and notices.
mixing up tcs and tds
tcs and tds are different things. tcs is collected by the platform under gst. tds is deducted by the platform under income tax.
tcs is claimed as a credit in the gst return. tds is claimed as a credit in the income tax return. mixing them up can lead to missing credits or incorrect filings.
underestimating the equalisation levy
non-resident e-commerce operators face an equalisation levy of 2% on consideration received from online sales to indian residents, if revenue exceeds ₹2 crore.
domestic sellers paying foreign platforms for advertising or services must deduct a 6% equalisation levy on payments exceeding ₹1 lakh. small sellers using international platforms for ads may be unaware of this. non-compliance can attract penalties.
ignoring gst return deadlines
gst returns must be filed monthly or quarterly. gstr-1 is due by the 11th. gstr-3b is due by the 20th. missing deadlines attracts late fees and interest.
frequently asked questions
1. do i need gst registration to sell on amazon in india
yes. any seller using an e-commerce platform must register for gst regardless of turnover.
2. what is the tds rate on e-commerce sales
0.1% of the gross amount, including shipping fees, convenience fees, and commissions. individual/huf sellers with annual sales below ₹5 lakh are exempt.
3. what is the difference between tcs and tds
tcs is collected by the marketplace under gst and claimed in the gst return. tds is deducted under income tax and claimed in the income tax return.
4. which itr form should an online seller file
itr-4 if using presumptive taxation. itr-3 if maintaining books of account.
5. can tds deducted by amazon be claimed in the itr
yes. the tds appears in form 26as and can be claimed as a credit while filing the income tax return.
