GST for E-commerce Sellers: Marketplace vs D2C Explained

Selling online has never been easier, but GST can become confusing, especially when choosing between an online marketplace and your own website. The rules differ for each model.

Marketplace sellers are subject to mandatory registration requirements and Tax Collected at Source (TCS), while Direct-to-Consumer (D2C) sellers follow the standard GST registration thresholds unless they are otherwise required to register.

How is marketplace selling different from D2C selling?

Here’s how the two dominant selling structures in Indian e-commerce work:

• Marketplace selling means you list your products on a third-party platform, such as Amazon, Flipkart, Meesho, Myntra and Snapdeal, and the platform facilitates the transaction between you and the buyer. You remain the seller of record, but the platform manages payments, logistics support and tax deductions on your behalf.
• D2C means you sell directly to customers through your own website, app or social commerce channels like Instagram, WhatsApp or Facebook. There is no intermediary e-commerce operator involved. You control the entire customer experience and payment flow.

Do marketplace and D2C sellers have the same GST registration requirements?

Under Section 24 of the CGST Act, GST registration is mandatory for most sellers on an e-commerce platform regardless of turnover.

However, since 1 October 2023, small goods sellers making only intra-state supplies through an e-commerce operator and whose aggregate turnover is within the threshold limit (₹40 lakhs for goods / ₹20 lakhs for special category states) are exempt from mandatory registration under Notification No. 34/2023-Central Tax. Such sellers can operate with an enrolment number on the GST portal instead of full registration.

For D2C sellers, the standard threshold rules do apply. If your annual turnover from your own website is below ₹40 lakhs (goods) or ₹20 lakhs (services), you are not legally required to register for GST. However, once you cross that threshold or sell interstate, registration becomes mandatory.

However, if you operate both a marketplace storefront and a D2C website under the same GSTIN, the combined turnover determines your compliance obligations. Many sellers who start D2C also register voluntarily to claim Input Tax Credit (ITC) on business purchases, which often more than offsets the compliance effort.

TCS rules for e-commerce business

TCS is what fundamentally separates marketplace and D2C compliance.

For marketplace sellers

Under Section 52 of the CGST Act, every e-commerce operator is mandated to collect TCS at 0.5% of the net taxable value of sales made through their platform.

This is split as 0.25% CGST + 0.25% SGST for intra-state sales, or 0.5% IGST for inter-state transactions.

In practice, this means: if you sell ₹1,00,000 worth of goods in a month through Amazon, Amazon will deduct ₹500 as TCS before remitting your payment. Amazon then deposits this with the government under your GSTIN via GSTR-8. You can claim this as a credit in your GSTR-3B, reducing your net GST liability.

This creates a temporary impact on working capital. Your money is deducted upfront, and you recover it only when you file returns and offset it against your outward tax liability. 

For D2C sellers

No TCS applies. Since there is no e-commerce operator in the transaction chain, you collect the full payment from customers and remit GST to the government yourself.

What are the e-invoicing requirements for e-commerce businesses?

Here are the key e-invoicing requirements for e-commerce businesses:

• E-invoicing (electronic invoice generation through the Invoice Registration Portal or IRP) is mandatory for GST-registered businesses whose aggregate annual turnover exceeds ₹5 crore in any financial year from 2017-18 onwards, unless specifically exempted.
• Under this system, every applicable B2B, export and deemed export invoice must be reported to the IRP and obtain a unique Invoice Reference Number (IRN). The authenticated invoice data is automatically populated into GSTR-1, reducing manual data entry and reconciliation errors.
• Businesses with an aggregate annual turnover exceeding ₹500 crore must issue B2C invoices with a Dynamic QR Code in accordance with GST rules. This requirement is separate from the e-invoicing framework.

Specifically:

• For D2C sellers, e-invoicing applies only to their applicable B2B, export and deemed export transactions. Regular B2C invoices are currently outside the scope of the e-invoicing mandate.
• Marketplace sellers crossing the ₹5 crore threshold must generate e-invoices for their own applicable B2B, export and deemed export supplies, including direct business sales made outside the marketplace. The marketplace's customer invoice does not replace the seller's e-invoicing obligation where applicable.

What are the ITC rules for e-commerce sellers?

If you are an e-commerce seller, you should be aware of the following conditions:

• You can claim ITC only if the goods or services are used in the course or furtherance of business. Purchases made for personal use are not eligible.
• ITC is available only when you have a valid tax invoice or debit note, have received the services or goods, and the invoice details in GST returns have been furnished by the supplier has; subject to the conditions prescribed under Section 16 of the CGST Act.
• The input tax credit should reflect in your GSTR-2B. Sellers should regularly reconcile GSTR-2B with purchase records to identify mismatches and avoid disputes.
• If payment to a supplier is not made within 180 days from the invoice date, the claimed ITC must generally be reversed along with applicable interest. The credit can be reclaimed once payment is made.
• E-commerce sellers can claim ITC on eligible business expenses such as inventory purchases, packaging materials, office supplies, warehousing charges, courier and logistics services, software subscriptions, advertising and professional services, provided GST has been charged and the expenses are used for business.
• ITC cannot be claimed on blocked credits specified under Section 17(5), including goods or services used for personal consumption and certain other restricted items such as club memberships, employee recreational expenses and specified motor vehicles, except where statutory exceptions apply.
• If you pay GST under the Reverse Charge Mechanism (RCM), you must first pay the tax in cash. After satisfying the applicable conditions, you can claim ITC on that tax.
• ITC for an invoice or debit note must be claimed by 30 November following the end of the relevant financial year or before filing the annual return for that year, whichever is earlier.

How does GST place of supply work for e-commerce businesses?

Regardless of your selling model, you must correctly determine the 'place of supply' to apply the right tax:

• Intra-state sales (seller and buyer in the same state): CGST + SGST applies
• Inter-state sales (seller and buyer in different states): IGST applies

For marketplace sellers, the platform typically captures buyer delivery addresses and handles this determination in its settlement reports. However, you are still responsible for reporting it correctly in GSTR-1.

For D2C sellers, this determination is manual. Your payment gateway or order management system must capture the delivery state for every order so you can categorise and report intra-state vs inter-state sales correctly. Social commerce sellers on Instagram, WhatsApp or Facebook must follow the same D2C rules.

What GST rules apply to quick commerce and dark store operators?

The rise of 10 to 30-minute delivery platforms has created specific GST obligations. If you operate or supply through quick commerce channels:

• Delivery charges attract GST, regardless of whether the customer or the platform bears the cost
• Cloud kitchens and dark stores must obtain separate GST registrations in each state where they operate
• Commission and platform fees paid to quick commerce operators may fall under RCM in certain cases

GST 2.0: What changed for e-commerce sellers

The most significant reform since GST's launch in 2017 came into effect on September 22, 2025. The GST 2.0 overhaul was approved at the 56th GST Council meeting.

The old four-tier system of 5%, 12%, 18% and 28% was replaced with a simplified structure of two main slabs and a special demerit rate:

• 5%: Essentials, food items, medicines and mass-consumption goods
• 18%: Standard goods and services (most items that were earlier taxed at 12% or 18% now fall under this slab)
• 40%: Luxury and sin goods (a special demerit rate for select items including tobacco, pan masala, aerated drinks, high-end automobiles and yachts)

Key changes relevant to e-commerce sellers include:

• White goods such as air conditioners, televisions and dishwashers reduced from 28% to 18%
• FMCG products now attract 5%
• Bakery items reduced from 18% to 5%
• Manmade fibre reduced from 18% to 5%, while manmade yarn reduced from 12% to 5%
• Handicrafts, sculptures and toys reduced from 12% to 5%
• All medicines and drugs now attract a concessional GST rate of 5%

For e-commerce sellers, these changes mean updating HSN code-to-rate mappings in ERP systems, invoicing software and marketplace product listings.

Conclusion

As your e-commerce business grows, staying compliant becomes easier when your accounting, inventory and GST processes work together.

Regularly review your product classifications, automate routine compliance tasks where possible and maintain accurate financial records to reduce manual effort.

An integrated business management solution like TallyPrime can help streamline invoicing, inventory tracking, GST reporting and reconciliation. Running an e-commerce business is demanding, so having everything in one place lets you focus more on growing your business and serving your customers.