GST TCS on Marketplace Sales: 0.5% Rate, GSTR-8 Filing and Seller Credit

What is GST TCS on marketplace sales?

Under Section 52 of the Central Goods and Services Tax (CGST) Act, an electronic commerce operator (ECO) that is not acting as an agent must generally collect tax at source (TCS) on certain taxable supplies made through its platform by other suppliers. This applies when the operator collects the consideration for those supplies.

The operator reports the transactions and TCS in Form GSTR-8 and pays the amount to the government. For a registered seller, the amount is credited to the seller’s electronic cash ledger. It can be used towards GST dues or, subject to the rules, claimed as a refund of excess cash-ledger balance. It is not input tax credit (ITC) and does not replace the seller’s GST return obligations.

Here, TCS means GST collected by an ECO under Section 52. It is separate from tax collected at source under the Income-tax Act.

Current TCS rate

From 10 July 2024, the total GST TCS rate is 0.5% of the applicable net taxable value:

The place of supply and transaction details determine the applicable tax head. The rate is not 0.5% under each tax head. For an intra-State supply, the combined rate is 0.5%; for an inter-State supply, the IGST rate is 0.5%.

Which marketplace transactions attract TCS?

Section 52 generally applies when:

• A taxable supply is made by another supplier through an ECO that is required to collect TCS; and
• The ECO collects the consideration for that supply.

A platform is not automatically required to collect TCS on every payment made through it. Check who makes the supply, who collects the consideration and whether a separate GST mechanism applies.

For example, a marketplace that sells its own inventory does not collect TCS under Section 52 on its own sales merely because the sale takes place on its website. Section 52 concerns supplies made by other suppliers through the operator.

Certain services on which the operator is liable to pay GST under the notified provisions of Section 9(5) are excluded from the net taxable supplies used for Section 52 TCS. The operator’s GST liability on those services is a separate matter.

How is TCS calculated?

The statutory base is the net value of relevant taxable supplies made by suppliers through the ECO during the month, reduced by taxable supplies returned during that month. The calculation is not based on the seller’s profit or the amount remaining after the marketplace deducts its commission.

For a simple example, suppose a seller makes taxable marketplace supplies of ₹10 lakh during a month and ₹1 lakh of those supplies is returned in that same month:

• Net value for the example: ₹10 lakh − ₹1 lakh = ₹9 lakh
• If the supplies are intra-State, TCS is ₹9 lakh × 0.5% = ₹4,500, split between CGST and SGST or UTGST.
• If the supplies are inter-State, TCS is ₹9 lakh × 0.5% = ₹4,500 as IGST.

These are alternative calculations, depending on the place of supply. The example assumes the full ₹9 lakh is taxable value covered by Section 52. The operator must use the taxable-supply and return details required by law and the current GSTR-8 utility.

Marketplace commission, advertising costs or other charges deducted from a seller’s settlement are generally separate from the value of the seller’s supply to the customer. The bank payout is therefore not, by itself, the right figure for calculating TCS. Reconcile the platform’s gross supply, returns, tax and settlement reports.

If a return is recorded in a later month, do not assume the seller can subtract it from a previous month’s TCS on their own. The operator must make any adjustment through the applicable GSTR-8 amendment process.

Who collects TCS and when?

Subject to the statutory conditions, the ECO collects TCS in the month in which it collects consideration from the customer. A platform settlement statement may show the sale, GST, TCS, commission, refunds and final payout separately.

TCS is generally deducted from the settlement amount payable to the seller and remitted to the government. It is not an extra GST charge added to the seller’s invoice to the customer.

A seller should compare each marketplace statement with their sales register and GST records. The amount credited to the seller’s bank account may be lower than the taxable value because the platform has deducted TCS, commission, refunds or other charges.

GSTR-8 due date and filing process

An ECO required to collect TCS must file Form GSTR-8 electronically. The normal due date is the 10th day of the month following the month of collection, unless the government extends it. The amount collected is also payable within the statutory period, normally by that date.

The operator prepares GSTR-8 using transaction and settlement records. The portal includes sections for supplies attracting TCS, certain supplies by unregistered suppliers, amendments and payment information.

A practical monthly process for the operator is:

1. Reconcile marketplace orders, customer payments, cancellations, refunds and returns.
2. Identify supplies covered by Section 52 and separate supplies governed by another GST mechanism.
3. Work out the net taxable value for each supplier and the applicable tax head using the place-of-supply details.
4. Enter the transaction and TCS information in the relevant GSTR-8 tables.
5. Review amendments and previous-period adjustments before filing.
6. Calculate the liability, pay it through the portal and file GSTR-8 using an available verification method.
7. Keep the filed return, acknowledgement and supplier-level transaction workings.

GSTR-8 is the operator’s statement and payment mechanism for TCS. It is not the seller’s GST return. Sellers must continue filing their applicable GST returns and reporting taxable supplies.

Seller registration: check the exception carefully

The general rule requires a supplier selling through an ECO that is required to collect TCS to obtain GST registration, even if the supplier’s turnover is below the usual registration threshold. A limited relaxation is available for certain small, unregistered suppliers of goods.

Subject to the prescribed conditions, a supplier may be exempt from mandatory registration if they:

• Stay within the applicable turnover threshold in both the preceding and current financial years;
• Do not make inter-State supplies of goods;
• Make supplies through an ECO in only one State or Union Territory;
• Have a PAN; and
• Obtain the required enrolment number on the GST portal before making supplies.

This is not a blanket exception for all marketplace sellers or service providers. Confirm the current conditions and portal process before relying on it. Separate rules apply to certain services for which the ECO pays GST under Section 9(5).

TaxClear’s GST registration guide explains the general registration process and related risks.

How sellers receive and use TCS credit

After the operator files GSTR-8 and pays the amount, the relevant information is made available in the seller’s GST records. For a registered seller, the TCS amount is credited to the electronic cash ledger under the appropriate tax head. It is not added to the electronic credit ledger as ITC.

The seller should:

• Review the TCS details in the GST portal, including the operator’s GSTIN, tax period, value, amount and tax head;
• Compare the credit with marketplace reports and sales and return records;
• Check the TCS balance in the electronic cash ledger; and
• Use the balance towards eligible GST dues through the return process.

If the credit is missing or incorrect, check whether the operator used the correct supplier GSTIN and tax period. Then ask the operator to correct the GSTR-8 details. A seller cannot correct the operator’s filed statement merely by changing their own sales return.

If the cash-ledger balance remains unused after dues are paid, the seller may be able to claim a refund of the excess balance under the applicable GST provisions. A refund is not automatic; the seller must meet the requirements and submit a claim.

To reconcile marketplace transactions with GST records, see TaxClear’s GST reconciliation guide. TaxClear also provides GST registration and return assistance.

Common mistakes to avoid

• Applying 0.5% under each tax head instead of treating 0.5% as the total rate.
• Calculating TCS on profit or on the bank payout after commission.
• Including the operator’s own sales as supplies by other suppliers.
• Ignoring the requirement that the operator collects the consideration.
• Applying Section 52 without checking whether another notified GST mechanism applies.
• Using the wrong place of supply or tax head.
• Failing to report returns or amend transaction details accurately.
• Treating TCS as ITC instead of a credit in the electronic cash ledger.
• Assuming that TCS credit has been received without checking the GST portal.
• Treating the small unregistered-supplier exception as available to all marketplace sellers.

Frequently asked questions

Does GST TCS apply to every marketplace order?

No. It generally applies to taxable supplies made by another supplier through an ECO when the operator collects the consideration. Certain transactions are governed by separate provisions.

Is the 0.5% divided between CGST and SGST?

For intra-State supplies, the total 0.5% is generally split into 0.25% CGST and 0.25% SGST or UTGST. For inter-State supplies, the 0.5% is IGST.

What is the due date for GSTR-8?

GSTR-8 is normally due by the 10th day of the following month, unless the government extends the deadline.

Is GST TCS eligible for ITC?

No. TCS is credited to the seller’s electronic cash ledger, not the electronic credit ledger. It can be used towards eligible GST dues, subject to the rules.

Can an unregistered seller use a marketplace?

A limited registration exemption is available to some small suppliers of goods who meet the prescribed conditions, including restrictions on inter-State supplies and portal enrolment. It does not apply to all sellers.