TCS on marketplace sales: what the 0.5% is and how to claim it
If you sell on Amazon, Flipkart or Meesho, part of every payout is held back as TCS, tax collected at source. It is not a fee and it is not lost. It is your money, paid to the government in your name, and you can use it to pay your GST.
1. What TCS is
Under section 52 of the CGST Act, an e-commerce operator must collect tax on the net value of taxable supplies made through it by other sellers. The current rate is 0.5% of the net taxable value:
- Sales within your own state: 0.25% CGST and 0.25% SGST.
- Sales to other states: 0.5% IGST.
Net value means sales minus returns in the month, excluding the GST itself. Marketplace fees and commission are not deducted from the value.
2. Worked example
| Sales | Net taxable value | TCS rate | TCS |
|---|---|---|---|
| In your own state | ₹60,000 | 0.25% CGST + 0.25% SGST | ₹150 + ₹150 |
| To other states | ₹40,000 | 0.5% IGST | ₹200 |
| Total | ₹1,00,000 | ₹500 |
3. How it reaches you
- The marketplace deducts TCS from your payout during the month.
- By the 10th of the next month, it deposits the TCS and files GSTR-8, listing your GSTIN and your net sales.
- The amount appears on the GST portal under Returns → TDS and TCS credit received.
- You accept it there. Once accepted, it is credited to your electronic cash ledger.
- You use the cash ledger balance to pay the tax in your GSTR-3B.
If you think the marketplace reported the wrong value, you can reject the entry and ask the marketplace to correct its GSTR-8. Unused balance in the cash ledger can be carried forward, or claimed as a refund.
4. Does TCS change GSTR-1?
No. Your GSTR-1 reports your sales and the tax on them in full. TCS is a payment made on your behalf, so it only affects how you pay the GSTR-3B tax. The net sales the marketplace reports in GSTR-8 should match the sales you show for it in GSTR-1 Table 14.
5. When the TCS does not match your sales
Divide the TCS by 0.005 to get the net value the marketplace used. If it is far from your own figure, the usual reasons are:
- Timing: an order invoiced on the last day of a month can fall in different months in different reports.
- Returns counted in a different month by you and by the marketplace.
- Cancelled orders included in your sales.
- A missing report for one of the months in a quarter.
Fix differences in your own data before filing. If the marketplace’s figure is wrong, raise it with seller support so it can amend its GSTR-8.
6. Income tax TDS is different
Marketplaces also deduct TDS under section 194-O of the Income Tax Act, at a small percentage of your gross sales. That is income tax, not GST. It shows in Form 26AS and is claimed in your income tax return, not on the GST portal.
Common mistakes
- Treating TCS as a marketplace fee in your books.
- Not accepting TCS on the portal, so the credit never reaches the cash ledger.
- Mixing up GST TCS with income tax TDS under section 194-O.
- Reducing the sales in GSTR-1 by the TCS amount.