Do not book the bank credit as sales. Record gross sales and returns from invoices, then use the settlement report to post commission and other fees (with GST) as expenses, TCS and TDS as receivables, and the net bank receipt against a marketplace clearing account. If the clearing account does not net to zero, investigate the difference.
Start with the settlement report, not the bank statement
The bank shows one number: the net payout. It cannot tell you what was sold, what was returned, what the marketplace charged or what it withheld. The settlement report (the payment or remittance report in your seller panel) carries that detail, order by order.
Before posting anything, download the report for the settlement period and confirm that its net total matches the bank credit. If it does not, resolve that first. Differences usually come from held amounts, adjustments carried over from an earlier cycle, or a payout that spans two periods.
Set up the ledgers before you post
Create one clearing account and a small set of ledgers. Names will vary by your chart of accounts, but the logic stays the same.
| Ledger | Type | What goes in |
|---|---|---|
| Marketplace receivable (clearing) | Asset | Gross invoiced value, less returns, less settlements received |
| Sales and Sales returns | Income | Taxable value of invoices and credit notes |
| Output GST | Liability | GST on sales, reduced for returns |
| Marketplace commission and fees | Expense | Commission, fixed fee, shipping, collection and other charges |
| Input GST on marketplace fees | Asset | GST charged on those fees, subject to eligibility |
| TCS receivable (GST) | Asset | Tax collected at source by the marketplace |
| TDS receivable (Income Tax) | Asset | Tax deducted at source by the marketplace |
Keep one set per marketplace, or use a cost centre or tag, so you can compare channels later.
Post each payout in five steps
- Book sales when invoiced. Debit marketplace receivable, credit sales and output GST. This is independent of the payout date.
- Book returns as credit notes. Debit sales returns and output GST, credit marketplace receivable.
- Book fees from the settlement report or fee invoice. Debit commission and fees and input GST on fees, credit marketplace receivable.
- Book TCS and TDS as receivables. Debit TCS receivable and TDS receivable, credit marketplace receivable.
- Book the bank receipt. Debit bank, credit marketplace receivable. The clearing account should then net to zero for that period.
Take the amounts from the report as shown. Do not recompute TCS or TDS from a percentage you remember.
Treat TCS and TDS as receivables and reconcile them
TCS under GST and TDS under the Income Tax Act are not expenses. They are amounts the marketplace has withheld on your behalf, which you recover through your GST and income tax filings. Hence the receivable ledgers.
- TCS: match the amounts in your settlement reports to what the marketplace reports against your GSTIN on the GST portal (check GSTR-2B and your cash ledger).
- TDS: match to Form 26AS or AIS, and to the TDS certificates issued by the marketplace.
Rates, thresholds and applicable sections change. Check your seller agreement, the marketplace's tax communication and your tax adviser for the current position rather than relying on an old article, including this one.
Mistakes that break the reconciliation
- Booking the net payout as sales, which understates turnover and hides fees.
- Posting fees only when the payout arrives, so month-end expenses are wrong.
- Ignoring GST on fees and losing eligible input credit.
- Netting TCS and TDS into fees, so you cannot match them to government records.
- Not tracking returns that arrive after the settlement cycle, which reverse sales later.
- Accepting commission without checking it against the rate card or agreed terms.
Month-end checks
Close each month with four checks: the clearing account balance is explained, fees match your agreed rate card, TCS and TDS totals match the government-side records, and open returns or disputed deductions are listed with an owner.
Doing this by hand across thousands of orders is slow. MarketplaceMetrics by Fundle reconciles sales and settlements, checks commissions and fees against agreed terms, and tracks returns and recovery cases. Myntra Excel reports are reviewed today; other marketplaces are in scope discussion.
Worked example
Illustrative example only. All figures are made up to show the mechanics. They are not rates, and your report will differ.
| Item | Amount (₹, illustrative) |
|---|---|
| Taxable sales | 1,00,000 |
| GST on sales | 12,000 |
| Returns, taxable value | 10,000 |
| GST on returns | 1,200 |
| Commission and fees | 20,000 |
| GST on fees | 3,600 |
| TCS withheld | 900 |
| TDS withheld | 450 |
| Net payout to bank | 75,850 |
Working: 1,12,000 invoiced, less 11,200 returned, gives 1,00,800. Less 23,600 fees with GST, 900 TCS and 450 TDS, the payout is 75,850.
| Entry | Debit (₹) | Credit (₹) |
|---|---|---|
| Bank | 75,850 | |
| Marketplace commission and fees | 20,000 | |
| Input GST on fees | 3,600 | |
| TCS receivable | 900 | |
| TDS receivable | 450 | |
| Sales returns | 10,000 | |
| Output GST (return reversal) | 1,200 | |
| Sales | 1,00,000 | |
| Output GST | 12,000 | |
| Total | 1,12,000 | 1,12,000 |
In practice you would route these through the marketplace receivable account in the steps above. The combined effect is the same.
Questions and answers
Should I book the marketplace payout as sales?
No. The payout is net of returns, fees, TCS and TDS. Book sales at the invoiced value when you raise the invoice, and use the payout only to clear the marketplace receivable. Booking the net amount understates turnover and hides costs.
Are TCS and TDS expenses?
Generally not. They are tax amounts withheld by the marketplace that you recover through your GST and income tax filings, so they are normally carried as receivables. Confirm the treatment for your business with your tax adviser.
Where do I find the TCS and TDS amounts?
Use the settlement or payment report in your seller panel for amounts withheld per period. Then match them with GSTR-2B and the cash ledger for TCS, and with Form 26AS, AIS or TDS certificates for TDS.
What if the payout does not match the settlement report?
Check for held amounts, adjustments from earlier cycles, payouts spanning two periods and late returns. Keep the difference in the clearing account with a note until resolved, and raise a ticket with the marketplace if a deduction looks wrong.