Record the sale as Dr Marketplace Receivable, Cr Sales and Output GST. Record returns as a reversal against the receivable. On settlement, debit Bank for the net payout, commission and fees as expenses, GST on fees as input credit, and TCS and TDS as receivable tax credits, crediting the Marketplace Receivable for the total. Confirm all rates from your agreement and settlement report.
Set up the ledgers before you post
A marketplace payout mixes sales, returns, fees and taxes. Posting only the bank credit hides all of that. Create these accounts first:
- Marketplace receivable, one per marketplace, showing what the marketplace owes you.
- Sales and sales returns.
- Output GST payable.
- Commission and separate heads for fixed fees, shipping fees, ads and penalties.
- Input GST on marketplace fees.
- TCS receivable (GST) and TDS receivable (income tax), both as tax-credit assets.
Take fee types from your seller agreement and rate card. Take the actual TCS and TDS amounts from the settlement report. Do not hardcode rates in your accounting; confirm the latest position with your tax adviser.
Entry 1: record the sale
Post sales on the invoice or dispatch date, following your revenue policy, not on the payout date. The marketplace owes you the invoice value until it settles.
| Account | Dr | Cr |
|---|---|---|
| Marketplace receivable | Invoice value | |
| Sales | Taxable value | |
| Output GST payable | GST on sale |
Entry 2: record returns and cancellations
A return reverses the sale. Debit sales returns for the taxable value and output GST for the tax, and credit the marketplace receivable. Refunds are usually adjusted inside the next settlement rather than paid separately, so the receivable falls without any cash moving.
Match each return to its original order. Returns that reach the warehouse in one month and appear in a settlement in the next are a common reason balances do not agree.
Entry 3: record the settlement
This is the entry that clears the receivable. The bank receives only the net amount, so every deduction needs its own line.
| Account | Dr | Cr |
|---|---|---|
| Bank | Net payout received | |
| Commission expense | Commission charged | |
| Other marketplace fees | Fixed, shipping, ads | |
| Input GST on fees | GST charged on fees | |
| TCS receivable (GST) | TCS deducted | |
| TDS receivable (income tax) | TDS deducted | |
| Marketplace receivable | Total cleared |
TCS and TDS are not expenses. They are tax already collected on your behalf, to be set off later: TCS through your GST electronic cash ledger and TDS against income tax liability. Whether input credit on fee GST is available depends on your registration and the rules, so confirm with your tax adviser.
Reconcile TCS and TDS credits to the portals
Your ledger balance is a claim, not a confirmed credit. TCS appears on the GST portal only after the marketplace files its return, and TDS appears in Form 26AS or AIS only after it files its TDS return. At each month end or quarter end, compare your receivable balances with what the portals show.
Gaps usually come from a wrong GSTIN or PAN, a marketplace not yet filed, or a deduction in the settlement that does not match the statement. Raise these with the marketplace in writing, with order-level proof.
If you sell on several marketplaces, doing this by hand in spreadsheets gets 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.
Common mistakes to avoid
- Booking only the bank credit as sales, so commission and tax never appear.
- Expensing TCS or TDS and losing the credit.
- Ignoring GST charged on commission and fees.
- Using one receivable account for all marketplaces.
- Letting unexplained deductions such as penalties or wrong fee slabs sit in the receivable instead of raising a recovery claim.
Worked example
Illustrative example only. All ₹ figures are made up to show the mechanics; use the amounts in your own settlement report.
Orders invoiced: taxable ₹1,00,000, GST ₹12,000, invoice value ₹1,12,000. Returns: taxable ₹10,000, GST ₹1,200, total ₹11,200. Settlement deductions: commission ₹15,000, GST on commission ₹2,700, TCS ₹900, TDS ₹1,000.
| Entry | Debit | Credit |
|---|---|---|
| 1. Sale | Marketplace receivable ₹1,12,000 | Sales ₹1,00,000; Output GST ₹12,000 |
| 2. Return | Sales returns ₹10,000; Output GST ₹1,200 | Marketplace receivable ₹11,200 |
| 3. Settlement | Bank ₹81,200; Commission ₹15,000; Input GST ₹2,700; TCS receivable ₹900; TDS receivable ₹1,000 | Marketplace receivable ₹1,00,800 |
Check: ₹1,12,000 less ₹11,200 leaves ₹1,00,800 receivable. Entry 3 clears it exactly, and the receivable closes at nil.
Questions and answers
Is marketplace commission booked as an expense or deducted from sales?
Book sales at the full invoice value and commission as a separate expense. Netting commission against sales hides your true revenue and makes GST reconciliation harder. Check your auditor's preference, but separate heads usually give the clearest trail.
Should TCS and TDS deducted by the marketplace be treated as expenses?
No. Treat them as receivable tax credits. TCS is set off through your GST cash ledger and TDS against income tax liability. Expensing them loses visibility of the credit. Confirm the treatment with your tax adviser.
Where do I find the TCS and TDS rates and amounts?
Take actual amounts from each settlement report and the rates from current law and your seller agreement. Do not rely on remembered rates, as they can change. Your tax adviser can confirm the latest applicable provisions.
Why does my receivable not match the marketplace statement?
Common causes are returns settled in a later cycle, fee deductions not in your agreed terms, missing GST on fees, or orders settled in different periods. Reconcile order by order, then raise unexplained deductions with the marketplace in writing.