Under Section 52 of the CGST Act, an ecommerce operator collects tax at source from the sellers it pays, calculated on the net value of taxable supplies made through it. The rate widely quoted for sellers is 0.5% (0.25% CGST plus 0.25% SGST, or 0.5% IGST). It is not an extra cost: it is credited to your electronic cash ledger and can be used against your GST liability.
What TCS under GST means for a marketplace seller
Section 52 of the CGST Act requires an ecommerce operator, such as a marketplace, to collect tax at source (TCS) from the consideration it pays to sellers for taxable goods or services supplied through its platform. The operator deposits this with the government and reports it in its monthly return, GSTR-8.
For you as a seller, TCS is not an additional tax. It is an advance deposit made on your behalf against your GST liability. You see it as a deduction in the settlement, and as a credit on the GST portal once the operator has filed GSTR-8.
The 0.5% rate: what to confirm before you rely on it
The figure sellers usually search for is 0.5%, commonly described as 0.25% CGST plus 0.25% SGST for intra-state supplies, or 0.5% IGST for inter-state supplies. The rate has been revised in the past, so do not hard-code it into your books from an article alone.
- Check the latest CBIC notification under Section 52 on the official GST website.
- Check how your marketplace states the TCS line in its seller agreement and settlement report.
- Ask your tax adviser if your seller category (for example composition, or a seller with special registration) changes anything.
If the settlement uses a different rate from the one in force for that month, raise it with the marketplace in writing, with the settlement ID and period.
How the TCS base is calculated
TCS is calculated on the net value of taxable supplies made through the operator in a month. In simple terms, that is taxable sales made by registered sellers, less the value of supplies returned in that period.
| Component | Effect on TCS base |
|---|---|
| Taxable sales through the marketplace | Added |
| Sales returned or cancelled | Reduced |
| Exempt or non-taxable supplies | Generally excluded; confirm with your adviser |
| Sales made outside the marketplace | Not part of the base |
Marketplaces differ in how they handle the timing of returns and the treatment of tax in the order value, so compare their working with the statute rather than assuming it is right.
Where TCS shows up: settlement report and GST portal
You will usually see TCS in two places, and both need to agree.
- Settlement or payment report: a TCS line (sometimes split into CGST, SGST and IGST) deducted from the amount payable to you.
- GST portal: the operator's GSTR-8 details appear against your GSTIN. Check the portal for the procedure to view and claim the credit into your electronic cash ledger, and confirm the current steps with your adviser.
Note that TCS under GST is separate from income tax TDS on payments by ecommerce operators (Section 194-O of the Income-tax Act). The rate, base and credit mechanism differ, so track them as separate lines in your accounts.
Common TCS mismatches and how to reconcile them
Most disputes come from a handful of causes:
- Returns timing: a return in a later month reduces that month's base, not the original month's, so TCS can look overcharged in one period.
- State of supply: a wrong state mapping can swap IGST for CGST and SGST.
- Filing lag: the operator deducted TCS but has not filed GSTR-8, so the credit is not visible yet.
- Gross versus net: the marketplace applied the percentage to a value that includes tax or ignores returns.
A monthly three-way check works well: settlement TCS total, GSTR-8 credit visible to you, and your own recomputation from sales and returns. Tools such as MarketplaceMetrics by Fundle can automate the sales and settlement side of this, but the principle is the same even in a spreadsheet.
A monthly TCS checklist for your finance team
- Download the month's settlement and returns data for each marketplace.
- Recompute net taxable supplies and apply the rate currently in force.
- Compare with the TCS deducted and note differences by order or settlement.
- After the operator's filing date, compare with the GST portal credit.
- Log unresolved differences as cases with evidence, and follow up until closed.
- Keep TCS credit in your GST workings so it is utilised against liability.
Worked example
Illustrative example only. Figures and the 0.5% rate are assumptions for explanation; use your own data and the rate currently in force.
| Item | Amount (₹, illustrative) |
|---|---|
| Taxable sales through the marketplace in the month | 1,00,000 |
| Less: returns in the same month | 10,000 |
| Net taxable supplies (TCS base) | 90,000 |
| TCS at 0.5% | 450 |
For an intra-state sale this would be split as ₹225 CGST and ₹225 SGST; for an inter-state sale it would be ₹450 IGST. If the settlement shows ₹500 instead, the marketplace may have ignored the ₹10,000 of returns (0.5% of ₹1,00,000 is ₹500). That ₹50 difference is what you would raise as a query.
Questions and answers
Is TCS under GST an extra cost for sellers?
No. It is collected on your behalf and credited to your electronic cash ledger once the operator files its return. You can use it against GST liability. The cost is only a cash flow delay, plus the effort of reconciling it if amounts do not match.
Is the TCS rate really 0.5% for all sellers?
0.5% is the commonly cited combined rate, but rates can be revised by notification. Always check the latest CBIC notification and your marketplace settlement report, and ask your tax adviser if your registration type is unusual.
Why does TCS in my settlement not match my GST portal?
Usual causes are the operator not yet filing GSTR-8, returns falling in a later month, a wrong state of supply, or the percentage applied on a different base. Compare settlement, portal credit and your own recomputation for the same period.
Is TCS under GST the same as TDS under Section 194-O?
No. GST TCS falls under Section 52 of the CGST Act and is credited in the GST ledger. TDS under Section 194-O is an income tax deduction by the operator. Their rates, bases and credit routes differ, so track them separately.