Ecommerce accounting is not ordinary accounting with a different customer list. On a marketplace, the money you finally receive has already passed through returns, commission, shipping, storage, advertising, penalties, reimbursements and two separate tax deductions. By the time it lands in your bank account, almost every number a business owner cares about has already been altered by somebody else.
This guide explains how ecommerce accounting actually works for Indian sellers on Amazon, Flipkart, Myntra, Meesho and their own D2C websites: what the reports mean, how settlements are reconciled, how TCS and TDS fit in, what a proper monthly close looks like, and the mistakes that cost sellers the most money. It is written from what we handle every month, not from theory.
1. The number in your bank is not your sales
This is where most seller accounts go wrong on day one. Suppose Rs 8 lakh arrives from a marketplace in a month. It is tempting to treat that as the month’s sales. It is not. It is what is left after a long chain of deductions:
- Gross sales, at the price the customer actually paid
- Less returns, refunds and RTO shipments
- Less marketplace commission or referral fees
- Less shipping, fulfilment, pick-and-pack and storage charges
- Less collection fees, payment gateway charges and COD handling
- Less advertising billed through the platform
- Less penalties, chargebacks and other adjustments, plus any reimbursements added back
- Less TCS under GST and TDS under income tax
- Equals the net settlement that reaches your bank
Every one of those lines is a different account, and several of them carry input tax credit or a tax credit you can claim. Recording only the bank receipt collapses ten pieces of information into one, and the ten cannot be recovered later without going back to the raw reports. This chain, from marketplace gross sales through fees, returns and taxes to the bank receipt, is the entire job. Everything else in this guide is detail hanging off it.
2. The reports you need, and what each one is for
Every marketplace publishes broadly the same family of reports under different names. You need all of them, every month, downloaded for the same date range:
- Order report: what was sold, at what price, to which state. This is your gross sales and your place of supply.
- Settlement or payment report: the platform view of what it paid you and why. This is what you reconcile against the bank.
- Returns report: customer returns, RTO and refunds, which reverse both revenue and tax.
- Fee and commission report: the expense side, and the source of input tax credit on platform charges.
- GST and TCS report: what the marketplace has reported and deducted on your GSTIN.
- Inventory and reimbursement reports: lost, damaged and reimbursed stock, which affect both stock value and other income.
The reports must be mapped to accounts once, deliberately, and then applied the same way every month. Mapping that changes month to month is the most common reason a seller P and L looks unstable when the underlying business is not.
3. Book gross sales, not net settlements
Revenue is the price the customer paid, recorded when the sale happened. Marketplace charges are expenses, recorded separately. Netting them off understates turnover, hides how much the platform is really costing you, and makes GST reconciliation impossible because the value the marketplace has reported against your GSTIN will not match anything in your books.
Booking gross also protects the two things sellers use their accounts for: comparing platforms honestly, and proving turnover to a bank or an investor. A seller who books net settlements will show a fraction of their real scale.
4. Returns, refunds and RTO
Returns are the largest single distortion in ecommerce books, and they rarely land in the same month as the sale. A March order returned in April reverses March revenue in an April settlement. If returns are recorded only when the money moves, both months are wrong.
Three things need to happen for every return: the revenue is reversed, the output tax on that sale is reversed through a credit note, and the stock either comes back into inventory or is written off if it comes back unsellable. RTO shipments deserve their own account. They carry forward and reverse shipping charges without ever producing revenue, and a category with high RTO can be loss-making while looking healthy on gross sales alone.
5. Marketplace fees, in the detail that matters
Sellers commonly post the entire deduction block to one expense head called commission. That single account then hides commission, shipping, fulfilment, storage, closing fees, advertising and penalties. Split them, because each behaves differently:
- Referral or commission fee moves with the price and the category, so it is a percentage problem.
- Shipping and fulfilment move with weight, dimensions and distance, so they are a packaging and catalogue problem.
- Storage fees move with how long stock sits, so they are an inventory-planning problem and they punish slow movers quietly.
- Advertising is a discretionary spend that many sellers never separate from platform fees, which makes return on ad spend impossible to calculate.
- Penalties and chargebacks point at an operational failure that is usually fixable once it is visible.
Marketplace fees carry GST, and the input tax credit on them is claimable if the invoice appears in your GSTR-2B. Sellers who post fees straight from the settlement summary without matching the tax invoices routinely lose that credit.
6. Settlement reconciliation: the discipline the whole system rests on
Reconciliation means proving, at order level, that gross sales minus every deduction equals the amount that actually reached the bank, for each marketplace, for each settlement cycle. It is the only test that catches money the platform owes you and has not paid.
What it turns up, month after month: orders delivered but never settled, refunds charged back twice, returns that were refunded to the customer and never returned to your warehouse, reimbursements for lost stock that were approved but not paid, fees charged at the wrong category rate, and TCS deducted but reported against the wrong GSTIN. None of these are visible in a bank statement. All of them are visible in an order-level reconciliation.
The practical rule is that reconciliation has to happen monthly. Marketplace dispute and reimbursement windows close, and a difference identified nine months later is usually a difference you can no longer claim.
7. TCS under GST, section 52
Every marketplace that collects payment on your behalf deducts tax at source on the net taxable value of your supplies. The rate is 0.5 per cent, split as 0.25 per cent CGST and 0.25 per cent SGST for supplies within a state, or 0.5 per cent IGST for inter-state supplies. It was reduced from 1 per cent with effect from 10 July 2024. The marketplace reports it in GSTR-8 by the 10th of the following month.
That TCS is your money. It appears as a credit in your electronic cash ledger once the marketplace files, and you accept it in the TCS and TDS credit received statement on the GST portal. Sellers who never open that statement leave real cash sitting on the portal, sometimes for years, while paying tax in cash every month. This is one of the first things worth checking on any new set of books.
The other half of the job is matching what the marketplace reported against what you have declared. A mismatch between your GSTR-1 and the platform GSTR-8 is a notice waiting to happen, and it is nearly always caused by returns and credit notes being recorded in a different period from the one the platform used.
8. TDS under income tax, section 194-O
Separately from GST, the platform deducts income tax at source on the gross amount of your sales. The rate is 0.1 per cent, reduced from 1 per cent with effect from 1 October 2024. For individuals and HUFs whose gross sales through the platform stay within Rs 5 lakh in the year, and whose PAN and Aadhaar are linked, no deduction applies. Companies and firms have no such threshold.
This deduction shows up in Form 26AS and the annual information statement, and it is adjusted against your income tax liability. Because it is charged on gross sales and not on your margin, it is also a useful cross-check: if the TDS on a platform does not roughly reconcile to 0.1 per cent of the gross sales you have booked for that platform, something in your revenue recognition is off.
9. Where your stock sits decides where you register
If you use marketplace fulfilment and your stock is held in a warehouse in another state, you are making supplies from that state and you need a GSTIN there. This catches out a large number of sellers who move to fulfilment by the platform for delivery speed without realising it changed their registration position.
Multi-state registration then multiplies the compliance work: separate returns, separate stock transfers between your own GSTINs, and separate reconciliation of TCS credited against each registration. It is manageable, but it has to be planned before the stock moves, not discovered in an assessment.
10. Inventory, COGS and the profit you cannot see
Ecommerce inventory sits in several places at once: your own godown, marketplace fulfilment centres, stock in transit, stock with a job worker, and returns awaiting inspection. A stock figure that only counts your own godown will overstate cost of goods sold in one month and understate it in the next.
Landed cost matters as much as unit cost. Purchase price, inbound freight, packaging and any job-work charge all belong in the cost of the product. Once landed cost is right, channel-wise and SKU-wise profitability becomes possible, and that is usually the moment a seller discovers that a bestseller is their worst product.
11. Payment gateways, COD and your own website
D2C sales bring the same problem in a different shape. A gateway settles in batches, net of its own fee and GST on that fee, often with a rolling reserve held back. COD adds a courier remittance cycle, undelivered orders that never convert to cash, and remittance deducted for RTO freight.
Each gateway and each courier remittance needs the same treatment as a marketplace settlement: orders to remittance to bank, with fees booked separately and the reserve tracked as a receivable rather than lost from view.
12. Selling on three platforms at once
Once a seller is on Amazon, Flipkart, Myntra, Meesho and a website simultaneously, the numbers stop being comparable unless the accounting is built for it. The same SKU carries a different commission, a different fulfilment charge and a different return rate on each platform. Consolidated totals will hide a channel that is losing money on every order.
The fix is structural rather than clever: marketplace-wise revenue, marketplace-wise fees, marketplace-wise returns and a marketplace-wise settlement reconciliation, all rolling up to one P and L. It costs more effort each month and it is the only way a multi-channel seller can make a pricing decision with evidence.
13. What a month should actually look like
A working ecommerce close runs to a calendar, because the GST deadlines do not move. The rhythm we run for our own clients:
- By the 8th: all marketplace and sales data collected and mapped, so GSTR-1 can be filed by the 11th.
- By the 14th: bank statements, purchase bills, expenses and the rest of the accounting data in.
- Between the 15th and the 20th: reconciliation completed and the reporting pack delivered.
Sellers who close two months late are not doing accounting, they are doing archaeology. The decisions that data was meant to inform, on pricing, on ad spend, on which SKU to reorder, have already been made by then.
14. The reports a seller should get every month
A trial balance is not a management report. What an ecommerce business needs on a monthly basis is:
- Profit and loss, and balance sheet
- Marketplace-wise sales
- Settlement reconciliation for each platform
- Marketplace fees analysis
- Returns and refunds analysis
- GST, TCS and TDS reconciliation
- Bank reconciliation
- Receivables and payables
- Inventory position
- Channel-wise profitability
15. The three mistakes we correct most often
Treating sales, settlement and cash as one number. They are three different figures with three different purposes, and every reconciliation problem in ecommerce starts with collapsing them into one.
Judging profit by cash in the bank. A good cash month can be a loss-making month, usually because stock was bought ahead of a sale season or because returns from the previous month have not landed yet. Cash tells you about liquidity, not profitability.
Skipping marketplace-wise reconciliation. Reconciling only at the bank level proves that money arrived. It does not prove that the right amount of money arrived, which is the question worth asking.
16. What reconciliation finds in practice
Two examples from our own client work, anonymised.
A seller at roughly Rs 1 crore of annual turnover: a detailed reconciliation identified over Rs 1 lakh of previously unmatched amounts. Differences of that kind usually turn out to be unclaimed TCS credit, an unmatched remittance, a missing adjustment or a marketplace deduction that was accounted incorrectly.
A business that came to us with eight months of historical accounts: reconciliation identified a previously unmatched difference at the Rs 25 lakh level. The records were cleaned, the opening position corrected and the monthly process standardised so that the same gap stopped recurring.
Neither number was money conjured out of nowhere. In both cases the information already existed in the marketplace reports. Nobody had matched it line by line.
17. When a seller needs a specialist
Plenty of sellers manage their own books early on, and that is fine. The point at which it usually stops working is recognisable: order volume is high enough that order-level matching cannot be done by hand, there are two or more platforms, stock sits in more than one state, or the books are several months behind and nobody is confident in the opening balances.
For context on scale, we currently reconcile roughly 15 to 18 lakh order-level ecommerce transactions a month across our client base, more in festive periods, and handle GST filings across approximately 60 to 70 GSTINs. Onboarding a clean set of books takes one to two weeks. A six-month backlog takes two to six weeks or longer, because we would rather establish a correct opening position than a fast one.
If you would rather hand this work over than build the process yourself, our outsourced accounting and bookkeeping services from India page explains what can be handed over, which accounting platforms we work in, and how engagements are scoped.
Frequently asked questions
Is ecommerce accounting really different from normal accounting?
The principles are the same. The difference is that a third party controls your revenue data, deducts a dozen types of charge before paying you, and deducts two separate taxes on your behalf. Without order-level reconciliation of that data, the resulting accounts are guesses.
How much TCS does a marketplace deduct?
0.5 per cent of the net taxable value of supplies, reduced from 1 per cent on 10 July 2024. It is reported by the marketplace in GSTR-8 by the 10th of the following month and appears as a credit you accept on the GST portal.
Do I need a GST registration in every state I sell to?
No. Selling to customers in a state does not require registration there. Holding stock in a state does, which is why marketplace fulfilment usually triggers additional registrations.
Can my existing accountant handle marketplace settlements?
They can if they are willing to work from the raw marketplace reports rather than the settlement summary, and to reconcile at order level every month. The problem is rarely competence. It is that general practice accounting was never built for a data set of this size.
My books are eight months behind. Is that fixable?
Yes, and it is a large part of what we do. Historical marketplace reports can be downloaded and reconciled retrospectively. Expect two to six weeks or more depending on volume and the number of platforms, and expect the exercise to surface differences that are worth the effort.
Talk to us
Om Accounting has been doing ecommerce accounting since July 2017 from Jaipur, for sellers across India. If you want your settlements reconciled properly, or your backlog cleaned up before the next filing season, call +91 80944 44888 or write to cs@omaccounting.in. You can also read more about our ecommerce accounting services, Amazon seller accounting, Flipkart seller accounting and Shopify and D2C accounting.