If you sell through an online marketplace, your settlement statement may show several tax deductions. They can look similar, but they come from different laws and do not all apply to every seller. This guide separates income-tax TDS, GST TDS, GST TCS and e-invoicing so you can reconcile each amount correctly.
Quick answer: For tax year 2026–27, the Income-tax Act, 2025 retains the marketplace deduction at 0.1% of the gross sale or service amount under Section 393(1), Table 8(v). Many sellers still search for the old label, Section 194-O, which applied under the Income-tax Act, 1961. GST TCS is a separate collection under GST law, while GST TDS generally relates to specified government and notified deductors. E-invoicing is a reporting requirement, not a tax deduction.
1. Marketplace income-tax TDS: old Section 194-O and the 2026 provision
Section 194-O of the Income-tax Act, 1961 required an e-commerce operator to deduct income tax when it credited or paid sale or service proceeds to a resident e-commerce participant, whichever happened first. The rate was reduced from 1% to 0.1% with effect from 1 October 2024. For transactions in tax years beginning before 1 April 2026, the old Act continues to matter for the relevant period and related filings.
The Income-tax Act, 2025 applies to tax years beginning on or after 1 April 2026. Its Section 393(1), Table 8(v) carries the marketplace deduction at 0.1% of the gross amount. The Act also preserves a narrow exception for an individual or HUF participant whose gross annual amount does not exceed ₹5 lakh, if the participant has furnished PAN or Aadhaar to the operator. Check the exact conditions and the applicable tax year before relying on that exception.
The base is not simply the seller’s profit or the amount left after platform fees. The operator’s statement and the statutory rules determine the gross amount to which withholding applies. The deducted income tax is a tax credit to reconcile against the seller’s tax records; it is not the GST on the sale.
| Deduction | Law and who generally handles it | What it is for |
|---|---|---|
| Marketplace income-tax TDS | Income-tax Act: old Section 194-O for earlier tax years; Section 393(1), Table 8(v) for tax years from 1 April 2026 | Income-tax withholding on marketplace sales or services |
| GST TCS | GST Act, Section 52; collected by a qualifying e-commerce operator | GST cash-ledger credit for the supplier, based on net taxable supplies and applicable conditions |
| GST TDS | GST Act, Section 51; specified government bodies and notified deductors | Deduction from qualifying taxable contracts above the statutory threshold |
| E-invoice | GST invoice-reporting rules and notifications | Invoice reporting and IRN/QR-code compliance where applicable; it is not a tax deduction |
2. GST TCS on marketplace sales
Section 52 GST TCS is collected by a qualifying e-commerce operator on the net value of taxable supplies made through it where the operator collects the consideration. Returns and other statutory adjustments matter, so the amount may not equal a simple percentage of every order shown in a sales dashboard.
The notified rate was reduced to 0.25% CGST plus 0.25% SGST/UTGST for intra-State supplies, and 0.5% IGST for inter-State supplies, effective 10 July 2024. The collected amount is reported through the prescribed GST process and is credited to the supplier’s electronic cash ledger when reflected correctly. That ledger credit is distinct from income-tax TDS and from input tax credit.
For example, a settlement can show both income-tax withholding and GST TCS on the same commercial sales flow. Do not add the two percentages and treat the result as one tax rate: each levy uses its own base, conditions, reporting trail and credit mechanism.
3. GST TDS is a different rule
GST TDS under Section 51 is not a general marketplace deduction. It applies to specified deductors, including notified government bodies and other notified categories, when the statutory conditions are met. The threshold is based on the value of taxable supplies under a contract: it must exceed ₹2.5 lakh, excluding GST shown on the invoice. The applicable split is generally 1% CGST plus 1% SGST/UTGST for intra-State transactions, or 2% IGST for inter-State transactions, subject to the place-of-supply and registration rules.
So a marketplace seller should not assume that the GST TDS rule applies merely because the buyer is a business, a government department, or because the seller issued an e-invoice. Confirm that the payer is a notified deductor and check the contract, supplier location, place of supply and tax base.
Worked comparison: marketplace sale vs government contract
These examples use simplified assumptions to show the different tax bases; an operator’s or deductor’s actual statement may include returns, adjustments and other line items.
| Example | Assumed base and condition | Illustrative deduction |
|---|---|---|
| Marketplace sale | ₹1,00,000 gross amount for income-tax TDS; separately assume ₹1,00,000 net taxable supplies for an intra-State marketplace sale with no returns | Income-tax TDS at 0.1%: ₹100. GST TCS at 0.25% CGST + 0.25% SGST: ₹500 total. GST TDS does not apply merely because this is a marketplace sale. |
| Government contract | ₹3,00,000 taxable contract value before GST, intra-State, with a qualifying notified deductor and all Section 51 conditions met | GST TDS at 1% CGST + 1% SGST: ₹6,000 total. The threshold is exceeded because the taxable contract value, excluding separately indicated GST, is over ₹2.5 lakh. |
The first row can show both income-tax TDS and GST TCS against the same marketplace activity because they are separate levies with different bases. The second row is a separate contracting example: it does not turn the marketplace TCS rate into GST TDS.
4. E-invoicing does not create TDS or TCS
E-invoicing is the reporting of specified invoices to the Invoice Registration Portal under GST rules. It is separate from marketplace income-tax withholding and GST TDS/TCS. A seller can have an e-invoicing obligation without a Section 51 deduction, and a marketplace operator can have a Section 52 collection obligation without that being caused by e-invoicing.
Check the current notified turnover threshold, exclusions and invoice types using the E-Invoice Eligibility Checker. Keep the generated invoice/IRN record and the marketplace settlement report as separate reconciliation documents.
5. How to reconcile a marketplace settlement
- Match the order-level gross sale, cancellations and returns to the marketplace settlement period.
- Identify income-tax TDS separately and reconcile it with the applicable income-tax statement and the correct tax-year law.
- Reconcile GST TCS with the operator’s GST reporting and the amount appearing in your electronic cash ledger.
- Check GST TDS only where the payer and contract meet Section 51 conditions; reconcile that credit in the GST portal records.
- Reconcile the taxable value, output tax and e-invoice/IRN data in your GST returns and books. A withheld amount does not reduce the GST rate on the sale.
For a GST TDS estimate, use the GST TDS Calculator. For marketplace TCS, use the GST TCS Calculator. The calculators illustrate arithmetic; they cannot determine whether a transaction legally qualifies or whether a portal credit has been posted.
Common questions
Is Section 194-O still the right section number in 2026?
It remains a useful search term and applies to the old Act’s relevant periods. For a tax year beginning 1 April 2026 or later, use the Income-tax Act, 2025 provision in Section 393(1), Table 8(v), and check transitional rules for earlier tax years and filings.
Is marketplace TDS the same as GST TCS?
No. Marketplace income-tax TDS is withheld under income-tax law. GST TCS is collected under GST law and, when properly reported, credited to the supplier’s GST electronic cash ledger.
Does GST TDS apply to every Amazon or Flipkart sale?
No. Section 51 is limited to specified deductors and qualifying contracts. Marketplace settlement deductions should be classified from the statement and the applicable law rather than assumed to be Section 51 GST TDS.
Does e-invoicing mean a seller must pay TDS?
No. E-invoicing and tax deductions are separate compliance rules. An e-invoice does not by itself trigger Section 51 GST TDS or income-tax withholding.
Can I claim the amounts deducted by a marketplace?
Potentially, through the credit mechanism for the specific levy, once correctly reported and reflected. Income-tax TDS and GST TCS/TDS appear in different records and are not interchangeable. Reconcile each against the applicable return and portal statement.
Official sources
- Income-tax Act, 2025, as amended by Finance Act 2026 — Section 393, Table 8(v), and the related exception table.
- Income Tax Department: objective and scope of the new Act — commencement and transition for tax years from 1 April 2026.
- Income-tax Act, 1961, Section 194-O — prior-law provision and historical rate change.
- CBIC Central Tax notifications archive — Notification 50/2018-Central Tax brought Section 51 TDS into force from 1 October 2018.
- CBIC Circular 76/50/2018-GST — clarifies the notified categories covered by Section 51.
- Notification 15/2024-Central Tax and the 54th GST Council meeting notification list — cover the 10 July 2024 TCS rate amendment for intra-State and inter-State supplies.
This guide is general educational information, not a transaction-specific tax opinion. Check current notifications, portal records and the facts of the supply before filing.