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How India Taxes E-Commerce in 2025

9/07/2025 09:34:00 PM
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India uses two parallel tax codes to regulate online trade:

  1. Goods and Services Tax (GST) – an indirect tax that applies to every sale or service rendered on a digital platform.
  2. Direct-tax rules – chiefly Section 194O (TDS on marketplace payouts) and the now-withdrawn equalisation levy that once targeted foreign operators.

Understanding both is essential whether you run a marketplace, sell on Amazon/Flipkart, or operate a D2C web-shop. Below is a concise walkthrough of the current framework and the headline changes that took effect this year.

1. GST Rules for E-Commerce Operators (ECOs)

Topic

2025 position

Key point for sellers

 

GST rate on platform commission, listing fees, hosting services

18 % standard slab

Charged by the platform; sellers take input-tax credit (ITC) if eligible.

 

GST on restaurant food delivered via apps

5 % (no ITC to restaurant)

Platform, not the eatery, remits the tax.

 

GST on delivery charges collected by the platform

18 % when treated as a separate service

Bundling delivery into product price adopts the product’s GST rate.

 

Tax-collected-at-source (TCS)

1 % on gross value of each sale; deposited by ECO

Auto-reflects in sellers’ cash ledger; claim credit while filing GSTR-3B.

 

Registration threshold for online sellers

Nil – every e-commerce seller must obtain GSTIN, even below ₹40 lakh turnover

Aadhaar-based e-KYC now speeds approvals.

 

E-invoicing

Mandatory for turnover ≥₹10 crore

Violations block ITC to buyers; integrate billing software early.

 

2025 GST reform highlights

  • Two-slab system (5 % essentials, 18 % standard) replaces the earlier 5-12-18-28 matrix, easing rate lookup and invoicing.
  • Delivery services explicitly pulled into 18 % to end ambiguity that spawned disputes.
  • Stricter auto-matching of TCS with sellers’ returns; late reconciliation now triggers system-generated notices.

2. Direct-Tax Provisions Affecting Online Marketplaces

2.1 Section 194O – TDS on Marketplace Payouts

Rule

Current rate

Scope

TDS on gross sales proceeds paid or credited to resident sellers

1 % once yearly sales >₹5 lakh (PAN/Aadhaar provided)

Operators must deduct on gross amount, ignoring returns.

If seller fails to furnish PAN/Aadhaar

5 % under Section 206AA

Ensures KYC compliance.

Non-resident sellers

Section 194O does not apply

Income may still be taxable under other sections.

The TDS auto-appears in Form 26AS, offsetting the seller’s final income-tax liability.

2.2 Sunset of the Equalisation Levy

Parliament repealed the 6 % “Google Tax” on foreign digital advertising and the 2 % marketplace levy from 1 August 2025, citing progress on OECD Pillar One negotiations. Overseas operators supplying Indian customers no longer face this extra cost, although they remain subject to GST if they cross ₹20 million in annual Indian turnover.

 

Obligation

Frequency

2025-26 due date

GSTR-1 (outward supplies)

Monthly

11th of next month

GSTR-3B (summary return & payment)

Monthly

20th of next month

TCS statement GSTR-8

Monthly

10th of next month

Payment of TCS

Monthly

Same as GSTR-8

Quarterly return option (QRMP) for small sellers

Turnover ≤₹5 crore

13th of month after quarter

TDS return under 194O (Form 26Q)

Quarterly

31 Jul / 31 Oct / 31 Jan / 31 May

3. Compliance Timeline (FY 2025-26)Late filing of GSTR-8 attracts a ₹100 per-day late fee (CGST+SGST), while delayed TDS returns draw ₹200 per day plus interest at 1 % a month.

4. Typical Tax Workflow for an Online Sale

  1. Buyer pays ₹1,000 product price + ₹180 platform commission GST + ₹50 delivery fee (+₹9 GST).
  2. Platform collects total and immediately deducts:
    • Commission + GST (18 %)
    • Delivery GST, if separate (18 %)
    • TCS @1 % on ₹1,050 sale value.
  1. Net settlement to seller = ₹1,050 – commission – TCS.
  2. Platform remits GST and TCS to government; uploads data in GSTR-8.
  3. Seller claims ITC on commission GST and delivery GST; TCS credit offsets GST liability.

5. Strategic Tips for 2025

  • Automate reconciliation – Use accounting tools that ingest GSTR-2B, GSTR-8, and marketplace fees to match ITC and TCS monthly.
  • Segment delivery income – If you operate own website, break out delivery as a separate line item; keeps principal goods in 5 % slab where possible.
  • Opt for composition? Not allowed on marketplaces after new CBIC rules; small sellers must shift to regular scheme and manage ITC flow.
  • Watch e-invoice limits – A sudden festive-season spike can push turnover over ₹10 crore; enable API integration beforehand.
  • Plan for higher working capital – Repeal of equalisation levy may lower ad costs, but 18 % GST on logistics raises expenses; revisit pricing models.

 Read Also: gst 2-0 rate rationalization guide businesses

Bottom line: 2025 brings simpler GST slabs but tighter digital oversight. Marketplaces handle most front-end compliance, yet sellers must stay vigilant on TCS credit, e-invoicing and Section 194O TDS to avoid cash-flow shocks and penalties.

 

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Frequently Asked Questions

1. What is GST and who needs to register for it?

GST stands for Goods and Services Tax; businesses with turnover exceeding thresholds specified by law must register for GST.

2. How can I register for GST online?

Registration can be done via the GST portal by submitting required details and documents electronically.

3. What are the types of GST taxes?

CGST, SGST (for intra-state sales), and IGST (for inter-state sales) are the principal GST types.

4. When and how often should I file GST returns?

Filing frequency varies; monthly, quarterly, or annually based on turnover and nature of registration.

5. What documents are required for GST registration?

PAN card, Aadhaar card, business address proof, bank account details, and photographs are typically required.

6. What is Input Tax Credit (ITC)?

ITC allows taxpayers to deduct the tax paid on purchases from the GST payable on sales.

7. How do I claim Input Tax Credit?

ITC claims are filed via GST returns with valid tax invoices and compliance with specific conditions.

8. What are the penalties for late GST filing?

Penalties include late fees, interest on tax dues, and potential legal consequences for prolonged non-compliance.

9. How can I file my Income Tax Return (ITR)?

ITR can be filed online on the Income Tax Department’s e-filing portal using relevant forms based on income sources.

10. What documents are needed for filing ITR?

PAN, Aadhaar, bank statements, Form 16, investment proofs, and relevant income and expense documents.

11. What is TDS and when is it applicable?

Tax Deducted at Source is applicable on various payments like salary, rent, professional fees as per thresholds.

12. How can tax consultancy help me save money?

By identifying tax deductions, exemptions, and planning strategies tailored to individual or business finances.

13. What is the difference between direct and indirect taxes?

Direct taxes like income tax are paid directly by the individual; indirect taxes like GST are passed to consumers.

14. What are the income tax slabs for individuals?

Income tax slabs vary by age and income under old and new regimes, with different rates applicable.

15. How do I compute taxable income?

Taxable income is total income minus eligible deductions under sections like 80C, 80D, etc.

16. What are common sections for tax deductions?

Sections like 80C (investments), 80D (health insurance), 80G (donations) offer deductions.

17. What is the process for GST audit?

GST audit involves verification of records by a chartered accountant to ensure compliance and proper tax payments.

18. Can tax consultants represent me before tax authorities?

Yes, tax consultants can represent clients during assessments, audits, and inquiries.

19. What is the due date for filing income tax returns?

Typically July 31st for individuals and September 30th for businesses for the previous financial year.

20. How are capital gains taxed?

Capital gains are classified as short-term or long-term, with different tax rates and exemptions.

21. What is e-way bill in GST?

E-way bill is an electronic document for movement of goods worth above a threshold under GST law.

22. How can I verify my ITR online?

Using Aadhaar OTP, net banking, Demat account or sending signed ITR V physically to CPC Bangalore.

23. What forms are used for income tax returns?

ITR-1 to ITR-7 forms, selected based on income sources and taxpayer category.

24. What is advance tax?

Advance tax is the income tax payable in installments during the year itself.

25. What is TDS refund?

Refund of excess TDS deducted beyond actual tax liability after filing ITR.

26. How can I update my PAN details?

PAN details can be updated through NSDL or UTIITSL websites with proper documents.

27. What are the tax benefits for senior citizens?

Higher exemption limits and specific reliefs are available for senior and super senior citizens.

28. Can NRIs file income tax returns in India?

Yes, NRIs with income earned or accrued in India must file ITR.

29. What is the significance of PAN and TAN?

PAN is Permanent Account Number for taxpayers; TAN is Tax Deduction Account Number for deductors.

30. What is the GST composition scheme?

A simplified tax scheme for small taxpayers with turnover under specified limits, with lower compliance.

31. How do I register a partnership firm for GST?

Partnership firms must apply online on GST portal with required documents and info.

32. What are invoices under GST?

GST invoices detail supply of goods or services and are mandatory for claiming ITC.

33. How can I update my business address in GST?

GST portal allows amendment of business address after submitting proof and documents.

34. What is the penalty for late GST payment?

Interest and late fee are levied on tax not paid on or before the due date.

35. What are exempted goods and services under GST?

Certain goods and services like agriculture produce, education, and healthcare may be exempt from GST.

36. How do I know if I'm liable to pay advance tax?

Taxpayers with tax liability exceeding ₹10,000 in a year must pay advance tax.

37. What are tax audit requirements under Income Tax?

Business or professional income taxpayers exceeding threshold turnover must audit accounts and file tax audit reports.

38. What are the consequences of not filing GST returns?

Penalties, blocking of ITC claims, and legal action may follow non-filing of returns.

39. How can tax consultants aid in tax planning?

Consultants analyze finances and suggest legal ways to optimize taxes and maximize deductions.

40. What is the importance of PAN in income tax?

PAN is mandatory for filing returns, TDS transactions, and financial dealings to track taxed income.

41. How is salary income taxed?

Salary income is added to total income and taxed as per slab rates after allowed deductions.

42. What is the limit for cash donations under section 80G?

Cash donations exceeding ₹2,000 are generally not eligible for deduction except to specified funds.

43. Can I file a revised ITR?

Yes, revised returns can be filed before the end of the relevant assessment year to correct errors.

44. What is the impact of GST on exports?

Exports are treated as zero-rated supplies under GST with benefits for refund of input taxes.

45. Can I avail GST registration for multiple states?

Yes, GST registration in multiple states is mandatory if business operates across those states.

46. How do I know my GSTIN?

GSTIN is issued at time of registration and can be viewed/downloaded from GST portal.

47. What documents are required for Income Tax audit?

Financial statements, books of accounts, tax invoices, bank statements, and audit reports are usually required.

48. What is Section 194T and its applicability?

Section 194T mandates TDS deduction on cash withdrawals over a specified limit by individuals or HUFs.

49. Can I claim deductions on home loan interest?

Yes, interest on self-occupied property is deductible under Section 24 up to ₹2 lakh per year.

50. How can I get expert tax consultancy services?

Expert services can be approached through qualified tax consultants who analyze your tax situation comprehensively and help ensure compliance and savings.
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