Why your marketplace payout never matches the sale

Marketplace selling has a particular kind of blindness built into it.

In a normal business, you raise an invoice for ₹1,000 and the customer pays ₹1,000. Any gap is obvious and someone chases it.

On a marketplace, you sell for ₹1,000 and receive ₹740, and that is entirely normal. Commission, shipping, closing fee, a return from last month, tax collected at source — all of it sits between the sale and the settlement. Because a gap is expected, an unexplained gap looks exactly like an expected one.

That is the whole problem. Not fraud, not incompetence. Just a structure where errors are invisible by default.

What sits between the sale and the money

A settlement report typically nets off some combination of:

• Commission — a percentage that varies by category, and changes more often than sellers track
• Closing or fixed fee — per order, often slab-based on order value
• Shipping and weight handling — priced on the charged weight, which is not always the actual weight
• Returns and RTO — reversal of the sale, and frequently the forward shipping is not reversed with it
• Promotions and coupons — funded by you, by the platform, or shared
• Storage and long-term storage fees — if you use platform fulfilment
• TCS under Section 52 — GST collected on your behalf
• TDS under Section 194-O — income tax deducted on your behalf

The last two are not costs. They are your own tax sitting with the government in your name. Booking them as expenses is one of the most common and most expensive errors I see in seller books, and I will come back to it.

The two rates most sellers still have wrong

Both of these changed and a great deal of published material has not caught up.

TCS under Section 52 of the CGST Act is 0.5%, not 1%. The rate was reduced from 1% to 0.5% by Notification 15/2024 – Central Tax with effect from 10 July 2024. For an intra-state supply that is 0.25% CGST plus 0.25% SGST; for inter-state, 0.5% IGST. It is charged on the net taxable value — sales less returns — not on gross sales.

TDS under Section 194-O of the Income-tax Act is 0.1%, not 1%. That reduction took effect from 1 October 2024.

Both apply to the same order and they are entirely separate. Section 52 TCS is GST, reported by the operator in GSTR-8, and lands in your electronic cash ledger where it offsets your GST liability. Section 194-O TDS is income tax, appears in your Form 26AS, and is claimed against your income tax in your return.

They flow through different forms into different ledgers. Netting them together as one “platform tax” line is wrong, and it makes both unrecoverable in practice.

Why booking tax as an expense is so costly

If TCS is written off to expenses, three things happen at once.

Your losses are overstated, because a recoverable asset has been treated as a cost. Your electronic cash ledger quietly accumulates credit nobody is claiming. And at year end, your books and the portal disagree, with no trail to explain why.

The correction is straightforward: TCS is a receivable until it appears in your cash ledger and is used. TDS is a receivable until it is claimed in your return. Neither belongs in the profit and loss account.

Worth checking quarterly: log into the GST portal, open the TCS and TDS credit received statement, and match it against your settlement reports. The credit only appears after the operator files GSTR-8 — so if a platform files late, your credit shows up late. It is still yours. It just is not visible yet.

Returns are where the margin actually goes

Most sellers know their return rate. Fewer know their return cost.

When an order comes back, the sale reverses. What often does not reverse is the forward shipping, the packaging, the handling, and — depending on condition — the sellable value of the unit itself.

So a 20% return rate is not a 20% revenue reduction. It is a 20% revenue reduction plus the full delivery cost of every returned order plus the write-down on whatever comes back damaged. On thin-margin categories that difference decides whether the line is profitable at all.

This is worth calculating per category rather than overall. Sellers are routinely surprised to find that their highest-revenue category is their least profitable one once returns are loaded onto it properly.

Money owed is not money coming

Marketplaces settle on a cycle — commonly seven to fifteen days, longer while a return window is open, longer again if the platform is holding a reserve against disputes.

That gap is working capital. You have bought stock, paid for it, shipped it, and are waiting.

The number that matters is not “how much did I sell?” It is how much have I sold that has not yet reached my bank, and how old is it? Broken into buckets, that answer tells you whether your cash problem is a sales problem or a timing problem. They look identical from inside the business and need completely different responses.

You can see your own position on our free Receivables Ageing Visualiser. Enter what is outstanding and it buckets everything by age, gives you a weighted collection period, and flags concentration — including a warning where anything is approaching the three-year limitation wall. It runs in your browser and asks nothing of you to use.

What good reconciliation looks like

It is not complicated. It is just consistent.

1. Download the settlement report every cycle, not at year-end
2. Match each payout to orders — value sold, minus each fee line, equals the amount received
3. Verify the fee rates against the current rate card. Commission and weight slabs change; sellers rarely notice until a reconciliation catches it
4. Book TCS and TDS as receivables, then track them to the cash ledger and Form 26AS
5. Load return costs onto the category that generated them
6. Reconcile GSTR-2B against your purchase register monthly, so input credit mismatches surface while the supplier can still be asked to fix them

Sellers who do this find things. Not usually fraud — commission applied at the wrong category rate, weight charged above actual, returns where the forward shipping was never credited back. Individually small. Across a year of volume, not small.

The wider point

Marketplace selling gives you enormous distribution and almost no visibility. The platform knows exactly what your economics look like. You get a settlement file.

Closing that gap is not about mistrust. It is about being able to answer basic questions — which category actually makes money, what a return really costs, how much of your own cash is sitting in the system — without guessing.

Those answers exist in the data you are already receiving. They just have to be assembled by someone, every month, before the trail goes cold.