E-commerce Marketplace Seller Audit: Settlements, Returns and TCS Credit

An audit of an online seller checks that sales shown on the platform agree with the books, that returns, commissions and fees are recorded, that stock at fulfilment centres is counted, and that tax collected at source by the platform is matched to credits claimed. The platform holds the money and the data, so the audit starts with the settlement report.

Last reviewed: 17 October 2026. Facts checked. We ran a web search on collection of tax at source by e-commerce operators under GST. It returned tax-portal explainers, a consultancy page, a bare-text section file and a few commercial guides. We read the search summaries and did not open the CGST Act, any notification or any platform terms. The results indicated that the Act has a provision under which an operator collects a capped percentage of net value of supplies made through it, that it is reported by the operator in a monthly statement and credited to the supplier's cash ledger, and that a separate provision makes the operator liable for tax on certain notified services. The sources disagreed on the current percentage, so we give none. Confirm rates and the income-tax equivalent from current notifications. Existing site posts were checked so that links point to pages that exist.

What is distinctive about marketplace selling

• The platform collects from the customer and pays the seller in settlement cycles after deducting commission, fees, shipping and returns.
• Sales are in many small orders, across states, with each order a GST event.
• Returns and cancellations are frequent and arrive after the sale.
• Stock may sit at the platform's fulfilment centres, so the seller does not hold it.
• The platform withholds tax at source on payments, both under GST and the income-tax law.
• Promotions, discounts and advertising are charged through the same account.

Key risks

1. Revenue cut-off. Orders booked on dispatch and returned after year-end.
2. Settlement mismatches. Money received not agreeing to the sales net of deductions.
3. Unrecorded charges. Fees, penalties, storage and advertising shown only in platform statements.
4. Stock at fulfilment centres. Quantities not confirmed, lost or damaged items not claimed.
5. Tax credit mismatch. TCS credit in the portal not agreeing to the platform statements.
6. State-wise GST. Wrong place of supply and wrong tax split.
7. Return handling. Credit notes and tax adjustments missing.
8. Concentration. One platform dominating revenue.

Audit programme in steps

Step 1: Obtain platform data

Download order, return and settlement reports for each platform and each account, plus invoice and fee statements. Record the report dates and filters used. Confirm the seller's login holder and that all accounts are listed.

Step 2: Reconcile sales to the books

Tie platform sales to the revenue ledger and the GST returns by month. Investigate gaps between gross orders, returns, cancellations and net sales. Our GST reconciliation playbook can speed the comparison across returns.

Step 3: Reconcile settlements to bank

For each settlement cycle, tie the amount received in the bank to the settlement report and to the ledger. List items deducted, such as commission, fixed fees, shipping, ad spend, and any reserve held. Tie each category to an expense or receivable account.

Step 4: Test returns and cut-off

Review returns received in the weeks after year-end and test whether revenue and stock were reversed in the right year. Test credit notes, and check the matching GST adjustment. Examine unusually high return rates by product.

Step 5: Test commission and fee charges

Recompute fees for a sample from the platform's fee schedule. Test that tax on platform fees is claimed as credit where eligible and that platform invoices are held. Review advertising and promotion charges for completeness.

Step 6: Test stock at fulfilment centres

Obtain inventory reports and confirmations from the platform where available. Compare to the books by item, and review reports of lost, damaged or stranded stock and claims. Use the framework in our stock count procedures for stock held with others.

Step 7: Reconcile tax collected at source

Compare the amounts collected by the platform under GST and under the income-tax provisions to what appears in the seller's portal statements and the cash ledger. Investigate differences and items with a mismatch between the seller's and the platform's registration. Check that credit claimed was used in the correct period. See the TCS reference for rates, and confirm applicability from the current provisions.

Step 8: Test state-wise GST and invoicing

Sample orders across states and test place of supply, tax type and invoice details. Check tax on shipping or packing charges billed to the customer.

Step 9: Review inventory valuation and purchases

Test purchase invoices for goods sold and credit availability. Review valuation for slow-moving and seasonal goods, and test provisions for expiry or obsolescence.

Step 10: Review concentration, staff and other tax

Note dependence on a platform and the effect of account suspension on going concern. Test payments to freelancers and agencies, and TDS thereon. Reconcile payroll for warehouse and support staff.

Common findings

• Settlement amounts that do not agree to the ledger.
• Platform fees booked on receipt, not on charge.
• Returns after year-end not reversed.
• Stock at fulfilment centres not confirmed.
• Tax collected at source not matched to portal credit.
• Credit notes missing for returns.
• Place of supply errors on inter-state orders.

Which Indian rules to check

Name only. Verify current text:

• The Central Goods and Services Tax Act, 2017 provisions on e-commerce operators, including collection of tax at source and notified services.
• The Income-tax Act provisions on tax withheld on payments by e-commerce operators.
• The Consumer Protection (E-Commerce) Rules, 2020.
• The platform's seller agreement and policy terms.
• Legal metrology and labelling rules for goods sold online.

FAQs

Why start with the settlement report?

It shows what the platform actually paid and deducted, and links every order to cash.

Does tax collected at source reduce GST payable?

It is credited to the seller's cash ledger and can be used as set out in the law, so confirm treatment.

What is the most common cut-off error?

Treating dispatched orders as final sales when returns arrive after the year-end.

Related Articles

• GST reconciliation using AI playbook
• TCS rates quick reference
• Stock count procedures
• Retail chain audit

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