GST Licensing & Compliance Guide for E-commerce Operators

GST Licensing & Compliance Guide for E-commerce Operators  . Licensing and GST Obligations for E-commerce Operators: A Practical Guide for 2026
Under the CGST Act, an Electronic Commerce Operator (ECO) refers to any person or entity that owns, operates, or manages a digital platform facilitating online trade or services. This includes large aggregators like Amazon, service platforms such as Urban Company, and even niche marketplaces.
For e-commerce businesses, the right to operate isn’t linked to a conventional “license” alone it is closely tied to GST registration and ongoing tax compliance. 
GST Registration: The First and Non-Negotiable Step
Unlike traditional businesses that enjoy turnover-based exemptions, e-commerce operators fall under a special category.
No Turnover Exemption for ECOs
As per Section 24 of the CGST Act, every e-commerce operator must obtain GST registration, irrespective of annual turnover. Even a single transaction facilitated through the platform makes GST registration mandatory.
Inventory + Marketplace Model: Dual Responsibility
Many platforms operate on a hybrid model—selling their own products while also onboarding third-party sellers. In such cases, compliance must be handled separately:

As an e-commerce operator: Facilitating third-party sales and collecting TCS

As a supplier: Paying GST on products sold from own inventory

Maintaining clear and separate records is essential to avoid disputes during audits.
Foreign E-commerce Operators
Foreign entities operating in India without a physical office must appoint an authorised representative or agent in India. This representative is responsible for GST registration, tax payments, and handling notices under Indian tax laws.
Tax Collection at Source (TCS): A Core Ongoing Obligation
One of the most important responsibilities of an e-commerce operator is collecting TCS under Section 52 of the CGST Act.
How TCS Works
When an operator collects payment from customers on behalf of sellers, it must deduct TCS before releasing funds to the seller.

Rate:

0.5% CGST + 0.5% SGST (intra-state)

1% IGST (inter-state)

Base for calculation:
 TCS is calculated on the net value of taxable supplies, i.e., total sales minus returns or cancellations within the same month.

Monthly Compliance: GSTR-8 Filing
GST compliance for e-commerce operators is not a one-time formality—it requires consistent monthly reporting.
GSTR-8 Return
Every ECO must file Form GSTR-8 by the 10th of the following month. This return includes:

Total value of supplies made through the platform

Details of returns and refunds

Amount of TCS collected and deposited

Automated Data Matching
The GST portal matches GSTR-8 data with sellers’ GSTR-1 filings. Any mismatch such as excess sales reported by a seller gets flagged automatically. By 2026, this reconciliation process is largely automated, and unresolved discrepancies may lead to suspension of GSTINs for sellers or operators.
Services Covered Under Section 9(5): Special Responsibility
For certain notified services, the law shifts the tax liability entirely to the e-commerce operator.
These include:

Passenger transportation services (e.g., cab aggregators)

Accommodation services (hotels, guest houses)

Housekeeping and cleaning services

In such cases:

The platform is treated as the supplier

The operator pays the full GST, not just TCS

Individual service providers may not need GST registration if their turnover is below the threshold

Key Compliance Updates in 2026
The compliance environment in 2026 is more technology-driven and tightly monitored.
Bank Account Validation
GST registration remains active only if a verified business bank account is linked to the GST portal. Failure to validate can result in automatic suspension.
Data Protection Obligations
With full enforcement of the Digital Personal Data Protection (DPDP) Act, 2023, e-commerce operators must ensure that customer and seller data collected for GST purposes is handled strictly as per consent-based data protection norms.
Consequences of Non-Compliance 
Non-compliance under GST can lead to serious financial as well as legal consequences for e-commerce operators. If an operator fails to collect or deposit the applicable tax, a penalty of Rs.10,000 or the amount of tax not collected whichever is higher may be imposed by the authorities. In addition to the penalty, delayed payment of tax attracts interest at the rate of 18% per annum, calculated from the due date until the actual date of payment. In cases where non-compliance involves wilful tax evasion exceeding Rs.5 crore, the consequences become far more severe, and the law provides for prosecution, which may result in imprisonment for a term of up to five years.
Why a Compliance Calendar Is Critical for E-commerce LLPs
For e-commerce LLPs, compliance extends beyond GST. Apart from GSTR-8 and tax payments, LLPs must also meet MCA requirements such as Form 8 (Statement of Accounts) and Form 11 (Annual Return).
A well-structured compliance calendar helps prevent missed deadlines that can trigger cascading penalties—late fees under GST, interest outflows, and even the risk of LLP strike-off for MCA non-compliance. Maintaining “good standing” is also essential for funding, partnerships, and long-term scalability.
Frequently Asked Questions (FAQs)
Q1. Is a physical office required in every state of operation?
Ans. No. If you don’t have a physical presence, you may register using your head office address. However, a person responsible for compliance in that state must be designated.
Q2. Does TCS apply to Cash on Delivery orders?
 Ans. TCS applies only when the operator collects the payment. If the customer pays the seller directly, TCS under Section 52 generally does not apply.
Q3. How are returns handled if they occur in the next month?
 Ans. Returns are adjusted in the month in which they occur. If returns exceed sales, the net taxable value becomes negative and no TCS is payable for that month.
Q4. Can an e-commerce operator opt for the GST Composition Scheme?
 Ans. No. ECOs are specifically excluded from the Composition Scheme.
Q5. Is PAN mandatory for GST registration?
 Ans. Yes. A valid PAN is mandatory. For foreign operators, the PAN or prescribed identification of the authorised representative is required.
Q6. Is an FSSAI license required along with GST?
 Ans. Yes. Platforms facilitating the sale of food or beverages must obtain an FSSAI Central License as an “E-commerce FBO”.
Q7. Is Income Tax TDS under Section 194-O also applicable?
 Ans. Yes. ECOs must deduct 1% TDS on payments to sellers if turnover thresholds under the Income Tax Act are met.
Q8. Can an ECO claim Input Tax Credit (ITC)?
 Ans. Yes. ITC can be claimed on expenses such as hosting services, office rent, professional fees, and marketing costs, subject to GST rules.
Q9. How is TCS split for intra-state and inter-state supplies?
 Ans. Intra-state sales attract 0.5% CGST + 0.5% SGST, while inter-state sales attract 1% IGST.

Licensing and GST Obligations for E-commerce Operators: A Practical Guide for 2026

Under the CGST Act, an Electronic Commerce Operator (ECO) refers to any person or entity that owns, operates, or manages a digital platform facilitating online trade or services. This includes large aggregators like Amazon, service platforms such as Urban Company, and even niche marketplaces.

For e-commerce businesses, the right to operate isn’t linked to a conventional “license” alone it is closely tied to GST registration and ongoing tax compliance.

GST Registration: The First and Non-Negotiable Step

Unlike traditional businesses that enjoy turnover-based exemptions, e-commerce operators fall under a special category.

No Turnover Exemption for ECOs

As per Section 24 of the CGST Act, every e-commerce operator must obtain GST registration, irrespective of annual turnover. Even a single transaction facilitated through the platform makes GST registration mandatory.

Inventory + Marketplace Model: Dual Responsibility

Many platforms operate on a hybrid model—selling their own products while also onboarding third-party sellers. In such cases, compliance must be handled separately:

As an e-commerce operator: Facilitating third-party sales and collecting TCS
As a supplier: Paying GST on products sold from own inventory

Maintaining clear and separate records is essential to avoid disputes during audits.

Foreign E-commerce Operators

Foreign entities operating in India without a physical office must appoint an authorised representative or agent in India. This representative is responsible for GST registration, tax payments, and handling notices under Indian tax laws.

Tax Collection at Source (TCS): A Core Ongoing Obligation

One of the most important responsibilities of an e-commerce operator is collecting TCS under Section 52 of the CGST Act.

How TCS Works

When an operator collects payment from customers on behalf of sellers, it must deduct TCS before releasing funds to the seller.

Rate:

0.5% CGST + 0.5% SGST (intra-state)
1% IGST (inter-state)

Base for calculation:

TCS is calculated on the net value of taxable supplies, i.e., total sales minus returns or cancellations within the same month.

Monthly Compliance: GSTR-8 Filing

GST compliance for e-commerce operators is not a one-time formality—it requires consistent monthly reporting.

GSTR-8 Return

Every ECO must file Form GSTR-8 by the 10th of the following month. This return includes:

Total value of supplies made through the platform
Details of returns and refunds
Amount of TCS collected and deposited

Automated Data Matching

The GST portal matches GSTR-8 data with sellers’ GSTR-1 filings. Any mismatch such as excess sales reported by a seller gets flagged automatically. By 2026, this reconciliation process is largely automated, and unresolved discrepancies may lead to suspension of GSTINs for sellers or operators.

Services Covered Under Section 9(5): Special Responsibility

For certain notified services, the law shifts the tax liability entirely to the e-commerce operator.

These include:

Passenger transportation services (e.g., cab aggregators)
Accommodation services (hotels, guest houses)
Housekeeping and cleaning services

In such cases:

The platform is treated as the supplier
The operator pays the full GST, not just TCS
Individual service providers may not need GST registration if their turnover is below the threshold

Key Compliance Updates in 2026

The compliance environment in 2026 is more technology-driven and tightly monitored.

Bank Account Validation

GST registration remains active only if a verified business bank account is linked to the GST portal. Failure to validate can result in automatic suspension.

Data Protection Obligations

With full enforcement of the Digital Personal Data Protection (DPDP) Act, 2023, e-commerce operators must ensure that customer and seller data collected for GST purposes is handled strictly as per consent-based data protection norms.

Consequences of Non-Compliance

Non-compliance under GST can lead to serious financial as well as legal consequences for e-commerce operators. If an operator fails to collect or deposit the applicable tax, a penalty of Rs.10,000 or the amount of tax not collected whichever is higher may be imposed by the authorities. In addition to the penalty, delayed payment of tax attracts interest at the rate of 18% per annum, calculated from the due date until the actual date of payment. In cases where non-compliance involves wilful tax evasion exceeding Rs.5 crore, the consequences become far more severe, and the law provides for prosecution, which may result in imprisonment for a term of up to five years.

Why a Compliance Calendar Is Critical for E-commerce LLPs

For e-commerce LLPs, compliance extends beyond GST. Apart from GSTR-8 and tax payments, LLPs must also meet MCA requirements such as Form 8 (Statement of Accounts) and Form 11 (Annual Return).

A well-structured compliance calendar helps prevent missed deadlines that can trigger cascading penalties—late fees under GST, interest outflows, and even the risk of LLP strike-off for MCA non-compliance. Maintaining “good standing” is also essential for funding, partnerships, and long-term scalability.

Frequently Asked Questions (FAQs)

Q1. Is a physical office required in every state of operation?

Ans. No. If you don’t have a physical presence, you may register using your head office address. However, a person responsible for compliance in that state must be designated.

Q2. Does TCS apply to Cash on Delivery orders?

Ans. TCS applies only when the operator collects the payment. If the customer pays the seller directly, TCS under Section 52 generally does not apply.

Q3. How are returns handled if they occur in the next month?

Ans. Returns are adjusted in the month in which they occur. If returns exceed sales, the net taxable value becomes negative and no TCS is payable for that month.

Q4. Can an e-commerce operator opt for the GST Composition Scheme?

Ans. No. ECOs are specifically excluded from the Composition Scheme.

Q5. Is PAN mandatory for GST registration?

Ans. Yes. A valid PAN is mandatory. For foreign operators, the PAN or prescribed identification of the authorised representative is required.

Q6. Is an FSSAI license required along with GST?

Ans. Yes. Platforms facilitating the sale of food or beverages must obtain an FSSAI Central License as an “E-commerce FBO”.

Q7. Is Income Tax TDS under Section 194-O also applicable?

Ans. Yes. ECOs must deduct 1% TDS on payments to sellers if turnover thresholds under the Income Tax Act are met.

Q8. Can an ECO claim Input Tax Credit (ITC)?

Ans. Yes. ITC can be claimed on expenses such as hosting services, office rent, professional fees, and marketing costs, subject to GST rules.

Q9. How is TCS split for intra-state and inter-state supplies?

Ans. Intra-state sales attract 0.5% CGST + 0.5% SGST, while inter-state sales attract 1% IGST.