6 Sept 2026 · ECOMCA Team
194-O TDS and GST Reconciliation for D2C Sellers
A marketplace deducts three things from every settlement before the money reaches your bank: its commission, income-tax TDS under a provision the Income-tax Act, 1961 called Section 194-O, and GST TCS under Section 52 of the CGST Act, 2017. Most D2C finance teams treat the two tax deductions as one bucket. They are two different taxes, deducted under two different statutes, reported by the operator in two different returns, and reclaimable through two entirely separate mechanisms. Reconciling them as if they were interchangeable is the single most common reason a brand's GST credit ledger and its income-tax TDS position both end up wrong at the same time.
Key takeaways
- Section 194-O TDS, for the period it applied under the Income-tax Act, 1961, was deducted at 0.1% of gross sales made through an e-commerce operator; individual and HUF sellers with a linked PAN and gross annual sales through that operator up to ₹5 lakh were exempt.
- Section 52 GST TCS is deducted separately by the operator at 0.5% of the net value of taxable supplies made through it (0.25% CGST plus 0.25% SGST on intra-state supplies, or 0.5% IGST on inter-state supplies).
- These two deductions land in different places: the income-tax deduction shows up in Form 26AS and the Annual Information Statement; the GST deduction shows up in the operator's GSTR-8 and then in your electronic cash ledger.
- Netting the two off against each other, or against marketplace commission, is the error that most often breaks a seller's monthly reconciliation.
- From 1 April 2026, income earned is governed by the Income-tax Act, 2025, and the section number applicable to any period from that date must be verified independently before it is relied on for filing.
Short answer
Section 194-O TDS and Section 52 GST TCS are separate deductions under separate statutes. The income-tax deduction is 0.1% of gross sales, reflected in Form 26AS/AIS and set off against income-tax liability. The GST deduction is 0.5% of net taxable supplies, reflected in the operator's GSTR-8 and credited to your electronic cash ledger. Reconcile each independently against the settlement report; do not merge them into a single "TDS/TCS" line.
What Section 194-O actually required, and what changes from 1 April 2026
Under the Income-tax Act, 1961, Section 194-O required an e-commerce operator, meaning a marketplace or a facilitator of online sales such as Amazon, Flipkart or Myntra, to deduct TDS at 0.1% of the gross amount of sales made through its platform, at the time of credit to the seller's account or actual payment, whichever came first. The deduction was calculated on the gross order value, before the operator's own commission was netted out, so a seller processing ₹10 lakh of gross sales in a month saw ₹1,000 deducted regardless of how much commission or shipping was also taken off the same settlement.
The provision exempted individual and Hindu Undivided Family sellers whose gross sales through a given operator did not exceed ₹5 lakh in the financial year, provided a valid PAN was furnished to that operator. Where PAN was missing or unlinked in the seller's account, Section 206AA of the same Act pushed the rate up to 5%, a jump large enough to distort margins on a growing account if the mismatch went unnoticed for even one quarter.
The Income-tax Act, 1961 stood repealed with effect from 1 April 2026, replaced by the Income-tax Act, 2025 and the Income-tax Rules, 2026. The 2025 Act is principally a re-codification exercise and did not, on its own account, signal a change in the underlying tax burden for operator-facilitated online sales. What it did change is the numbering: virtually every section of the old Act has been renumbered, and the twelve-month "previous year" and "assessment year" framework has been replaced by a single "Tax Year" running from 1 April to 31 March. A brand closing its books for Tax Year 2026-27 should not cite "Section 194-O" from memory; the provision continues in substance as TDS obligation on e-commerce operators, but the correct section number under the 2025 Act should be confirmed from the Act or the accompanying Rules before it is used in any filing or client note. Income and deductions relating to any period up to 31 March 2026 continue to be governed by the 1961 Act and its original numbering.
Section 52 GST TCS: the separate deduction
Section 52 of the CGST Act, 2017 requires an electronic commerce operator to collect tax at source on the net value of taxable supplies made through it, where the consideration is collected by the operator on the supplier's behalf. The rate is 0.5% of the net taxable value: 0.25% CGST plus 0.25% SGST for an intra-state supply, or a combined 0.5% IGST for an inter-state supply. This rate sits outside the rate rationalisation carried out by the 56th GST Council meeting with effect from 22 September 2025, which restructured the outward tax slabs on goods and services into 0%, 5%, 18% and 40%. The TCS collection rate under Section 52 is a distinct mechanism and any change to it would require its own notification; none should be assumed without checking the current CGST Rules.
The operator reports this collection in a monthly return, GSTR-8. On acceptance, the credit is reflected against your GSTIN and made available in your electronic cash ledger through the TDS/TCS credit receipt statement, commonly referred to as GSTR-2X. That credit can then be utilised against your output GST liability. It is not a reduction in the invoice value of your sale and it does not touch your income-tax position at all.
194-O TDS versus Section 52 GST TCS at a glance
| Aspect | 194-O TDS (Income-tax) | Section 52 TCS (GST) |
|---|---|---|
| Governing law | Income-tax Act, 1961 up to 31 March 2026; described provision under the Income-tax Act, 2025 thereafter | CGST Act, 2017, Section 52 |
| Rate | 0.1% of gross sales (5% without PAN, under Section 206AA) | 0.5% of net taxable supplies (0.25% + 0.25% intra-state; 0.5% IGST inter-state) |
| Threshold | Exempt for individual/HUF with linked PAN and gross sales up to ₹5 lakh a year | No threshold |
| Operator's return | Quarterly TDS return | Monthly GSTR-8 |
| Where the seller sees it | Form 26AS / Annual Information Statement | Electronic cash ledger, via TDS/TCS credit receipt (GSTR-2X) |
| How it is reclaimed | Set off against income-tax liability | Utilised against GST output liability |
Table: comparison of 194-O TDS and Section 52 GST TCS. Compiled from the Income-tax Act, 1961 (Section 194-O and Section 206AA) and the CGST Act, 2017 (Section 52). Verify current section numbering under the Income-tax Act, 2025 for periods from 1 April 2026.
A worked reconciliation
Take a single settlement cycle with a gross order value of ₹2,50,000, marketplace commission of 20%, and shipping and fulfilment charges of ₹8,000, both commission and shipping attracting 18% GST as input credit.
| Line item | Amount (₹) |
|---|---|
| Gross order value (revenue booked) | 2,50,000 |
| Less: marketplace commission (20%) | (50,000) |
| Less: GST on commission (18%, input credit) | (9,000) |
| Less: shipping and fulfilment | (8,000) |
| Less: GST on shipping (18%, input credit) | (1,440) |
| Less: 194-O TDS (0.1% of gross sales) | (250) |
| Less: Section 52 GST TCS (0.5% of net taxable value) | (1,250) |
| Net credited to bank | 1,80,060 |
Table: illustrative settlement working for a single cycle. Figures are for illustration only and exclude output GST on the sale itself, which is booked as a separate liability.
Revenue booked is ₹2,50,000, not the ₹1,80,060 that lands in the bank. The ₹250 TDS sits in a TDS receivable ledger, to be matched against Form 26AS at quarter end and claimed against income-tax liability. The ₹1,250 GST TCS sits in a GST TCS credit ledger, to be matched against the operator's GSTR-8 filing and utilised against output GST. Booking the net bank figure as sales, or netting the TDS and TCS against each other because both look like small percentage deductions, is what causes turnover, margin and available tax credit to all come out wrong at once.
What to actually do
A brand reconciling marketplace settlements should keep the TDS receivable ledger, the GST TCS credit ledger, and the GST output payable ledger entirely separate, and reconcile each on its own cycle rather than as a combined "platform deductions" line. Form 26AS and the Annual Information Statement should be checked quarterly, operator by operator, against the gross sales actually reported to that operator, since a PAN mismatch in even one seller panel silently converts the 0.1% deduction into 5% for that operator alone. GST TCS credit should be reconciled monthly against each operator's GSTR-8, matched against the electronic cash ledger, before it is treated as available for utilisation. Where a discrepancy shows up between the settlement report and either ledger, the settlement report is not the authority; Form 26AS governs the income-tax credit and GSTR-8 governs the GST credit, and the settlement report should be traced back to whichever of the two is short.
Where this is unsettled
The section number that will apply, from Tax Year 2026-27 onward, to the provision that currently operates as Section 194-O has not been stated here, because it has not been independently verified against the Income-tax Act, 2025 and the Income-tax Rules, 2026. A brand or its accountant citing this provision for any period from 1 April 2026 should confirm the correct numbering from the Act itself before using it in a return, a note to auditors, or a client communication. Describing the obligation in words, as this post has done, is the safer position until that number is confirmed.
FAQ
Is 194-O TDS the same as GST TCS deducted by a marketplace? No. They are separate deductions under separate statutes. 194-O is an income-tax deduction of 0.1% of gross sales, reflected in Form 26AS and set off against income-tax liability. GST TCS under Section 52 of the CGST Act is a 0.5% collection reflected in the operator's GSTR-8 and credited to the electronic cash ledger for GST purposes.
What happens if my PAN is not linked correctly on a marketplace seller panel? The 194-O deduction rate rises from 0.1% to 5% under Section 206AA of the Income-tax Act, 1961, for sales processed while the PAN remains unlinked or mismatched. Correcting the PAN in the panel does not automatically reverse deductions already made at the higher rate; those must be reconciled against Form 26AS and claimed at return filing.
Where does GST TCS credit actually show up in my GST filings? It appears in the electronic cash ledger, populated once the operator files GSTR-8 for the relevant month and the seller accepts the credit through the TDS/TCS credit receipt statement (GSTR-2X). It can then be utilised against output GST liability; it is not adjustable against income tax.
Does the September 2025 GST rate change affect the TCS rate under Section 52? The rate rationalisation effective 22 September 2025 restructured the outward tax slabs on goods and services into 0%, 5%, 18% and 40%. It did not, on the information available, alter the separate 0.5% TCS collection rate under Section 52. Any change to that specific rate would require its own notification and should be verified against the current CGST Rules before relying on it.
Should I net 194-O TDS and GST TCS against each other in my books? No. They should sit in two separate ledgers because they are claimed through two different processes: the income-tax TDS is claimed against income-tax liability using Form 26AS, and the GST TCS is utilised against GST output liability from the electronic cash ledger. Netting them produces a figure that reconciles to neither return.
Law stated as on: 6 September 2026. This post reflects the position for the Income-tax Act, 1961 up to 31 March 2026 and flags the numbering change under the Income-tax Act, 2025 without stating an unverified section number. GST provisions are stated as they stand under the CGST Act, 2017, read with the rate structure effective 22 September 2025.
This post is for general information and does not constitute professional advice. It reflects the position of law as on 6 September 2026 and may not account for subsequent amendments, notifications or judicial developments. Tax and regulatory outcomes depend on the specific facts of each case. Readers should obtain advice appropriate to their own circumstances before acting on anything stated here.