What is ITC on marketplace fees?

Where the GST on fees comes from

Marketplaces charge GST on every service they provide to sellers: commission or referral fee, closing fee, shipping or weight-handling fee, storage, removal and ad services. The fees and the GST are deducted from your payouts, and the marketplace issues a tax invoice for them, usually once a month, to your GSTIN in each state where you sell through it.

That GST is input tax credit (ITC). Claimed properly, it is not a cost.

Conditions for the credit

The usual conditions under section 16 of the CGST Act apply:

1. You have a tax invoice in your GSTIN's name.
2. You have received the service.
3. The invoice appears in your GSTR-2B, after you act on it in the IMS.
4. The supplier has paid the tax.
5. You have filed your GSTR-3B.

The credit must be claimed within the time limit in section 16(4), which runs from the end of the financial year. After that it is lost, so claim it in the month the invoice appears in GSTR-2B.

What goes wrong

• Wrong GSTIN. Fees billed to your registration in one state for sales made from another. The credit then sits where you may not need it. Ask the marketplace to bill each GSTIN correctly.
• Settlement and invoice do not match. The GST deducted in your settlements during the month should equal the GST on the month's fee invoices. Differences come from fee refunds on returns, credit notes or billing errors.
• Ads billed separately. Marketplace ads are often billed by a different entity or on a separate invoice. Ads bought from an overseas company with no Indian billing entity are imports of services, on which you pay GST under reverse charge and then claim it.
• Booked as a cost. If your books record fees including GST, you overstate costs and may miss the credit.

Credit on fees and inverted duty refunds

Marketplace fees are input services. Under the current refund formula for an inverted duty structure, credit on input services is not refundable, so a seller whose credit builds up mainly from fees cannot get it back as cash. In October 2026 the GST Council recommended counting credit on input services availed from a future date. Until that is notified, the current formula applies.

Monthly check

Each month, for each GSTIN: total the GST on fees in the settlement reports, match it to the marketplace's fee invoices, match those to GSTR-2B, and claim the credit in GSTR-3B.