How to start an e-commerce marketplace seller business in India: registrations and licences

Which structure suits a marketplace seller?

Many sellers start as proprietors because marketplaces onboard individuals with a PAN and GSTIN. This is fine while volumes are small. As you scale, hire staff or take on inventory financing, a private limited company or LLP limits personal liability and looks better to lenders and brand partners.

If you sell your own brand rather than resell others' products, register the trademark early. Marketplaces' brand registry programmes generally ask for a trademark application or registration.

Registrations a marketplace seller needs

The list below covers a typical seller of goods. Sellers of food, cosmetics, electronics or toys have extra product approvals on top of these, and marketplaces check them during category approval.

GST rules specific to marketplace sellers

Earlier, anyone supplying goods through an e-commerce operator had to register for GST regardless of turnover. From 1 October 2023, Notification 34/2023-Central Tax exempts sellers of goods whose turnover is below the threshold, who make no inter-state supplies and who sell through marketplaces in only one state. They declare PAN and address on the GST portal and get an enrolment number. Selling across states still requires full registration.

Registered sellers see GST TCS collected by the marketplace at 0.5% of net taxable value; this flows into the cash ledger and can be used to pay tax. Under income tax, marketplaces deduct TDS at 0.1% of gross sales, a rate in force since 1 October 2024. Reconcile both monthly against platform reports.

Ongoing compliance

File GSTR-1 and GSTR-3B on time and reconcile against the marketplace's TCS statements. Mismatches can trigger notices. If you use fulfilment-by-marketplace programmes, inventory may sit in warehouses across states, which can require GST registration in each of those states.

Keep product listings accurate: country of origin, MRP, net quantity and manufacturer details must appear on listings under Legal Metrology and e-commerce rules. Respond to customer grievances within platform timelines, because repeated complaints can lead to suspension.

Income tax for online sellers

Proprietors and partnership firms with turnover up to ₹2 crore can use presumptive taxation under section 58 of the Income-tax Act 2025. The limit rises to ₹3 crore if cash receipts are within 5% of turnover, which is usually true for marketplace sellers paid by bank transfer. Profit is deemed at 6% of digital receipts.

If your actual margin is lower and you declare less than the deemed profit, you must maintain books and may need a tax audit. Tax audit applies to businesses with turnover above ₹1 crore, or ₹10 crore where cash receipts and payments are each within 5%, under section 63.

Pitfalls for new sellers

Settlement reports, invoices and returns should match. Unreconciled TCS is a common source of GST notices for online sellers, and it is easy to prevent with a monthly check.

• Enabling inter-state shipping while relying on the enrolment exemption.
• Using marketplace fulfilment in another state without registering there.
• Ignoring TCS and TDS credits, which are adjustable or refundable money.
• Listing branded goods without authorisation from the brand owner.

Step by step

1. 1Get PAN and bank account

   In the name of the proprietor or entity.

2. 2Decide GST route

   Full registration for inter-state sales, or enrolment number if you qualify for the exemption.

3. 3Obtain product licences

   FSSAI, BIS or other approvals required for your category.

4. 4Register on the marketplace

   Submit PAN, GSTIN or enrolment number, bank and address details.

5. 5Add warehouses

   Add marketplace fulfilment centres to your GST registration.

6. 6Protect your brand

   File a trademark and enrol in brand registry.

7. 7Reconcile monthly

   Match sales, TCS and TDS with GST returns and Form 26AS.