Last Updated on January 31, 2026
One of the greatest benefits of the Goods and Services Tax (GST) is the Input Tax Credit (ITC), which helps businesses reduce their overall tax liability. For e-commerce sellers operating on websites such as Amazon, Flipkart, and other e-marketplaces, ICT eligibility is necessary to plan and comply with the tax system effectively.
Many online sellers are unsure whether they can claim ITC, especially because eCommerce transactions involve intermediaries, Tax Collected at Source (TCS), and multiple compliance requirements.
This article explains whether eCommerce sellers can claim ITC, the conditions attached to it, and the common challenges faced in practice.
What is Input Tax Credit (ITC)?
Input Tax Credit: This is the GST credit for GST paid on purchases of goods or services used in business. This credit is allowable to be offset against the GST on outward supplies, which prevents the cascading effect of tax.
For example, when a seller pays GST on packaging materials, advertising services, or inventory purchases that are subject to GST, it can claim ITC, provided it complies with the provisions of the GST laws.
GST Registration and ITC Eligibility of eCommerce Sellers
Most sellers in eCommerce must obtain GST registration, regardless of their turnover, when supplying goods through an eCommerce operator. After being registered under GST, the seller will be able to claim ITC, provided the statutory requirements are met.
The prerequisite is GST registration. In the absence of it, no ITC can be claimed, despite the business expenses paid to GST.
Conditions for Claiming ITC
To claim Input Tax Credit, e-commerce sellers must meet the conditions stipulated in the CGST Act. The seller should possess a valid tax invoice or debit note from a registered supplier. The commodities or services are supposed to have been received, and the supplier should have paid the tax to the government.
Also, the seller should have submitted the corresponding GST returns, and the details of invoices are to be registered in the records of the GST portal of the seller. Any of these conditions not being met can result in the rejection or reversal of ITC.
Input Tax Credit – Common Expenses on eCommerce Sellers
eCommerce sellers may deduct ITC on a number of expenses concerning business, but it must be incurred in the course or furtherance of business. This encompasses GST on the purchase of inventory, packaging materials, warehousing costs, logistics costs, professional fees, software subscription, advertising and marketing costs and office costs.
GST charged on Amazon or other platform fees, including referral fees or fulfilment fees, can also be claimed in ITC with proper documentation and reflection in returns.
Impact of TCS on ITC
Tax Collected at Source (TCS) is a peculiarity of eCommerce transactions: an eCommerce operator is expected to collect TCS on net taxable supplies transacted via their platform and remit the money to the government.
TCS is not ITC in the real meaning of the word, but it is displayed as a credit in the electronic cash ledger of the seller. In this amount, sellers are able to pay their GST liability. Reconcilment of TCS statements with sales data is important, however, since inconsistencies can influence the filing of returns and the use of ITC.
Blocked Credits for eCommerce Sellers
Not all GST paid can be claimed as ITC. Certain expenses are specifically blocked under the GST law. For example, ITC cannot be claimed on personal expenses, food and beverages provided for personal consumption, or goods lost, stolen, or destroyed.
eCommerce sellers must carefully segregate business and non-business expenses to avoid wrongful ITC claims, which can attract penalties and interest.
Significance of Invoice Matching and Reconciliation
Invoice reconciliation is one of the most significant problems of e-commerce sellers. ITC can be claimed only on the basis that the invoice details published by the supplier are correct and are reflected in the seller’s GST records.
There should be a regular reconciliation between the purchase invoice, the platform statement, and the GST returns. Any discrepancy ought to be fixed in good time to avoid ITC reversals or tax authority notices.
Effects of ITC Claims that are Wrongly Made
Making claims for ineligible or excess ITC may have severe repercussions, such as the reversal of credit, interest charges, and penalties. Suspension or cancellation of GST registration can also result from non-compliance over a period.
Given the high volume of transactions in eCommerce businesses, maintaining accurate records and ensuring compliance becomes even more critical.
Conclusion
Yes, e-commerce sellers are allowed to claim Input Tax credit, provided they are registered under GST and meet the terms stipulated by law. ITC is essential for minimising operational costs and enhancing cash flow for online vendors.
But with the presence of the eCommerce operators, TCS provisions and multiple transactions, compliance may be complex. Maximising ITC benefits without staying out of the regulations requires proper documentation, timely filing of returns and frequent reconciliation. Professional advice should assist e-commerce sellers in not going wrong and maximising the GST system.
