A customer in Pune pays ₹2,625 for two kurtas on your Shopify store. Three days later your bank shows ₹2,563 from the payment gateway. The ₹62 gap is the gateway's fee plus 18% GST on that fee, and how you book that gap decides whether your GSTR-1, your ITC and your profit are right.
The short answer: record every Shopify order at its full invoice value, treat the gateway as a party that owes you money, and book its fee as an expense with input tax credit. The bank credit is a receipt, not a sale. Most of the errors we see in D2C books come from skipping that middle step.
This guide walks through GST registration, invoicing, gateway fees, COD remittances, Shopify's own bill and a month-end routine, with one month of numbers worked out in full.
Do you need GST registration to sell on your own Shopify store, and is TCS collected?
If you sell goods to customers in other states, yes, from the first sale. Section 24(i) of the CGST Act makes registration compulsory for anyone making an inter-state taxable supply, whatever the turnover. A Shopify store that ships across India is making inter-state supplies the day a parcel leaves your state. You can read the section on the CBIC tax information portal.
You may have heard that small online sellers can now skip registration. That relief (Notification 34/2023-Central Tax) covers only sellers supplying through an e-commerce operator, within one state, with an enrolment number. It does not cover sales on your own website, and it does not allow inter-state supplies at all.
If you only ever deliver within your own state, the normal turnover thresholds apply.
One more difference from marketplaces: on Amazon, Flipkart or Meesho the marketplace collects the money and deducts TCS under Section 52. On your own store, money goes from the customer to your gateway and then to your bank, and Shopify never collects your sale proceeds. We have not found any CBIC circular treating Shopify or a payment gateway as an e-commerce operator for Section 52, so do not expect GST TCS credits for Shopify sales. If you also sell on marketplaces, keep the channels separate; our guide to reconciling Amazon, Flipkart and Meesho settlements covers that side.
How should you invoice and charge GST on Shopify orders?
Every order needs a tax invoice (or a bill of supply if you sell exempt goods). Three points trip people up.
Place of supply follows the delivery address. For goods, Section 10(1)(a) of the IGST Act puts the place of supply where the movement of goods ends. A Gujarat seller shipping to Maharashtra charges IGST; shipping to Vadodara means CGST plus SGST. Your Shopify tax settings must pick this up from the shipping address, not the billing address.
Shipping you charge is part of the sale. Delivery charges collected from the customer are an incidental expense under Section 15(2)(c), and goods sent with transport are a composite supply taxed at the rate of the goods. If a kurta is taxed at 5%, the ₹100 shipping on that order is taxed at 5% too, not 18%.
Watch the rate line on apparel and footwear. Since 22 September 2025, apparel and footwear up to ₹2,500 per piece or pair are taxed at 5%, and above that at 18%. Discount codes and bundles can move a product across that line, so check that your tax settings apply the rate to the actual value of each piece. For borderline SKUs, ask your CA how your discounts should be treated.
How do you record payment gateway fees and settlements?
Create a ledger for each gateway (for example "Razorpay Clearing") under current assets. Then post four kinds of entries:
Sale: debit the gateway clearing ledger, credit sales and output GST, at full invoice value.
Refund: issue a credit note, debit sales returns and output GST, credit the gateway clearing ledger.
Fee: debit gateway charges and input GST, credit the gateway clearing ledger. Gateway fees fall under financial services taxed at 18%, and the gateway issues a tax invoice for its charges. Make sure it carries your GSTIN so the credit shows in your GSTR-2B.
Settlement: debit bank, credit the gateway clearing ledger, for the amount that actually arrives.
If everything is booked, the clearing ledger at month-end equals only the money still in transit: orders from the last few days that the gateway has not yet settled. A clearing balance that keeps growing month after month means something is missing.
A worked example: one month of Shopify sales
Say you run an ethnic-wear brand in Surat selling kurtas on Shopify, all taxed at 5%. In October your prepaid orders through the gateway total ₹4,72,500 including GST. During the month you refund ₹12,600 to customers who returned goods. The gateway charges 2% on collections (an illustrative rate; check your own agreement).
Item | Working | Amount (₹) |
|---|---|---|
Gross collections (incl. GST) | Shopify sales report | 4,72,500 |
Taxable value of sales | 4,72,500 ÷ 1.05 | 4,50,000 |
Output GST on sales | 4,50,000 × 5% | 22,500 |
Refunds (incl. GST) | Credit notes: 12,000 + 600 GST | 12,600 |
Gateway fee | 4,72,500 × 2% | 9,450 |
GST on gateway fee | 9,450 × 18% | 1,701 |
Net settled to bank | 4,72,500 − 12,600 − 9,450 − 1,701 | 4,48,749 |
Correct books show sales of ₹4,50,000, sales returns of ₹12,000, net output GST of ₹21,900, gateway charges of ₹9,450 as an expense and ₹1,701 as input tax credit. The clearing ledger nets to zero: 4,72,500 less 12,600, less 11,151, less 4,48,749.
Now the common shortcut. If your accountant books the bank credit of ₹4,48,749 as "sales", three things go wrong. Turnover in the books is lower than the invoices Shopify generated, so your GSTR-1 and your books will not agree. The ₹1,701 credit on the gateway invoice is never claimed. And because the fee is buried inside sales, your margin report hides what payments are costing you. Over a year, on these numbers, that is more than ₹20,000 of unclaimed credit alone.
What about COD orders and courier remittances?
Cash-on-delivery money comes back through your courier or shipping aggregator, in batches, often with freight and COD charges deducted. Treat the courier exactly like a gateway: one clearing ledger, the sale debited to it when invoiced, the remittance credited when it arrives, and the courier's own tax invoice booked separately as freight with input GST.
Two COD-specific problems need a fixed process:
Returned to origin (RTO). If the customer refused the parcel, you have issued an invoice for a supply that did not complete. Issue a credit note, bring the stock back in, and reverse the courier clearing entry. Section 34 lets you declare credit notes up to 30 November after the end of the financial year (or the annual return date, if earlier), but leaving them that long distorts every monthly GSTR-1 in between.
Short remittances. Match each remittance to order numbers, not to a total. A delivered order with no remittance after the courier's normal cycle is a receivable to chase, not a write-off.
How do you account for Shopify's own bill and your ad spend?
Shopify bills Indian stores for the plan, apps and other charges. According to Shopify's help centre, stores in India are charged GST on these fees unless they add a GSTIN in billing settings, after which GST is not charged on later invoices (earlier GST is not refunded). Shopify does not explain the tax treatment beyond that.
In our view, once you add your GSTIN, the subscription is an import of services and you pay IGST on it yourself under reverse charge in GSTR-3B, then claim the same amount as ITC in that return. It is usually cash-neutral, but it must be reported. If you have not added a GSTIN, the GST Shopify charges is a cost you cannot claim.
Google Ads in India are billed by Google India with GST at 18%, and Meta bills Indian advertisers through its local entity with Indian GST. Add your GSTIN to both ad accounts so the invoices are in your business name and the credit reaches your GSTR-2B. The equalisation levy that once applied to online advertising was withdrawn from 1 April 2025, so there is nothing to deduct on these payments.
How do you report Shopify sales in GSTR-1?
Most D2C customers are unregistered, so your sales go into the B2C tables:
Table 5 (B2C Large): inter-state invoices to unregistered buyers above ₹1 lakh each. The limit was cut from ₹2.5 lakh by Notification 12/2024-Central Tax, applied on the portal from the August 2024 period.
Table 7 (B2C Others): everything else, summarised state-wise and rate-wise. This is where most Shopify sales sit, and where wrong place of supply shows up.
Credit notes: returns against B2C Others sales are netted in Table 7; credit notes to registered buyers, or against B2C Large invoices, go in Table 9B.
Table 4: any orders from GST-registered businesses who entered their GSTIN at checkout. Do not lump these into B2C, or the buyer loses their credit.
A month-end routine for Shopify sellers
Export the month's orders from Shopify and agree the invoice total with sales in your books.
Download each gateway's settlement report and fee invoice. Post fees with input GST and confirm the clearing balance equals unsettled orders only.
Match COD remittances to delivered orders and list anything older than the courier's cycle.
Raise credit notes for refunds and RTOs in the same month, with stock taken back in.
Book Shopify, app and ad invoices, including any reverse charge entry.
Check the state-wise B2C summary against shipping addresses before filing GSTR-1, then file GSTR-3B.
Where hisabkitab fits in
The Shopify connection in hisabkitab brings your store's orders into your books so you are not retyping invoices, and AI OCR reads bank statements so settlement and remittance credits can be posted without manual entry. From there you file GSTR-1 and GSTR-3B, reconcile GSTR-2B so gateway and ad invoices are not missed, and use outstanding reports to see which gateway or courier still owes you money.
If you sell on marketplaces as well, the same books handle Amazon, Flipkart and Meesho settlement uploads with commission, returns and TCS tracking. See the e-commerce accounting features, or our guide on tracking profit across Amazon, Flipkart, Meesho and Shopify.
Frequently asked questions
Should I record Shopify sales at the gross amount or the amount received in the bank?
At the gross invoice value. The gateway fee is a separate expense with its own GST invoice, and the bank credit is a receipt against what the gateway owes you.
Can I claim ITC on payment gateway charges?
Yes, if the gateway's tax invoice carries your GSTIN and the charges are for your business. The credit appears in GSTR-2B once the gateway reports the invoice.
Is GST TCS deducted on my own Shopify store sales?
Not in the normal setup, because Shopify does not collect your sale proceeds. TCS applies when you sell through a marketplace that collects payment on your behalf.
Do I need to issue e-invoices for Shopify orders?
E-invoicing applies to B2B invoices once your turnover crosses the notified limit. Sales to consumers are outside it, but orders from registered businesses may need an IRN.
What GST rate applies to shipping charges on my orders?
The same rate as the goods in the order, because shipping charged by you is part of the value of a composite supply of goods.
How do I handle RTO parcels in GST?
Issue a credit note against the original invoice, take the stock back, and report the credit note in GSTR-1 for the month the parcel returned.
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