Marketplace, Inventory and Aggregator: Three Models, Three GST Outcomes

Marketplace explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

Two platforms can look identical to a customer and sit in entirely different places under GST. The model decides everything downstream — who raises the invoice, who is liable for the tax, who can take input tax credit, and whether the platform is a collector or a deemed supplier.

In the marketplace model the sellers invoice the customers, the ECO earns listing fees, advertising, logistics and commission, and the ECO collects TCS but cannot claim ITC on the goods because it never buys them. In the inventory model the ECO buys the stock, invoices the customer in its own name, and sits fully in the credit chain — claiming ITC on inward supply and using it against its own output tax. In the aggregator model, for services notified under section 9(5), the ECO is the deemed supplier: it invoices, pays the tax entirely from the electronic cash ledger, and takes no credit for it — while retaining its ITC for use against its own commission and platform fees.

The marketplace model

Sellers register on the platform to list products or services. The Handbook's description of what the ECO is and is not doing is the analytical core:

• The ECO's intent is to facilitate the transaction between supplier and customer, without holding any inventory.
• Pricing is determined by the supplier; the ECO has no control over it — though additional or special discounts may be given by the seller in consultation with the ECO to boost sales in a period.
• The model adds value in catalogue (options), convenience (delivery to suit the customer) and cost (many price points).
• Revenue comes from listing fees, advertisement, logistic fees, warehousing charges and commission.
• The invoice is raised by the supplier, and returns are managed by the supplier.
• Payments are routed through the ECO — which is what brings section 52 into play.

The credit consequence is the point that separates this model from the next. The ECO never purchases the goods, and therefore cannot claim ITC on them. Its credits relate to its own inputs, used against its own output tax on commission and fees.

One structural feature deserves attention: goods owned by sellers are often stored in warehouses owned by the ECO, and when goods are dispatched "the invoice is issued in the name of seller mentioning their particular GSTIN which is practically issued by ECO himself from those warehouses/godowns." That arrangement carries its own registration requirement. Warehouses and the additional place of business →

The inventory model

Here the platform is a trader that happens to sell online. The Handbook's markers:

• The ECO maintains the inventory, based on demand and supply trends it analyses.
• Pricing, offers, discounts and promotions are decided purely by the ECO; the supplier has no say.
• Returns of defective goods are handled directly by the ECO.
• Revenue is the margin on sale, plus advertisement and promotions carried out for brands.
• The ECO raises the invoice and collects the payment directly.

The ITC flow is what the Handbook calls "a fundamental distinction… crucial for professionals to understand":

1. Inward supply to the ECO. The manufacturer or distributor sells to the ECO — a B2B transaction, with a tax invoice in the ECO's name. The ECO, as recipient, claims ITC subject to section 16.
2. Outward supply by the ECO. The ECO sells from its own stock, issues its own tax invoice, charges GST, and uses the accumulated ITC to discharge that output tax.

"This seamless flow of credit is a hallmark of the inventory model and distinguishes it from the marketplace model, where the ECO does not purchase the goods and hence cannot claim ITC on them."

Note what falls away here. There is no other supplier making supplies through the platform in respect of that stock, so there is no TCS to collect on it — the ECO is the supplier, not a collector. A hybrid platform running both models must keep the two books apart.

The aggregator model

Businesses that gather individuals or businesses willing to supply services through the platform. The Handbook's markers:

• The aggregator does not provide the services directly but is responsible for facilitating the transactions through the platform.
• Revenue comes from platform fees or commissions from vendors and convenience or booking fees from customers.
• The aggregator is responsible for keeping the customer experience uniform across all services under its brand, by onboarding the right providers against parameters and terms of delivery — which maintains consistency and supports expansion with predictable service levels.
• The aggregator does not own the services and bears no risk for damage or deficiency — though its reputational risk is engaged.

And then section 9(5) changes everything. For notified categories of services, section 9(5) "shifts the responsibility of paying GST from the actual service provider to the Electronic Commerce Operator."

A. The deemed supplier provision

For notified services — passenger transportation, accommodation in hotels and inns, restaurant services — the ECO is treated as the deemed supplier. "This means the aggregator, not the driver, hotel, or restaurant, is liable to collect GST from the customer and remit it to the Government on the full value of the service."

B. No reversal of common ITC

Per Circular No. 167/23/2021-GST, the ECO is not required to reverse ITC on its common inputs and input services — marketing expenses, platform maintenance costs — used to facilitate section 9(5) supplies. The Handbook calls this "a specific exception to the general rules of ITC apportionment."

C. Payment in cash only

"The entire GST liability arising from the supplies made under Section 9(5) must be discharged by the ECO through its Electronic Cash Ledger only. The ITC available in the ECO's Electronic Credit Ledger cannot be utilized to pay this specific tax liability." The Handbook flags the commercial consequence: a direct impact on the working capital and cash flow management of the aggregator.

D. The ITC is not lost

It cannot be used for the 9(5) liability, but it is not forfeited. The ECO's ITC can be used against the GST on its own taxable supplies — the commission, platform fees or convenience fees it charges to vendors or customers.

The Handbook names the result: a "dual compliance structure — paying one liability in cash and another through ITC". That is the single most important sentence for anyone modelling an aggregator's cash flows.

Reading the three side by side

The last row is the same in all three, and it is the one that survives every model change: an ECO always takes credit on its own inputs against its own commission and fee income.

Key takeaways

• In a marketplace, the supplier invoices and is liable; the ECO collects TCS and has no ITC on the goods.
• In an inventory model, the ECO is a trader in the credit chain — ITC on inward supply, own invoice on outward supply.
• In an aggregator model, section 9(5) makes the ECO the deemed supplier on the full value of the notified service.
• Circular No. 167/23/2021-GST: no reversal of common ITC for facilitating 9(5) supplies.
• The 9(5) liability is payable from the cash ledger only — a real working-capital cost.
• The ECO's own ITC survives and is used against commission, platform and convenience fees.
• Hybrid platforms must separate the books, because the models produce opposite credit outcomes.

Read next

• Section 9(5): The Deemed Supplier, and Why It Is Not Reverse Charge
• Warehouses, "Fulfilled by ECO" and the Additional Place of Business
• Circular 240/2024: Cash Ledger Only, and No ITC Reversal

Disclaimer: Positions stated as on 5 September 2026, based on sections 9(5), 16 and 52 of the CGST Act, 2017 and Circular No. 167/23/2021-GST, as reproduced in the ICAI Handbook on E-Commerce Operators under GST (updated to 15 December 2025).