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New online sellers expect each customer payment to land in their bank, but instead see smaller combined credits days later and cannot match them to sales.
The gateway authorises and captures each payment, the aggregator holds funds in escrow, and settlement pays gross captured sales minus fees, GST on fees and netted refunds.
Download the gateway's settlement report for each settlement, with gross, fee, GST, refund and net columns, and keep the agreed fee rate card.
Each bank credit ties to one settlement report whose gross minus deductions equals the credit exactly, and each report row ties to an order.
A payment gateway is the secure checkout that passes your customer’s card, UPI or net-banking details to the banks and tells your website whether the payment worked. The money does not reach your bank at that moment. It arrives later as a settlement, usually one or two working days after the sale, with the gateway’s fee and GST on that fee already taken out.
What happens between the customer clicking Pay and the money arriving in your bank account?
- Checkout. The customer chooses card, UPI, net banking or wallet on the gateway’s page.
- Authorisation. The customer’s bank checks and approves the payment. On cards it blocks the amount.
- Capture. The gateway confirms the payment against your order. Your dashboard shows it as captured.
- Holding. The money reaches the payment aggregator’s escrow account.
- Settlement. On your cycle (T+1, T+2 and so on, counted in working days), the aggregator adds up all captured payments, deducts fees, GST and refunds, and sends one credit to your bank.
- Bank credit. Your statement shows one line under the aggregator’s name, with a settlement reference (UTR).
Steps 1 to 3 take seconds. Steps 4 to 6 take days.
Who holds the money after the customer has paid and before you are settled?
The payment aggregator does, in an escrow account at a scheduled commercial bank. Under RBI’s guidelines, an aggregator must keep merchants’ money in that account, separate from its own funds. So it is held for you, but it is not yet in your bank and you cannot spend it.
This is why your gateway dashboard and your bank never agree on the same day. The dashboard shows what customers paid. The bank shows what was settled.
Worked example: one ₹2,360 card payment
A customer pays ₹2,360 by credit card on Monday. Your agreement charges an illustrative 2 percent fee, settled T+2.
- Fee: 2 percent of ₹2,360 = ₹47.20
- GST at 18 percent on ₹47.20 = ₹8.496, rounded to ₹8.50
- Net settlement: ₹2,360 − ₹47.20 − ₹8.50 = ₹2,304.30
Credited Wednesday, two working days later.
What do the customer, the dashboard and the bank each show?
| Where | What it shows | Amount | Date |
|---|---|---|---|
| Customer’s card statement | Payment to your business | ₹2,360 | Monday |
| Gateway dashboard | Payment captured; later “settled” with fee and GST | ₹2,360 gross, ₹55.70 deductions | Monday, then Wednesday |
| Gateway settlement report | Gross ₹2,360, fee ₹47.20, GST ₹8.50, net ₹2,304.30 | ₹2,304.30 | Wednesday |
| Your bank statement | One credit from the aggregator with a UTR | ₹2,304.30 (plus any other payments in the batch) | Wednesday |
In real life the bank line includes every payment captured that day, so it might be ₹86,412.70, not ₹2,304.30. The settlement report is the bridge between the two.
How should I book it?
On the sale day, record the sale against a gateway receivable account, not the bank. When the settlement arrives, clear the receivable, debit the bank with the net and book the fee as an expense and the GST as input credit, if eligible. The GST on gateway fees is generally claimable when the gateway’s tax invoice carries your GSTIN.
What to read next
- Next in this series: what do authorised, captured and settled mean?
- The settlement step in detail: what is payment gateway settlement?
- A gateway walkthrough for matching credits to orders: Cashfree settlement reconciliation
- When matching becomes daily work: payment gateway reconciliation
Payment-gateway settlement reconciliation is on the TransactIG roadmap.