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A junior accountant cannot tell which gateway charges were already taken out of settlements and which arrive on invoices, so some fees get booked twice and others are missed.
Transaction-linked fees are normally netted in the settlement and covered by a monthly tax invoice that is not paid again; fixed or periodic fees are often invoiced and paid separately. The agreement decides.
The gateway agreement fee schedule, monthly settlement reports with fee columns, the gateway's monthly tax invoice and any separate fee invoices.
Each fee line is tagged as netted or invoiced, booked once, and the monthly tax invoice is reconciled to the fees actually deducted.
Transaction-linked fees, such as MDR (merchant discount rate) and the GST on it, are normally netted off in the settlement: the gateway keeps them before paying you. Setup, annual or add-on fees are often billed on a separate invoice that you pay. Your gateway agreement says which applies to each charge.
Which charge usually goes where?
| Charge | Usually netted or invoiced | Where to see it | How to book it |
|---|---|---|---|
| MDR on each payment | Netted from settlement | Fee column in settlement report | Expense: gateway charges |
| GST on MDR (18 percent) | Netted from settlement | Tax column in settlement report | Input tax credit |
| Instant settlement fee | Netted from settlement | Separate fee line | Expense, plus GST as input tax |
| Refund processing fee | Netted, if charged | Refund lines | Expense |
| Chargeback or dispute fee | Netted, if charged | Dispute lines | Expense |
| Setup or onboarding fee | Often invoiced | Separate invoice | Expense or as your accountant advises |
| Annual maintenance fee | Often invoiced | Separate invoice | Expense |
| Minimum commitment shortfall | Often invoiced | Separate invoice | Expense |
This table describes common practice, not a rule. Some gateways net annual fees from a settlement; some invoice even per-payment fees for large merchants. Your agreement wins.
How do I know which of my gateway’s charges are already inside the settlement?
- Open the fee schedule in your merchant agreement. It usually says “deducted from settlement” or “billed”.
- Download one month of settlement reports. Add up every fee and tax column.
- Get the gateway’s monthly tax invoice. For netted fees, the invoice total should match what the reports show as deducted. This invoice is for your GST records; you do not pay it again.
- Any other invoice is a separate bill. Check it is for something not already in the reports.
Can the same charge be taken twice, once in settlement and again on an invoice?
It can, by mistake. Common cases: an annual fee netted from a settlement and also billed; a monthly tax invoice paid as if it were a new bill; or a refund fee charged in the report and again on a service invoice. A simple check each month catches it: every invoice line should be either “not in any settlement” (pay it) or “already netted” (do not pay it).
Worked example: ₹3,00,000 settlement and a ₹2,500 annual fee
In March, a business’s gateway settles payments with gross value ₹3,00,000. The report shows ₹6,000 of fees netted, which already include GST on the fees. Separately, the gateway sends a ₹2,500 annual maintenance invoice plus ₹450 GST.
| Item | Amount |
|---|---|
| Gross payments | ₹3,00,000 |
| Fees netted, including GST | ₹6,000 |
| Bank credit (₹3,00,000 − ₹6,000) | ₹2,94,000 |
| Annual fee invoice (₹2,500 + ₹450 GST) | ₹2,950 to be paid separately |
| Total gateway cost for March | ₹8,950 |
The accountant checks that no ₹2,500 or ₹2,950 line appears inside the March settlements. If it did, the invoice would already be paid and should not be paid again. In Tally, the ₹6,000 is booked when the settlement is recorded, and the ₹2,950 when the invoice is entered as a purchase.
What is a minimum commitment shortfall?
Some agreements promise the gateway a minimum amount of fees each month. If the commitment is ₹10,000 of fees and your actual fees in a slow month are ₹6,000, the gateway may invoice the shortfall of ₹4,000 plus ₹720 GST. It is a real cost, but it is not in any settlement, so it only shows up on the invoice. Check whether your agreement has one before you approve the invoice.
What to read next
- Is GST charged on payment gateway fees and can you claim ITC?
- Platform fee leakage on Razorpay and PayU: spotting double-charged or missing fee lines.
- Platform fee recovery playbook
- Payment gateway reconciliation
Payment-gateway settlement reconciliation is on the TransactIG roadmap.
Content authored by practitioners with experience at Amazon India, Intuit QuickBooks, and the Tata Group. Meet the team →