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Lets say I'm a marketplace owner. I charge a 2% commission for every sale through my marketplace. Suppose a customer place an order for an item which cost 1000INR excluding 5% tax (1050INR Total). Customer pays through the portal. The seller is invoicing the customer. So most of the payments are reached at my marketplace.

So how will the supplier get the money after deducting the commission? Do they need to send an invoice? Will tax will be applicable as its a service?

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To my understanding of what you ask here: The marketplace is responsible to collect taxes only on the money they make from fees & services they provide to their users.

The individual sellers are responsible for promptly complying to tax regulations in regards to those sales, as well as declaring/delivering applicable taxes.

I dont see why you should complicate your situation by attempting to collect VAT from the sellers automatically. You re only selling your customer reach to said sellers for a fee, you re not selling the actual product here. No bigger marketplace Im aware of, including the likes of eBay collect anything like VAT on actual sales.

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