Payment gateway settlement reconciliation is the process of matching the net amount a payment gateway such as Razorpay or PayU deposits into your bank account against the gross value of the orders or invoices that make up that payout, accounting for the gateway's fees, GST on those fees, and any refunds or chargebacks deducted along the way. Because gateways settle in batches, often one or several days after the actual sale, and deduct fees before crediting your account, a payout amount rarely matches any single invoice amount, which is what makes this a distinct reconciliation problem from simple bank reconciliation.
What Is Payment Gateway Settlement Reconciliation?
Payment gateway settlement reconciliation is the process of matching a net settlement payout received from a payment gateway against the gross transaction values, gateway fees, GST on those fees, and refunds or chargebacks that together explain the payout amount. The reconciliation is considered complete only when gross sales minus fees, GST, refunds, and chargebacks equals the amount actually credited to the bank account.
What Is the Difference Between Gross and Net Settlement?
Gross settlement value is the total value of the customer-facing transactions processed by the gateway in a batch, the amount the customer actually paid. Net settlement value is what the gateway actually deposits into your bank account after deducting its fee, the GST charged on that fee, and any refunds or chargebacks processed in the same cycle. A ₹1,00,000 batch of orders rarely results in a ₹1,00,000 bank credit; the credited amount is always the net figure, and the difference must be reconciled line by line rather than assumed to be the gateway's margin alone.
How Are Gateway Fees and GST on Fees Calculated?
Payment gateways charge a percentage-based fee, commonly referred to as the merchant discount rate or MDR, on each transaction, which varies by payment method: cards, UPI, net banking, and wallets are often priced differently. GST applies to this fee at the standard rate for services, since the gateway is supplying a payment processing service. The gateway typically issues its own monthly tax invoice covering the fees charged and the GST on them, which is the document to use for claiming input tax credit, not the settlement report alone, which usually shows only the net fee deduction per transaction or per batch.
| Line Item | What It Represents |
|---|---|
| Gross transaction value | Total amount paid by customers in the settlement batch |
| Gateway fee (MDR) | Percentage-based fee charged by the gateway per transaction, varying by payment method |
| GST on gateway fee | Tax charged on the gateway fee, shown on the gateway's own tax invoice, typically at the standard GST rate for services |
| Refunds processed in the batch | Amounts returned to customers, deducted from the payout before settlement |
| Chargebacks or disputes | Amounts reversed by the customer's card issuer or the gateway following a dispute, deducted from the payout |
| Net settlement amount | Gross value minus fees, GST on fees, refunds, and chargebacks; the amount actually credited to the bank account |
What Does T+n Settlement Timing Mean?
T+n settlement means a transaction completed on day "T" is settled into your bank account "n" days later; for example, T+2 settlement credits Tuesday's transactions on Thursday. Settlement timing varies by gateway, payment method, and the merchant's agreement, and a single day's sales can be split across more than one payout if different payment methods settle on different schedules. This is why a bank credit on any given day rarely equals that same day's sales; it typically reflects sales from a batch of transactions completed a few days earlier.
How Do Refunds and Chargebacks Affect Settlement Reconciliation?
A refund reduces the net settlement amount in the batch it is processed in, not the batch the original sale belonged to, so a refund issued weeks after a sale shows up as a deduction in a much later payout. A chargeback works similarly but is initiated by the customer's bank rather than the merchant, and can be deducted from a payout even before the dispute is fully resolved, with a possible reversal later if the merchant wins the dispute. Both must be tracked against the original invoice so that revenue isn't overstated for a sale that was later reversed.
How Do You Match a Settlement Payout Back to Invoices?
- Download the gateway's settlement report for the payout, which lists every transaction included in that batch along with its fee and GST deduction.
- Match each transaction in the settlement report to its corresponding sale or invoice using the order ID or payment reference.
- Total the gross transaction values, fees, GST on fees, refunds, and chargebacks in the report, and confirm they sum to the net amount credited in the bank statement.
- Record the gateway fee and GST on the fee as a business expense with input tax credit, rather than netting it silently against revenue.
- Flag any transaction in the settlement report with no matching invoice, and any invoice with no matching settled transaction, for follow-up.
This is conceptually the same discipline as preparing a bank reconciliation statement, applied to a gateway payout instead of a plain bank credit: every rupee in the net settlement must be explained by a gross value, a fee, a tax, a refund, or a chargeback.
How Does OneBooks GST Help With Gateway Settlement Reconciliation?
OneBooks GST supports Razorpay-based subscription billing internally and provides bank statement upload and parsing, which turns the net settlement credits appearing in your bank statement into structured, dated transaction rows that can be checked against the gateway's own settlement report and your sales records. OneBooks GST is a GST and accounting platform for Indian businesses that imports marketplace sales from Amazon, Flipkart and Meesho, prepares GSTR-1, parses bank statements, and exports to Tally, Miracle and Profit NX. The same parsed-statement approach is used for matching UPI settlements and other bank credits. OneBooks GST does not currently pull settlement reports directly from payment gateways such as Razorpay or PayU into the platform; the settlement report itself still needs to be downloaded from the gateway's dashboard for the transaction-level fee and GST break-up.
Frequently Asked Questions
What is payment gateway settlement reconciliation?
Payment gateway settlement reconciliation is the process of matching the net payout a gateway such as Razorpay or PayU deposits into your bank account against the gross transaction value, gateway fees, GST on those fees, and any refunds or chargebacks that explain the difference.
What is the difference between gross and net settlement?
Gross settlement is the total value of customer transactions in a batch, while net settlement is the amount actually credited to your bank account after the gateway deducts its fee, GST on that fee, and any refunds or chargebacks processed in the same batch.
Does GST apply to payment gateway fees?
Yes, GST applies to the fee charged by a payment gateway for processing transactions, typically at the standard GST rate for services, and the gateway generally issues its own monthly tax invoice showing the fee and GST separately for claiming input tax credit.
What does T+n settlement mean?
T+n settlement means a transaction completed on a given day (T) is credited to the merchant's bank account n days later, so a bank credit on any date usually reflects sales completed a few days earlier rather than that same day's transactions.
How are refunds handled in settlement reconciliation?
A refund is deducted from the settlement batch in which it is actually processed, which may be weeks after the original sale, so it must be tracked back to the original invoice rather than assumed to reduce the same period's revenue automatically.
Can OneBooks GST reconcile payment gateway settlements automatically?
OneBooks GST parses bank statement PDFs and Excel files into structured transaction rows that show net settlement credits, but it does not currently pull settlement reports directly from gateways like Razorpay or PayU, so the transaction-level fee and GST break-up still needs to be downloaded from the gateway's own dashboard.
