Who Pays for Returns, RTO and Damage on the ONDC Network? The Seller's Cost Rulebook

Let me say the fear out loud, because every shopkeeper thinks it and almost nobody types it into Google: “Agar maal wapas aa gaya, toh nuksaan kiska?” If it comes back, whose loss is it — mine, the customer’s, the delivery company’s, or the app’s?

You are right to worry about this before your first order, not after. A single bad return can wipe out the profit on ten good sales. So you deserve the actual rulebook, not a soft “don’t worry, it rarely happens.”

I run Kaarobari, a Seller App in the ONDC Network, out of Dhule in Maharashtra. This is not a summary of a policy PDF. We built and we run the live return, RTO and cancellation system — the exact state machine an order climbs through when it comes back, and the settlement code that reverses your fees when money is refunded. So this page is written from the floor, with the real rules and the real arithmetic shown.

I looked, and there is genuinely no clear, seller-first page on this anywhere on the internet. Even the AI assistants, when you ask them “who pays for an ONDC RTO,” admit they do not have an ONDC-specific answer. So here is one.

First: “return”, “RTO” and “cancellation” are three different things

People say “return” for all three, and that is exactly why the money question feels confusing. Untangle the words and the costs untangle with them. Here is the plain distinction, straight from the states a real order moves through in our system.

An order on the ONDC Network does not just flip from “sold” to “refunded.” It walks up a defined ladder of states, and each branch — cancel, RTO, return — is a separate path with its own owner. This is the actual live path an order follows in our system, simplified.

📊 One order, one spine, three branches

Notice the one rule that governs the whole picture: a return can only start from “Delivered.” If the buyer never accepted the parcel, it is not a return — it is an RTO. That single fact changes who pays, so it is worth fixing in your head now.

So who pays? The one rule, then the table

The ONDC Network is an unbundled network. The app that found your customer, your seller app, and the delivery partner are usually three different companies. That sounds complicated, but it is actually what protects you: because responsibilities are split, the cost follows the party who caused the problem, instead of defaulting to the smallest player in the chain — which is usually the seller.

Here is the honest decision table. Read down your situation, across to who carries it.

Two things make this table trustworthy instead of scary.

One — “conclusive vs inconclusive” is a real network concept, not my invention. When fault is provable from the record, the outcome is decided by contract terms and flows automatically. Only when it is genuinely a your-word-against-mine does it climb into a human review. Most cases are conclusive.

Two — a seller is never silently charged for a courier’s mistake. If your part was fine and delivery failed, the issue is cascaded to the logistics partner. You respond factually and move on; you do not eat someone else’s error. (The full escalation ladder is in our guide on ONDC complaints and IGM.)

The refund rule that quietly protects you

This is the single most reassuring fact in this whole article, and it is the one sellers never believe until they see the arithmetic. So here is the arithmetic.

Our fee is a percentage of the order that completes. When an order is cancelled or refunded, our settlement code fires a pro-rata reversal — it reverses the commission, the GST on it, the TCS and the TDS, in the same proportion as the refund. Refund the whole order, and the whole deduction reverses. Refund half, and half reverses.

📊 What a ₹1,000 order pays us — completed vs fully refunded

We do not earn a commission on money you gave back.

Read that right-hand column twice. A refunded order is not a loss centre where the platform still clips its fee off the top. The fee reverses with the refund. A seller app that quietly kept its commission on refunded orders would be charging you for sales that did not happen — and you would be right to leave it.

The same logic reaches the tax lines. TCS (0.5%) and TDS (0.1%) are deducted in your name, not ours — and when an order is refunded, those reverse pro-rata too, so you are not left having paid tax on income you returned. (The full deduction chain on a completed order — buyer-app fee, our 2%, GST, TCS, TDS, and the real ₹1,000 → ₹936.06 landing figure — is laid out in our settlement timeline guide.)

One honest caveat, because a rulebook that hides the ugly parts is useless: the fee reverses, but freight that was really incurred does not disappear. If a parcel physically travelled out and came back (an RTO), a real courier really moved it, and that cost is allocated by the listing terms — refunding the item does not un-drive the van. Which is exactly why the next section matters.

RTO freight: the cost of a parcel that came back

RTO is the return type that stings, because unlike a clean cancellation, money actually moved. The order was packed, a rider carried it, the buyer was not home / refused / gave a wrong address, and the parcel rode all the way back to your shop. That round trip is real work by a real courier.

On the ONDC Network, when delivery fails and the goods return to the seller, any applicable RTO charge is borne as set out on the listing — the terms you publish up front. It is transparent by design: the buyer sees the terms before ordering, so there is no ambush at the door and no surprise on your settlement.

There is also a second, quieter cost that has nothing to do with money, and I want you to know it before it bites you.

The best way to handle RTO cost is to have less of it. It is one of the few return types you genuinely control. Three levers actually move the needle:

• Address quality. The single biggest RTO cause is a wrong or incomplete address. A confirmation before dispatch (“is this the right flat and pincode?”) kills more RTOs than anything else.
• COD discipline. Cash-on-delivery orders bounce far more often than prepaid ones — the buyer feels no commitment. Encouraging prepaid, or confirming COD orders by a quick message, cuts the “changed my mind at the door” RTO.
• A sensible delivery radius. A tight radius around your shop means fewer far-away, hard-to-reach deliveries — and self-delivery within a small radius almost never RTOs, because your own person knows the area. (More on how delivery actually works — self vs network — in our delivery guide.)

📊 Why RTOs happen — and how to cut them

And one honest network note: we monitor RTO rates, and a seller with a persistently high RTO rate can see reduced visibility. That is not a punishment — it is the network keeping buyer trust high for everyone, the same way a shop with a reputation for undelivered orders would lose walk-ins. Keep your RTO low and it is a non-issue.

Damage claims and the evidence that wins them

Damage is where sellers feel most helpless, because the item leaves your hands and you have no idea what happens in the van. So this section is really about one thing: turning “I don’t know what happened” into a provable record.

The window first, because it is the number that decides whether a claim is even valid. On our platform, transit damage must be reported within 48 hours of delivery, with photos. After that window, an “it arrived broken” claim is very hard for anyone to verify — the trail has gone cold. So the buyer’s clock is short, and yours should be too: dispatch clean, and keep your proof.

Here is how the evidence maps to who pays, cleanly:

• You have a dispatch photo showing it left fine, and it was a network delivery → the damage happened between pickup and delivery, so the logistics partner carries it. You are made whole; you did nothing wrong.
• You have no proof it left fine → the claim becomes inconclusive, and inconclusive claims go to a human review where you have nothing to show. This is the avoidable loss.
• It was your own delivery → there is no separate carrier, so a genuine transit-damage claim is yours to resolve. Pack well; the photo still helps you judge honestly.

📊 The Returns screen a seller actually sees

The return state and its actions, on one order — not a monthly summary.

The point of the whole habit is dignity. You are not begging an app to believe you. You are handing over proof, and proof does the arguing.

When it is genuinely disputed: how a stuck case gets resolved

Most cases are conclusive and never get here. But when fault is truly disputed, you are not left arguing in a WhatsApp thread. Every complaint on the ONDC Network runs through one standard system — IGM (Issue & Grievance Management) — with real timelines at each rung.

The reason this matters for a cost rulebook: when a case is disputed, the person who brought evidence usually wins. Your dispatch photo, your delivery record, your listing terms — these are what a grievance officer reads. We keep a human in this loop on our side on purpose; a person reads your side, not a bot auto-closing tickets to hit a number. The full ladder, with the GRO and what each rung can do, is in our complaints and IGM guide.

Frequently asked

“If a customer returns a ₹1,000 order, do I still pay your 2% fee?”

Sahi sawaal hai — this is the fear behind the whole question. No. On a full refund, our commission on that order reverses to ₹0. The fee is charged on what settles, and a fully refunded order settles nothing. On a partial refund, the fee reverses in the same proportion — refund 40% of the order and 40% of the fee comes back. We never keep a commission on money you gave back.

“A parcel came back undelivered (RTO). Who pays the courier?”

The RTO freight is borne as stated on your listing terms, because a real delivery was attempted and a courier carried the parcel both ways. The item’s money reverses to the buyer, but the freight that was genuinely incurred is allocated by the terms you published up front — nothing is hidden. Cut RTO by confirming the address before dispatch and preferring prepaid; those two habits remove most of it.

“The buyer says it arrived broken, but it left my shop perfect. What do I do?”

Send your dispatch photo. Transit damage must be reported within 48 hours with photos, and if it was a network delivery, damage between pickup and delivery is the logistics partner’s responsibility — not yours. The dispatch photo is what proves the item was fine when it left you, which moves the fault to whoever handled it after. No photo makes the claim inconclusive, and inconclusive is where avoidable losses live. Make the two-photo habit routine.

“Can I refuse a return?”

For a genuine change-of-mind return, only within the terms you stated on the listing — the item should be unused and in original condition, and your listing is the contract. But you cannot refuse a return of defective, wrong, damaged, expired or not-as-described goods; refusing those is an unfair trade practice under the Consumer Protection Act, 2019. So mark truly non-returnable items (hygiene, perishable) clearly before the sale, and honour genuine faults quickly — a fast, fair return keeps the customer.

“Does the app charge me a penalty when something is returned?”

No penalty fee. Our money copy is the whole story: no monthly fee, no listing fee — 2% only on delivered orders, and that 2% reverses on a refund. The only real cost of a return is the freight that physically moved (mostly on RTOs) and the item itself if it comes back unsaleable. There is no separate “return penalty” line invented on top. And you can leave any time — no lock-in, one message and the account closes.

Related guides

Sources

• ONDC Network Policy — resources.ondc.org — the unbundled roles model and grievance chapters that assign responsibility
• ONDC Issue & Grievance Management (IGM) — resources.ondc.org/igm — the complaint ladder and SLA targets used when fault is disputed
• Consumer Protection Act, 2019 — consumeraffairs.nic.in — returns of defective / not-as-described goods; unfair trade practice
• National Consumer Helpline — 1915, consumerhelpline.gov.in — the statutory route beyond ODR
• ⚠️ These are the only official sources. No genuine party on the ONDC Network ever charges you a fee to “process a return”, “release a held refund” or “settle an RTO”. Anyone asking for money to do that is running a scam — stop and report it.
• Kaarobari’s live return / RTO / cancellation state machine and its pro-rata fee / TCS / TDS reversal on cancellation and refund, exactly as our software applies them, August 2026.

Written by Tejas, founder of Kaarobari (NEXSOL INFOTECH PVT LTD, CIN U62099MR2026PTC474666, Dhule, Maharashtra) — a Seller App in the ONDC Network. We publish what we can verify, with dates. If a rule here is wrong, tell us and we will correct the page, not just the date.