How to calculate your real profit per order
Most sellers look at selling price minus product cost and call it margin. Here is the full calculation, step by step, with a worked example.
Ask ten sellers what their margin is and most will do the same sum in their head: selling price minus what they paid for the product. A ₹999 product that costs ₹380 feels like ₹619 of margin.
The real number is usually less than a quarter of that. This guide walks through every deduction between the price a customer pays and the money that actually stays with you.
The six things that come out of every sale
Every marketplace order loses money to the same six buckets. The amounts change by marketplace and category, but the buckets do not.
- GST on the sale. The customer’s price includes GST. That part goes to the government.
- Marketplace fees. Commission or referral fee, a fixed or closing fee, and shipping or weight handling.
- GST on those fees. Marketplaces charge 18% GST on their fees. You can usually claim this back.
- Product cost. What one unit costs you, landed at your warehouse.
- Packaging and ads. The box, the tape, the label, and the ad spend each order has to carry.
- Returns. Reverse shipping, damaged stock and the orders that never get delivered.
Step 1: Take GST out first
This is the step most people skip, and it is the biggest single mistake.
If your product is in the 18% GST slab and sells for ₹999, the ₹999 already includes GST. To find your actual revenue, divide by 1.18.
₹999 ÷ 1.18 = ₹846.61. The other ₹152.39 was never yours.
If you are GST registered and buy your stock with a GST invoice, you claim credit for the GST you paid on purchases. That is why we use product cost excluding GST later. If you are not registered, use the full price you paid, GST included.
Step 2: Subtract marketplace fees
Fees usually have three parts:
- Commission or referral fee: a percentage of the selling price. It depends on your category and often on the price band.
- Fixed or closing fee: a flat amount per order, often tiered by price.
- Shipping or weight handling fee: depends on the weight of the package and how far it travels.
Using example rates of 12% commission, a ₹25 fixed fee and ₹65 shipping:
| Fee | Amount |
|---|---|
| Commission (12% of ₹999) | ₹119.88 |
| Fixed fee | ₹25.00 |
| Shipping | ₹65.00 |
| Total fees | ₹209.88 |
The marketplace adds 18% GST on top of this. If you claim input tax credit, you get that GST back, so it is not a real cost. If you don’t, add it: ₹209.88 × 1.18 = ₹247.66.
Check your own rates These are example numbers. Your real commission, fixed fee and shipping depend on category, price, weight and fulfilment method. Find them in the fee preview or rate card inside your seller dashboard.
Step 3: Subtract product cost and packaging
Use the landed cost of one unit: purchase price plus inbound freight, divided by units. If you claim GST credit, use the cost before GST.
In our example the product costs ₹380 and packaging costs ₹18.
Step 4: Give ads their fair share
This is where good-looking products start losing money.
Take your total ad spend for the month and divide it by all orders for that product in the month, not just the orders the ad report says came from ads. Organic orders often exist only because ads pushed the product up the rankings, so they should share the cost.
If you spent ₹9,000 on ads and sold 100 units, each order carries ₹90 of ad cost.
Step 5: Spread the cost of returns
Returns hurt in two ways: the reverse shipping fee, and stock that comes back damaged or unsellable. Orders that are never delivered (RTO) cost you shipping both ways.
The fair way to count it is to spread returns across every order:
Return rate × average cost of one return = return cost per order
At an 8% return rate and ₹120 per return, every order carries ₹9.60.
The full calculation
| Line | Amount |
|---|---|
| Customer pays | ₹999.00 |
| GST to government (18%) | −₹152.39 |
| Marketplace fees | −₹209.88 |
| Product cost | −₹380.00 |
| Packaging | −₹18.00 |
| Ads per order | −₹90.00 |
| Returns per order | −₹9.60 |
| You keep | ₹139.13 |
That is a 13.9% margin, not the 62% it looked like at the start.
Two numbers worth tracking every month
Maximum ad spend per order. Add your ad cost back to your profit: ₹139.13 + ₹90 = ₹229.13. That is the most you can spend on ads per order before the product loses money. If your ad cost per order is creeping towards it, act before it crosses.
Marketplace take rate. Fees divided by selling price. Here it is 21%. If this jumps after a fee change or a price drop, your pricing needs a second look.
What about TCS and TDS?
Marketplaces deduct TCS under GST and TDS under income tax from your payouts. At the time of writing these are 0.5% and 0.1%. They reduce your payout, but they are not costs. Both show up as credits you can claim against your tax, so leave them out of profit calculations. Just make sure your accountant claims them.
Do this for your own products
Run your top five products through the profit calculator. It does every step above as you type. Most sellers find at least one product that is earning far less than they thought, and occasionally one that is losing money on every order.