How to work out your real profit on each marketplace order

1. Start with the price without GST

The price a buyer pays includes GST, but that GST is collected on the government's behalf. You pass it on when you file your return, so it is not your revenue. Divide the price by 1 plus the GST rate to get what is yours.

Our example sells for ₹1,180 at 18% GST. ₹1,180 ÷ 1.18 = ₹1,000. The other ₹180 belongs to the government.

2. Take off what the product cost you

Use the full cost of getting it ready to sell: what you paid the supplier, plus freight in and any packaging, not only the supplier's invoice. In the example it is ₹450.

3. Take off the marketplace charges

Marketplaces usually charge a percentage of the price (commission, sometimes a collection or payment fee) and one or more fixed amounts (a closing fee, pick-and-pack). Add them all up for the product, from the fee card or a recent settlement. In the example that is 15% of ₹1,180 plus ₹20, which is ₹197. Shipping you pay comes off here too: ₹60.

These charges carry 18% GST of their own. If you are registered for GST you can normally claim that back as input tax credit, so it does not reduce your profit. If you cannot claim it, it does, and you should count it as a cost. Check which applies to you with your accountant.

That leaves ₹1,000 − ₹450 − ₹197 − ₹60 = ₹293 on a unit the buyer keeps.

4. Count the returns

This is the one that surprises people. A returned unit earns nothing and still costs you: the shipping to get it back, and the product itself if it comes back damaged or cannot be resold. Spread that over everything you sell.

In the example 10% of units come back, each costing ₹80 in shipping, and 30% of those cannot be resold. Over every unit sold, returns take ₹50.80 off. Your real profit per unit is ₹242.20, not ₹293. This guide assumes the marketplace refunds its charges on a returned unit; that depends on the marketplace and the reason for the return, so check your own settlements.

5. What a per-unit sum leaves out

• Advertising on the marketplace, which is usually billed separately from fees.
• Storage and fulfilment charges, and anything the marketplace deducts as a penalty or adjustment.
• Tax withheld from your payouts. Marketplaces collect or deduct tax at source from what they pay you. That is not an extra cost, because it is credited against your tax later, but it changes how much cash arrives and when.
• The GST you owe on the sale itself. You collected it from the buyer; you pay it over. It is not profit, which is why step 1 removes it.

6. Check the estimate against what you were paid

A sum like this is a plan. The truth is in the settlement report the marketplace sends you. If your estimate says you should have received one amount and the payout is lower, the difference is where money is leaking: a fee that is higher than you assumed, returns above your guess, or deductions you did not know about. Doing that comparison order by order is slow by hand, which is why people stop doing it.