Margin calculator

Margin or markup: the one mix-up that costs shops money

Both start from the same profit, but they divide it by different things:

• Margin = profit ÷ selling price. It tells you how much of every sale you keep.
• Markup = profit ÷ cost. It tells you how much you added on top of what you paid.

Buy a shirt for ₹500, sell it for ₹800: the profit is ₹300, so the markup is 60% (300 ÷ 500) but the margin is 37.5% (300 ÷ 800). A shopkeeper who “adds 30%” and thinks they earn 30% actually keeps only 23.1% of the price. When a supplier, a bank or an accountant asks for your margin, they mean the share of the price.

To turn a target margin into a price, divide the cost by (1 − margin): a 30% margin on ₹1,000 is ₹1,000 ÷ 0.7 = ₹1,429, not ₹1,300.

GST and discounts

GST is charged on the value after the discount shown on the invoice (the valuation rule in section 15 of the CGST Act). So a 10% discount lowers the GST too, but the whole discount still comes out of your profit, never out of your cost. Since 22 September 2025 most goods sit in the 5% or 18% slab, with 40% for a few luxury and sin goods. The GST you collect isn’t yours: you pay it to the government, less the input credit on your purchases. That is why this tool works out your margin on the price before GST.

Discounts hurt more than they look. If you make ₹300 on a ₹800 sale, 10% off (₹80) cuts your profit to ₹220. You then need about 36% more sales to earn the same money. The Discount table shows this for every discount from 0 to 25%.

Selvam’s hardware shop in Kallakurichi

Selvam buys a pipe fitting kit for ₹500 and sells it for ₹800 plus 18% GST, so the customer pays ₹944. His rent, a helper’s salary and the electricity bill come to ₹30,000 a month.

1. Profit a piece: ₹800 − ₹500 = ₹300, a 37.5% margin.
2. Break-even: ₹30,000 ÷ ₹300 = 100 kits a month, about 4 a day over 26 working days.
3. At his usual 200 kits a month he makes ₹30,000 after fixed costs.
4. During Pongal he plans 10% off. Each kit then earns ₹220, and break-even rises to 137 kits. He needs about 36% more sales just to stand still.

He decides on a smaller 5% offer on slow-moving stock instead. Type his numbers into the tool and drag the discount to see it for yourself.

Selling on a marketplace

Marketplaces and payment gateways take their share from every sale: a commission (often 5–20% of the customer’s price, depending on the category), a payment fee (about 2% for many gateways) and per-order charges for shipping and closing. Turn on Marketplace fees and type the numbers from your seller dashboard. The Selling direct or on a marketplace bars show what the fees take. A margin that looks healthy in your shop can shrink to a few rupees online.

How to use this tool

1. Pick My price, Target margin or My markup.
2. Type the cost per piece. Include freight and packing, and leave out GST you can claim back.
3. That’s enough for your margin. Turn on Add GST, Give a discount, Break-even or Marketplace fees only when you need them.
4. Read the answer and the discount table; with Break-even on, the chart shows where sales cover your fixed costs.
5. Try the goal chips for a kirana shop, a clothes shop, online selling or a 30% target.

Common mistakes

• Pricing with a markup and calling it a margin.
• Working out margin on the price with GST: it makes the margin look bigger than it is.
• Forgetting fixed costs. A healthy margin on each piece can still mean a loss for the month.
• Giving discounts without checking the extra sales they need.