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Reviewed by CA Divyanshu Sengar · Last reviewed 11 October 2026
Start from unit cost and a target markup or margin, add a trade discount and GST, and see the list price, taxable value, GST, invoice amount and the margin you actually earn after the discount.
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Markup measures profit relative to cost: selling price equals cost multiplied by one plus the markup rate. Gross margin is profit divided by selling price: selling price equals cost divided by one minus the target margin rate. A 25% markup on ₹800 yields ₹1,000, but its gross margin is only 20%. Confusing these denominators is a common cause of product underpricing.
For a typical unrelated-party supply with price as the sole consideration, section 15 starts from the transaction value. GST charged on the invoice generally does not itself form operating profit; it is collected and settled subject to the applicable tax rules. This model applies an illustrative GST rate after a price discount and displays taxable value and total separately. The legally correct rate and classification must be independently verified.
Suppose unit cost excluding recoverable GST is ₹800 and a manager targets a 20% gross margin. The starting list price is ₹1,000. A 5% price discount reduces taxable sale proceeds to ₹950, and realised gross profit falls to ₹150, or about 15.79% of sales. At an illustrative 18% GST rate, the invoice amount becomes ₹1,121. GST changes the customer’s amount due, not the cost-based gross margin in this example.
Confirm costs include all relevant variable overheads, freight, returns, payment fees and discounts. Check if GST paid on input costs is recoverable; unrecoverable GST becomes part of cost. Products sold to related parties or through special valuation rules can require different tax values. The calculator is not a substitute for a full pricing strategy or CBIC rate notification.
A price above purchase cost may still be commercially unattractive when packaging, payment gateway charges, expected returns, delivery and customer acquisition cost are omitted. A contribution-margin model should include all variable costs expected per successful fulfilled order. For a discount campaign, compare the amount earned after promotional offers with the cost of fulfilling the discounted order. This calculator is a unit-level starting point, not a complete product profitability or channel commission waterfall.
A GST rate is not determined by the price of an item. Confirm HSN/SAC, applicable exemption, cess, bundled-supply classification and inter-state versus intra-state treatment. Time-of-supply and tax-invoice details may require a separate compliance determination. If the transaction is a special related-party transaction, reverse-charge service, or a supply where consideration is not wholly monetary, the standard transaction-value assumption may not apply. Use the output as a commercial pricing scenario until classification is documented.
Markup is profit as a percentage of cost; margin is profit as a percentage of the selling price. A 25% markup equals a 20% margin.
A discount reduces the selling price without reducing cost, so the same rupee profit is a smaller share of a smaller price, and the profit itself falls.
This tool builds tax-exclusive prices; divide a tax-inclusive amount by 1 plus the rate before margin analysis.
Profit is divided by selling price for margin and by cost for markup.
No; the chosen rate is only an input, not a legal classification.
Rates and rules were checked against these sources on 11 October 2026. Notifications and standards change; confirm on the official site before you file, book or advise.
Educational working tool. Results follow the scope and assumptions above and the figures you enter; they are not tax, audit, legal or accounting advice. Tax and accounting treatment depends on facts and on the law or standard in force for the relevant period, so verify the official source or consult a professional before you rely on a result.
Background, worked examples and the rules behind these numbers.