What a return really costs you — and the profit calculator built around it
Revenue counts on the units you kept. Shipping, fixed fees and packaging count on the units you shipped. That one asymmetry is why a loss-making SKU can look healthy in a spreadsheet — and it is the rule the iSellerEngine profit calculator is built around, alongside GST, TCS, TDS and the input-credit trap that once turned a real ₹617 loss into a ₹780 profit.
Three parcels out of forty came back — a 7.5% return rate, the kind of number that barely registers on a dashboard. In the P&L those three parcels are ₹444: shipping out, shipping back, a fixed per-unit fee and packaging, with no revenue against any of it. The iSellerEngine profit calculator is built around that asymmetry, because it is the most expensive thing Indian marketplace sellers routinely get wrong.
What a return actually costs you
A return keeps every forward cost you have already spent, adds the reverse leg on top, and removes the sale that was going to pay for both. The parcel went out, so forward shipping and the fixed per-unit fee were billed and the bag was consumed. Then it came back, and return shipping was billed too.
So the honest way to write the arithmetic is this: revenue counts on the units you kept; fees and packaging count on the units you shipped. Using one unit count for the whole calculation is the shortcut that turns a loss-making SKU into one that looks fine.
Commission is the line that depends on how it is charged. Where it is a percentage of order value — the default in all four presets — the calculator applies it to kept units only. Where it is a flat amount per unit, it lands on every unit shipped, returns included. Check which one your platform applies to a returned order.
Why the unit count decides the answer
The unit count matters because the two counts diverge exactly when you most need the truth. At a low return rate the difference is noise; as the rate climbs — and on sized goods like fashion and footwear it climbs a long way — you pay two shipping legs, a fixed fee and packaging on a growing share of parcels that earned nothing.
The same trap sits inside the per-unit figure, which is why the calculator reports profit per unit kept and not the other way round. Dividing by units shipped spreads a loss across parcels that produced no revenue, and flatters precisely the SKU that is bleeding.
The formula the calculator uses
Profit = (kept × price ÷ (1 + GST rate)) − marketplace fees − (kept × cost) − (shipped × packaging) − ads + TCS and TDS added back. Input GST credit is reported beside that figure, never inside it. Every term is a field you can edit.
- Revenue, on units kept Sold minus returned, times price, divided by (1 + your GST rate).
- Marketplace fees Commission (a percentage of gross, or a flat amount per unit), plus forward shipping per unit shipped, reverse shipping per unit returned, a fixed per-unit fee, and any period fee.
- Costs Supplier cost on units kept, packaging on units shipped, ads per unit or per period.
- What comes back TCS and TDS into profit; input GST credit reported separately alongside.
What happens to GST
GST is stripped out of revenue and left inside your costs, the reverse of what most sellers do by instinct. Revenue is divided by (1 + GST rate) because that component belongs to the government. Fees are charged at their full GST-inclusive value, because that is what leaves your settlement.
The input GST credit on those fees — and on packaging, if you entered packaging GST-inclusive — is then shown as its own line, and is never netted off the fee. That sounds like a fussy presentational choice. It is not.
While building this we hit exactly that error in our own model: fees were subtracted excluding GST, and then the input GST credit was added back as well. The credit was counted twice, and the screen looked entirely reasonable. A genuine ₹617 loss was displayed as a ₹780 profit. Either charge the fee GST-inclusive and report the credit separately, or subtract the fee ex-GST and never mention the credit again — but do not do both.
TCS and TDS are withheld, not spent
TCS at 1% and TDS at 0.1% of net revenue are deducted before the marketplace pays you, but they are not costs: you reclaim them on filing, so the calculator adds them back. Sellers reading a settlement statement often mistake them for another platform charge and understate their margin.
A ₹599 Meesho SKU keeps ₹140.60 a unit
This is the real output behind the example on the marketing page: Meesho, 40 units shipped, 3 returned, ₹599 price, ₹260 cost per unit, ₹380 of ads. These are the rates it ran on, so you can reproduce every line.
| Input | Value |
|---|---|
| Commission | 12% of order value, on units kept |
| Forward shipping | ₹62 per unit shipped |
| Reverse shipping | ₹66 per unit returned |
| Fixed fee | ₹11 per unit shipped |
| Packaging | ₹9 per unit shipped, entered ex-GST |
| GST on marketplace fees | 18% |
| GST on the product | 5% |
| Line | Amount | Counted on |
|---|---|---|
| Revenue after GST | ₹21,107.62 | 37 units kept |
| Marketplace fees | −₹5,777.56 | commission on 37 kept · shipping and fixed fee on 40 · reverse leg on 3 |
| Cost of goods | −₹9,620.00 | 37 units kept |
| Packaging and ads | −₹740.00 | packaging on 40 shipped, ads for the period |
| TCS/TDS + input GST credit back | +₹1,113.50 | net revenue, and marketplace fees |
| You keep | ₹5,202.24 | 24.6% margin · ₹140.60 per unit kept |
That fee line is commission ₹2,659.56, forward shipping ₹2,480.00, fixed fee ₹440.00 and reverse shipping ₹198.00. The three returns caused ₹417 of it — their forward shipping, their fixed fee and the whole reverse leg — plus ₹27 of packaging inside the ₹740.00. They caused none of the commission, which at a percentage rate is charged on the ₹22,163 of goods that stayed sold. That is the honest version of the headline: most of a return’s cost survives the return, not all of it.
Note also that ₹5,202.24 is not the column added up. ₹21,107.62 minus ₹5,777.56, ₹9,620.00 and ₹740.00 leaves ₹4,970.06; adding the ₹232.18 of TCS and TDS gives ₹5,202.24. The remaining ₹881.32 is input GST credit — 18/118 of the fee line — and it sits beside the profit, because those fees were already charged GST-inclusive. Folding it in as well is the ₹617-into-₹780 mistake again. The credit-inclusive total is shown too, clearly labelled.
Does the composition scheme change the answer?
Registration changes less of the profit line than you would expect, for the reason the previous section gives: the fee credit was never inside profit, so losing it cannot take anything out. What it does change is the GST on packaging — a registered seller reclaims that, a composition-scheme seller cannot, so it becomes a real cost.
Here that is ₹360 of packaging at 18%, or ₹64.80. Switch registration off and profit moves from ₹5,202.24 to ₹5,137.44, the margin from 24.6% to 24.3%. The larger change is on the line beside it, which now reads as not claimable: the ₹881.32 of fee GST you would otherwise reclaim is gone for good. Barely visible on this SKU, decisive on a thin-margin one.
The calculator returns four numbers
Profit, margin on net revenue, profit per unit kept, and a break-even price — the price at which this SKU, at this return rate and these fees, comes out at exactly zero. Break-even is the one to write down, because it rises with your return rate: shipping, the fixed fee and packaging stay on every parcel, so each extra return pushes the price you need higher.
So re-run it at the return rate you actually get, not the one you planned for, and read the gap between break-even and your listed price: that gap is your whole budget for coupons, discount campaigns and ads combined. If break-even sits above your price, the argument is over — volume only loses the money faster.
- Revenue counts on units kept; shipping, the fixed fee and packaging on units shipped. A returned parcel still costs all three.
- Percentage commission is charged on kept units; flat per-unit commission on every unit shipped.
- Divide revenue by (1 + GST rate). The GST you collected was never yours.
- Charge fees GST-inclusive and report input GST credit separately. Doing both double-counts it, and that turned a real ₹617 loss into a ₹780 profit.
- Composition-scheme sellers cannot reclaim GST on packaging or fees, so it is a permanent cost.
- TCS at 1% and TDS at 0.1% of net revenue come back on filing, so they are added back.
- Judge per-unit profit on units kept. Per unit shipped flatters exactly the SKU that is losing money.
What the calculator is, and what it is not
It is a planning tool that computes from figures you type in; it does not read your uploaded data. It is for the decision you make before you commit: should this go live at ₹599, can it survive a 20% return rate, what does another ₹380 of ads do to the margin. Presets for Meesho, Flipkart, Amazon and Snapdeal give a starting point, and every field stays editable — your commission and weight slab are yours, not ours.
It sits alongside the rest of iSellerEngine, which handles the mechanical end of marketplace selling: cropping shipping labels off the tax invoice, sorting and splitting label PDFs, extracting the order data. The calculator tells you whether those orders were worth picking. All of it is free while in development.
Pick your marketplace, enter your units, returns and costs, and see the profit per unit kept and the break-even price for your own SKU.
Open the profit calculatorCommon questions
How do I calculate profit on a Meesho or Flipkart order?
Profit = (units kept × price ÷ (1 + GST rate)) − marketplace fees − (units kept × cost) − (units shipped × packaging) − ads + TCS and TDS added back. Input GST credit is reported separately, never subtracted from the fees. In the worked example — Meesho, 40 shipped, 3 returned, ₹599 price, ₹260 cost, ₹380 ads, 5% product GST — that gives ₹21,107.62 revenue, ₹5,777.56 fees, ₹9,620.00 cost of goods, ₹740.00 packaging and ads, ₹232.18 of TCS and TDS back, and ₹5,202.24 kept: a 24.6% margin and ₹140.60 per unit kept.
If a customer returns an order, do I still pay marketplace fees on it?
Yes for the shipping and per-unit charges. A returned order still cost you forward shipping to send out, return shipping to get back, the fixed per-unit fee and the packaging it consumed. Commission depends on how it is charged: where it is a percentage of order value, the calculator applies it only to units you kept; where it is a flat amount per unit, it is charged on every unit shipped. In the worked example the three returns account for ₹417 of the ₹5,777.56 fee line plus ₹27 of packaging — ₹444 in all — while the commission of ₹2,659.56 was charged only on the ₹22,163 of goods that stayed sold.
Should I work out profit per unit sold or per unit shipped?
Per unit kept — units sold minus units returned. Dividing profit by units shipped spreads the result across parcels that earned you nothing, which makes a loss look shallower than it is and flatters exactly the SKU with a returns problem. The calculator reports profit per unit kept for that reason; in the Meesho example that is ₹140.60 across 37 units, not a figure smeared over all 40 parcels.
Should I subtract input GST credit from marketplace fees?
No — pick one treatment and stick to it. The calculator charges marketplace fees at their full GST-inclusive value and then reports the input GST credit as a separate line, because doing both counts the same credit twice. This was a real bug found while building the tool: subtracting fees excluding GST and then adding the credit back turned a genuine ₹617 loss into a ₹780 profit, and it looked entirely reasonable on screen. In the worked example the credit is ₹881.32 — 18/118 of the ₹5,777.56 fee line — and it sits beside the ₹5,202.24 profit, not inside it.
How does the composition scheme change my margin?
Less than most sellers expect on the profit line, and for a specific reason: the input GST credit on marketplace fees was never inside profit in the first place, so losing it cannot take anything out of it. What changes is the GST on packaging, which a registered seller reclaims and a composition-scheme seller cannot. In the Meesho example that is ₹360 of packaging at 18%, or ₹64.80 — profit falls from ₹5,202.24 to ₹5,137.44 and the margin from 24.6% to 24.3%, while the credit line switches to not claimable and the ₹881.32 of fee GST is gone for good.
Why does the calculator add TCS and TDS back instead of treating them as costs?
Because they are withheld, not spent. TCS at 1% and TDS at 0.1% of net revenue are deducted by the marketplace before it settles with you, but you reclaim them when you file, so the calculator adds them back to give a true profit figure. In the worked example that is ₹232.18 on ₹21,107.62 of net revenue. Sellers who see these deductions on a settlement statement often mistake them for another platform charge and understate the profit on the SKU.
Does the calculator use my uploaded order data?
No. It computes entirely from figures you type in, which makes it a planning tool for the decision you take before you commit stock or ad spend rather than a report on what already happened. It ships with fee presets for Meesho, Flipkart, Amazon and Snapdeal to give a realistic starting point, and every field stays editable. Uploaded shipping-label PDFs are handled separately by the rest of iSellerEngine, which crops labels off the tax invoice, sorts and splits them, and extracts the order data.