E-commerce Profit Calculation for Marketplace Sellers

Real profit on an e-commerce order is what remains after GST, marketplace commission and fees, shipping, product and packaging cost, advertising and the cost of returns, not the gap between your purchase price and the listed price. A product listed at ₹1,499 can leave around ₹260 of profit per order placed once these are counted, as the worked example below shows. Tax collected at source (TCS) under GST and TDS under income tax reduce your payout but are not costs, provided you claim them.

Every deduction between the listing price and your profit

Commission and fee structures vary by marketplace, category and price band, and are revised often. Use the current rate card for your category in your seller dashboard rather than any generic figure.

The tax rules, as of October 2026

GST on the product

Your product's GST rate depends on its HSN classification. After the GST rate rationalisation effective 22 September 2025, most goods fall into the 5% or 18% slabs. For apparel and footwear, items priced up to ₹2,500 per piece attract 5% and those above attract 18%. Calculate margins on prices excluding GST; the GST calculator splits a tax-inclusive price.

TCS under Section 52 of the CGST Act

The marketplace collects TCS on the net value of taxable supplies made through it (sales minus returns in the month). Since 10 July 2024 the rate is 0.5%: 0.25% CGST plus 0.25% SGST for intra-state sales, or 0.5% IGST for inter-state sales. The operator reports it in GSTR-8; it shows up in your GST portal and can be used from your electronic cash ledger.

TDS on e-commerce payments

Under old Section 194-O of the Income-tax Act, 1961, the operator deducts 0.1% of the gross amount of sales (cut from 1% with effect from 1 October 2024). Under the Income-tax Act, 2025, this obligation is carried in Section 393(1), according to published section mappings. Resident individual and HUF sellers who have furnished PAN or Aadhaar and whose gross sales through the operator do not exceed ₹5 lakh in the year are outside it. The TDS appears in your Form 26AS/AIS and is adjusted when you file your return.

GST registration

Sellers of goods through e-commerce operators generally must register under GST regardless of turnover. Since 1 October 2023, a small seller whose turnover is within the state's registration threshold, who sells goods only within one state and makes no inter-state supplies, can instead obtain an enrolment number and sell without registering, subject to conditions; check whether your marketplace supports this route. For specified services such as restaurant delivery, passenger transport and certain accommodation, the operator itself pays GST under Section 9(5).

Worked example: a ₹1,499 cotton kurta

All figures are illustrative assumptions, not any marketplace's actual rate card. A Jaipur seller lists a cotton kurta at ₹1,499 including 5% GST.

Per delivered order

The GST of ₹56.67 on fees (18% × ₹314.85) is claimed as input tax credit, so it is excluded from profit.

What the seller sees in the settlement

₹1,499 − ₹314.85 fees − ₹56.67 GST on fees − ₹7.14 TCS (0.5% × ₹1,427.62) − ₹1.50 TDS (0.1% × ₹1,499) = ₹1,118.84

From this the seller still pays ₹71.38 output GST, offset by ₹56.67 input credit and ₹7.14 TCS credit. The settlement is a cash figure, not profit.

Now add returns

Assume 15 of every 100 orders are returned. For each return, the seller loses:

• Forward shipping ₹70 and reverse shipping ₹70
• Packaging ₹25
• Advertising ₹120 already spent
• Damage: 10% of returned units cannot be resold, so 10% × ₹600 = ₹60 per return on average
• Commission is assumed to be refunded on returns; check your marketplace's policy

Cost per return = ₹70 + ₹70 + ₹25 + ₹120 + ₹60 = ₹345

Per 100 orders placed

• 85 delivered × ₹367.77 = ₹31,260.45
• 15 returns × ₹345 = ₹5,175.00
• Net profit: ₹26,085.37 (using unrounded per-order profit)

That is ₹260.85 per order placed, or ₹306.89 per delivered order, against the ₹367.77 the seller might have expected. Net margin on GST-exclusive revenue from delivered orders = ₹26,085.37 ÷ (85 × ₹1,427.62) = 21.5%, before the seller's own rent, salaries and income tax.

Sensitivity: what moves profit most

Returns and advertising usually matter more than the headline commission. Track return reasons by SKU: wrong size charts and misleading photos are fixable.

Cash flow is a separate question

Marketplaces typically settle in batches after delivery, and TCS and TDS sit in tax ledgers until used. Meanwhile, you have paid for inventory, often weeks earlier. Your cash conversion cycle as a marketplace seller is driven by inventory days and the settlement cycle, so a fast-growing seller can be profitable on paper and still short of cash.

Setting a price that works

1. Decide the profit per order placed you need after returns.
2. Work backwards: add product, packaging, ads, expected return cost per order and marketplace fees.
3. Because commission is a percentage of the selling price, solve for price rather than adding a flat markup; the logic is the same as in markup vs profit margin.
4. Add GST at the correct rate for the price band, and check that the GST-inclusive price does not cross a rate threshold (for apparel, ₹2,500 per piece) by accident.
5. Re-check the unit economics every time the marketplace revises its rate card.

To see how many orders a month cover your fixed costs, apply the contribution approach in break-even sales calculation.

Key takeaways

• Calculate profit on GST-exclusive prices, after commission, fees, shipping, product, packaging, ads and returns.
• As of October 2026, GST TCS by e-commerce operators is 0.5% and income-tax TDS is 0.1% (old Section 194-O, now Section 393 of the Income-tax Act, 2025); both are credits, not costs.
• In the illustrative example, a ₹1,499 kurta earned ₹367.77 per delivered order but only ₹260.85 per order placed after a 15% return rate.
• Returns and ad spend usually move profit more than commission does.
• The marketplace settlement is a cash figure; reconcile it separately from profit.