GST & business
How to Calculate Profit Margin (with Target Price)
Updated 25 September 2026 · 4 min read
Profit margin tells you how much of each rupee of sales you keep as profit. It's the number to watch when you set prices, give discounts or compare products.
The formula
Margin % = (Selling price − Cost) ÷ Selling price × 100
Example: you buy a product for ₹750 and sell it for ₹1,000. Profit is ₹250, so the margin is 250 ÷ 1,000 = 25%.
Finding the price for a target margin
Selling price = Cost ÷ (1 − target margin)
To earn a 40% margin on a ₹750 product: 750 ÷ (1 − 0.40) = ₹1,250. A common mistake is adding 40% to the cost (₹1,050) — that's a 40% markup, which is only a 28.6% margin. See gross margin vs markup for the difference.
Calculate margin, markup or target priceFind profit, gross margin and markup from cost and selling price — or the price for a target margin.Watch out for
- GST: calculate on prices before GST — the tax isn't your income.
- All costs: include shipping, packaging and marketplace fees in “cost” to see your true margin.
- Discounts: a 10% discount on a 25% margin product cuts your profit by 40% (from ₹250 to ₹150 on a ₹1,000 sale).
Frequently asked questions
What is the formula for profit margin?
Profit margin (%) = (selling price − cost) ÷ selling price × 100. For cost ₹750 and price ₹1,000, the margin is 250 ÷ 1,000 = 25%.
How do I find the selling price for a target margin?
Selling price = cost ÷ (1 − margin). For a 40% margin on a ₹750 cost: 750 ÷ 0.6 = ₹1,250.
Should I include GST when calculating margin?
No. Use prices before GST. GST you collect is paid to the government, so it isn't part of your revenue.