Margin and markup formulas
Worked example
You buy a product for ₹750 and sell it for ₹1,000. Profit is ₹250, so your gross margin is 25% (250 ÷ 1,000) and your markup is 33.33% (250 ÷ 750). If you want a 40% margin instead, price it at 750 ÷ 0.6 = ₹1,250.
Margin vs. markup: why the difference matters
Margin and markup describe the same profit from two different bases, and confusing them is one of the most common pricing mistakes. If you want a 30% margin but add a 30% markup to cost, you end up with only a 23% margin. Markup is always higher than margin for the same sale:
| Markup | Equivalent margin |
|---|---|
| 25% | 20% |
| 33.3% | 25% |
| 50% | 33.3% |
| 100% | 50% |
Gross vs. net margin
This calculator gives gross margin — revenue minus the direct cost of the product. Your net margin also subtracts overheads such as rent, salaries, marketing, payment gateway fees and taxes. A healthy gross margin needs to leave room for all of these.
Pricing tips for Indian businesses
- Calculate margins on prices excluding GST if you claim input tax credit.
- Factor in marketplace commissions and payment gateway fees (typically 2% plus GST) before setting prices.
- Review costs regularly — rising input costs silently erode margins on fixed prices.
Need to add tax to your final price? Use the GST calculator.
Frequently asked questions
What is the difference between margin and markup?
Margin is profit as a percentage of the selling price; markup is profit as a percentage of cost. A product that costs ₹75 and sells for ₹100 has a 25% margin but a 33.3% markup.
How do I calculate selling price from a target margin?
Selling price = Cost ÷ (1 − Margin/100). To earn a 40% margin on a ₹600 cost, price it at 600 ÷ 0.6 = ₹1,000.
Should I include GST in margin calculations?
No, if you're GST-registered and claim input tax credit. Calculate margin on prices excluding GST, since GST collected is passed on to the government rather than kept as revenue.
What is a good profit margin?
It varies widely by industry. Grocery retail often runs on 2–10% net margins, while software and consulting can exceed 30%. Compare against peers in your own sector.
Last updated: 22 September 2026Suggest an improvement · Report a problem