What is profit per SKU?

Profit per SKU is the net amount you keep on a single product after subtracting its purchase cost, shipping, marketplace and payment fees, and a share of returns from the GST-exclusive selling price. It tells you whether an individual product actually makes money.

Should GST be included in profit per SKU?

No. GST is collected from the buyer and remitted to the government, with input credit on your purchases, so it is a pass-through, not income or a cost. Calculate profit on the GST-exclusive (base) amount.

How do returns affect SKU profit?

Returns cost you reverse logistics and often non-refundable marketplace fees. Spread that expected cost across every unit using your return rate, so a product with high returns shows a lower true profit.

How to Calculate Profit Per SKU (2026 Guide)

The formula

Profit per SKU = Net revenue (ex-GST) − Purchase cost − Courier − Marketplace fees − Return allowance

Each term matters, and skipping any one of them is how a "profitable" product quietly loses money.

Step 1 — Start from net revenue, not the sticker price

If your price is GST-inclusive (an MRP), strip the GST out first. At 18% GST, a ₹1,499 price is really ₹1,270 of revenue and ₹229 of tax you owe the government. Always calculate margin on the ex-GST base.

Step 2 — Subtract the true cost of goods

Use your landed purchase cost — what the unit actually cost to get into your warehouse, including inbound freight if material. Don't use an old or list price.

Step 3 — Subtract per-order logistics

Courier or shipping is a real per-unit cost on every order you fulfil. If you offer "free shipping," you're paying it — so it belongs here.

Step 4 — Subtract marketplace & payment fees

Marketplace commission and payment-gateway charges are taken on the gross order value, not your margin. At 15% on a ₹1,499 order that's ₹225 — often the single biggest line after COGS.

Step 5 — Spread returns across every unit

A returned order costs you reverse logistics and frequently non-refundable fees. If 6% of orders come back, add roughly 6% of (shipping + fees) to every unit as a return allowance. High-return SKUs look far worse once you do this — which is the point.

Worked example

Line	Amount
Selling price (GST-inclusive)	₹1,499
Net revenue (ex 18% GST)	₹1,270
Purchase cost	−₹700
Courier	−₹80
Marketplace fees (15%)	−₹225
Return allowance (6%)	−₹18
True profit per SKU	₹247 (~19% margin)

The ₹1,499 "₹799 gross margin" product is really a ₹247 product once every cost is counted. Run your own numbers in the calculator below.

Common mistakes

Counting GST as profit — it's a pass-through, not income.
Ignoring returns — they can turn a thin-margin SKU negative.
Using gross margin only — fees and logistics often exceed COGS.
Averaging across the catalogue — winners subsidise losers and you never notice.

How to Calculate Profit Per SKU