"Revenue" for ROAS is the gross amount the buyer pays (what your ad pixel reports). GST is stripped out before subtracting costs since it is pass-through, not income.
What break-even ROAS actually means
ROAS (return on ad spend) is just revenue ÷ ad spend — it says nothing about profit on its own. A "3x ROAS" campaign can lose money on a thin-margin product and print money on a fat-margin one. Break-even ROAS is the specific ROAS where ad spend exactly equals what's left after every other cost is paid — the floor below which the campaign is losing money, and above which it's contributing to profit.
The formula is: Break-even ROAS = 1 ÷ Contribution margin, where contribution margin is the share of the gross order value left after purchase cost, courier, marketplace fees, GST and returns — everything except the ad spend itself.
Why plain ROAS targets are misleading
Industry benchmarks often cite "3x ROAS" as a rough rule of thumb for ecommerce, and 3x–4x is commonly reported for D2C brands running Meta ads in India. But that number only holds up if your gross margin is comfortably above ~40%. A seller with 20% contribution margin needs a 5x ROAS just to break even — a "good" 3x campaign for someone else would be a loss-making one for them. There's no universal good ROAS; there's only your break-even ROAS, plus the buffer you want above it.
How the calculator works
- Gross order value — what the buyer actually pays and what your ad platform's pixel reports as conversion revenue.
- Net revenue (ex-GST) — the gross value with GST stripped out, since GST is collected for the government and isn't income.
- Purchase cost, courier, marketplace fees, returns — the same real costs used to calculate true profit per SKU, subtracted before ad spend is even considered.
- Contribution profit — what's left per order to pay for advertising. This is the most you can spend on ads for that order before it becomes a loss.
- Break-even ROAS — gross order value ÷ contribution profit. Spend more than this ratio implies and the order loses money; spend less and it contributes to profit.
Worked example
| Line | Amount |
|---|---|
| Selling price (GST-inclusive) | ₹999 |
| Net revenue (ex 18% GST) | ₹847 |
| Purchase cost | −₹380 |
| Courier | −₹70 |
| Marketplace fees (12%) | −₹120 |
| Return allowance (5%) | −₹10 |
| Contribution profit per order | ₹267 |
| Break-even ROAS | 3.74x |
On this product, a campaign running below 3.74x ROAS is losing money on every order, no matter how good it looks on the ad platform's dashboard. At a 5x ROAS, ad spend to generate this ₹999 order is about ₹200 — leaving roughly ₹67 of profit per order after covering purchase cost, courier, fees, returns and the ad spend itself.
Rule of thumb: set your target ROAS above break-even, not at it — a 20-30% buffer covers measurement error, discounts and seasonal fee changes.
Frequently asked questions
What is break-even ROAS?
Break-even ROAS is the return on ad spend at which a campaign generates exactly zero profit — every rupee of revenue above ad spend has already gone to purchase cost, courier, marketplace fees, GST and returns. It equals 1 divided by your contribution margin (contribution profit as a share of gross order value).
Is 3x ROAS good for ecommerce?
It depends entirely on margin. Industry reporting for 2026 puts average ecommerce ROAS around 2.87x and commonly cites 3x as a rule-of-thumb target, with some Indian D2C brands running Meta ads at 3x-4x. But 3x is only profitable if your contribution margin is above roughly 33%; below that, a 3x campaign is still losing money.
Should GST be included when calculating ROAS?
Revenue tracked by ad platforms is usually the gross, GST-inclusive order value, since that's what the buyer paid. But when working out how much of that revenue is actually available to cover costs and ad spend, strip GST out first — it's collected for the government and isn't income.
How do returns affect break-even ROAS?
Returns lower contribution profit (you still pay courier and often non-refundable marketplace fees on a returned order) which raises break-even ROAS. A product with a high return rate needs a higher ROAS to be profitable than the same product with few returns.
What's the difference between break-even ROAS and target ROAS?
Break-even ROAS is the floor — the point of zero profit. Target ROAS is what you actually aim for in campaigns, and should sit above break-even by a margin that covers measurement noise, discounts, and any costs not captured in the calculator.