How to Price Products for Online Selling: A Formula That Protects Profit
To price a product for online selling, start from the profit you want per order and work backwards. Add product cost, packing, marketplace fees, shipping, ads and a share for returns, then add GST on top. Fees charged as a percentage of price need a small formula, shown below, or your margin quietly shrinks.
- Price from the bottom up: costs plus target profit, then GST. Never copy a competitor's price and hope.
- GST is collected for the government. Your income is the price before GST.
- GST on marketplace fees is 18%, and a regular GST seller claims it back as input tax credit.
- TCS (0.5% of net taxable sales) and TDS (0.1% of gross sales) are taxes paid in your name, not costs.
- For clothes, a price above Rs 2,500 a piece moves the GST rate from 5% to 18%.
In this guide
Why does a price that looks right still lose money?
Most new sellers look at what others charge, go Rs 20 lower, and list. Orders come in, the payout looks fine, and three months later the bank balance has not grown. Sound familiar?
The problem is that the price was never built. It was guessed. A marketplace price has to carry many layers: what you paid for the item, the box, the platform's commission and fixed fee, shipping, the ads that brought the buyer, the orders that come back, and GST. Leave out any one layer and the profit you think you make is not there.
Our article on profit per order after fees and GST takes a price you already have and finds the profit. This one does the reverse: it starts from the profit you want and finds the price.
The layers in a marketplace price
| Layer | How it behaves | Is it a real cost? |
|---|---|---|
| Product cost before GST | Fixed per unit | Yes. The GST you paid on purchase comes back as credit if you are a regular GST seller |
| Packing | Fixed per unit | Yes |
| Commission | A percentage of the selling price | Yes. GST on it is claimable |
| Fixed fee and shipping fee | A rupee amount per order, often by weight or price band | Yes. GST on it is claimable |
| Ads | Your spend divided by orders | Yes |
| Returns and RTO | Lost shipping, reverse shipping and damaged stock, spread across all orders | Yes, and often the biggest one |
| GST on the sale | A percentage on top of your price | No. You collect it and pay it over |
| TCS and TDS | Small percentages held back from the payout | No. You get credit for both |
Fee rates differ by marketplace, category and price band, and they change often. We did not read a current rate card on the Amazon, Flipkart or Meesho site today, so every fee below is a round illustration. Take your real figures from your seller panel before you price.
How to work out your price, step by step
- Fix your target profit per order. A rupee amount, such as Rs 100, is easier to defend than a vague percentage.
- Add up the fixed costs. Product cost before GST, packing, the fixed fee and shipping fee, ads per order and the returns share.
- Find the GST rate for your product. Check the HSN code and the rate. For garments, read HSN codes and GST rates for clothes.
- Note which fees are a percentage, and of what. Commission is often worked out on the selling price including GST. Your rate card tells you the base.
- Solve for the price. Taxable value is price divided by (1 + GST rate). The formula is: price = (fixed costs + target profit) divided by (1 / (1 + GST rate) minus commission rate).
- Round up to a clean price and recheck the profit at that price.
- Check the market. If your price is well above similar listings, the fix is cheaper sourcing, a lighter box or a bundle, not a price that loses money.
A worked example
Pooja sells cotton T-shirts from Jaipur. She is a regular GST seller and the shirts are taxed at 5%, because each is priced well under Rs 2,500. All fee figures are illustrations.
| Item | Amount |
|---|---|
| Product cost before GST | Rs 400 |
| Packing | Rs 15 |
| Fixed fee plus shipping fee (illustration) | Rs 100 |
| Ads per order | Rs 40 |
| Returns share: 1 in 10 orders comes back and each return costs her about Rs 300 | Rs 30 |
| Target profit | Rs 100 |
| Fixed costs plus profit | Rs 685 |
Commission is 10% of the selling price including GST, again as an illustration. The formula gives Rs 685 divided by (1 / 1.05 minus 0.10), which is about Rs 804. She rounds up to Rs 819.
Check at Rs 819. Taxable value is Rs 819 divided by 1.05, which is Rs 780, and GST is Rs 39. Commission is Rs 81.90. Profit is Rs 780 less Rs 81.90, Rs 100, Rs 400, Rs 15, Rs 30 and Rs 40, which leaves Rs 113.10. Had she copied a competitor at Rs 799, profit would be about Rs 96, before any discount.
What about the rest of the payout? GST of 18% on the commission and fees is about Rs 32.74. She claims it back as input tax credit, along with the Rs 20 GST she paid on the shirt. TCS of 0.5% on Rs 780 is Rs 3.90 and TDS of 0.1% is about Rs 0.78. Both are held from her payout and come back as credit, so they affect cash, not profit.
Does GST change with the price?
For most goods, no. For clothes and some textile items, yes. From 22 September 2025, garments of sale value up to Rs 2,500 a piece are taxed at 5%, and above that at 18%. So a kurta at Rs 2,500 before GST carries Rs 125 of tax, while one at Rs 2,520 carries Rs 453.60. The buyer pays Rs 348.60 more for a Rs 20 price rise. Whether the limit is tested before or after GST, and how a discount is treated, is not spelt out in the rate entry, so confirm with your CA before you price close to it.
One more ceiling: the MRP printed on a packaged product already includes all taxes. You cannot add GST over the MRP, and marketplaces are strict about prices above it. Read the Legal Metrology rules or ask your CA if you sell packaged goods.
The mistake people usually make
The usual mistake is to work out margin on the price including GST. Pooja's Rs 819 looks like Rs 419 over cost. In truth Rs 39 of it belongs to the government, so the real gap is Rs 380, and after fees, ads and returns it is Rs 113.10.
The second mistake is a price with no room for returns. A category where 1 in 5 orders comes back needs double the returns share used above. Find your own return rate in last quarter's sales report before you fix a price. For what returns do to your GST, see returns and RTO in GSTR-1.
When is it worth paying someone? If you sell a handful of products, a simple sheet with the formula above is enough. If you sell hundreds of items across marketplaces with changing fees, a monthly review of margins by product pays for itself.
Sources
- PIB: 56th GST Council meeting, rate changes from 22 September 2025 (checked 12 Nov 2026)
- Notification 15/2024-Central Tax, TCS rate (GST Council) (checked 12 Nov 2026)
- GST portal manual: Form GSTR-8 and TCS on net supplies (checked 12 Nov 2026)
- Section 194-O, Income-tax Act, 1961 (Income Tax Department) (checked 12 Nov 2026)
How AprilTax can help
Once your prices are set, the sales still have to be reported correctly. AprilTax has a free GSTR-1 tool for online sellers: upload the sales reports from Amazon, Flipkart or Meesho and it prepares your GSTR-1 at the right rate for each item, runs about 30 checks and matches the TCS your marketplaces reported. You upload the JSON file on the GST portal yourself.
Frequently asked questions
How do I calculate the selling price for an online marketplace?
Should I include GST in my margin?
Are TCS and TDS a cost when pricing?
Can I claim back the GST on marketplace commission?
How much should I keep aside for returns?
Does the GST rate on clothes depend on the price?
Can I sell above MRP if I add GST separately?
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