Margin vs markup: formulas, difference and examples

Both start from the same profit, the selling price minus the cost, but divide it by different numbers. Shopkeepers often say margin when they mean markup, so check which one a supplier or partner is quoting. Margin divides by the selling price, markup by the cost:

GST you collect is paid over to the government, so work out margin on the selling price before GST. If your price includes GST, as an MRP does, take the tax out first: price before GST = price ÷ (1 + GST rate ÷ 100). On the cost side, use landed cost, including freight and loading, not just the supplier's price, and leave out GST you claim back as input credit. If your shop sells goods at several GST rates, do this product by product, because the tax inside the price differs by rate.

The classic mistake is adding a 30% markup and expecting a 30% margin; it gives 23.1%. Another is forgetting how much a discount takes: on a product with a 25% margin, a 10% discount cuts the price from ₹100 to ₹90 and the profit from ₹25 to ₹15, a margin of 16.7%, so 40% of the profit is gone. And margin worked out from product cost alone is gross margin: rent, salaries and electricity still have to come out of it.