How the price is worked out
In this example, a suit bought at ₹750 lands in your shop at ₹874.50 once transport, packing and a 5% buffer are added. For a 40% margin, a GST-registered retailer sells it at ₹1,539 including 5% GST and keeps ₹591.21 a piece.
- Selling price before GST = landed cost ÷ (1 − margin)For a 40% margin, divide by 0.6. Multiplying cost by 1.4 gives a 40% markup, which is only a 28.6% margin.
- Purchase GST is a cost only without input creditRegular GST retailers claim it back. Composition and unregistered retailers carry it in every piece.
- Transport is a per-piece costA ₹600 parcel adds ₹50 to each of 12 pieces but ₹150 to each of 4. Bigger orders lower your landed cost.
- Watch the ₹2,500 garment slabAbove ₹2,500 a piece (before GST), garments move from 5% to 18% GST. Customer prices from ₹2,625 to ₹2,950 earn you nothing extra.
Readymade suits: margin and GST questions
What GST should I charge when I sell readymade suits?
Readymade suits are garments (HSN 6204). Charge 5% GST when the selling price of a piece, before GST, is up to ₹2,500, and 18% above that. The same slab applies when you buy from the wholesaler.
What is the difference between margin and markup?
Markup is profit as a share of your cost; margin is profit as a share of your selling price (before GST). A kurti that costs you ₹500 landed and sells for ₹750 before GST has a ₹250 profit: a 50% markup but a 33.3% margin. To get a 40% margin you need a 66.7% markup.
What is landed cost in textile retail?
Landed cost is what one piece really costs you once it is in your shop: the wholesale price, plus GST if you cannot claim input tax credit, plus your share of transport, packing, agent commission and a buffer for unsold or damaged pieces. Price from landed cost, not from the wholesaler's rate.
Is the GST I pay to the Surat wholesaler a cost for me?
Only if you cannot claim it back. A regular GST-registered retailer claims the GST on the purchase invoice as input tax credit, so it is not part of the cost. Under the composition scheme or without GST registration you cannot claim it, so it adds to the cost of every piece.
What is the ₹2,500 GST slab trap for kurtis and garments?
Garments are taxed at 5% up to ₹2,500 a piece and 18% above. For a GST-registered seller, any customer price from about ₹2,625 to ₹2,950 (including GST) leaves you no more than a price of ₹2,625, because the higher rate takes the difference. Price at or below ₹2,625, or above ₹2,950.
How do I add transport cost to each piece?
Divide the total transport and booking charge for the parcel by the number of pieces in it. ₹600 for a parcel of 12 sarees adds ₹50 to each saree. Small orders carry a much higher transport cost per piece.
How does the composition scheme change my selling price?
A composition dealer pays 1% of turnover as tax (for traders), cannot charge GST to customers and cannot claim input tax credit. Your purchase GST becomes a cost, and 1% of every sale goes to tax.
For planning only. Confirm GST treatment for your business with your CA.