Landed cost is what an item costs you once it is on your shelf. It is the right base for pricing, margin and stock valuation.
Landed cost = purchase price + freight in + loading and unloading + insurance + non-refundable duties and taxes + other direct charges
GST and landed cost
GST that you can claim back as input tax credit is not part of landed cost. If the credit is blocked or you are under the composition scheme, the GST becomes part of cost.
An example: imported carbide inserts
| Item | Amount |
|---|---|
| Price (CIF) | ₹1,00,000 |
| Customs duty | ₹11,000 |
| Customs agent and port charges | ₹4,500 |
| Freight to Rajkot | ₹3,200 |
| Landed cost | ₹1,18,700 |
The IGST paid at import is claimed as credit and left out.
Why it matters
A trader who prices on the supplier's rate alone overstates margin by the freight and handling on every sale. When freight is paid on one bill for many items, it is spread across them, usually by value or by weight.