Markup is the percentage added to the cost of an item to set its price.
Markup % = (selling price − cost) ÷ cost × 100An item that costs ₹500 and sells for ₹650 has a markup of 30%.
Converting markup to margin
Margin is measured on the selling price, so the same item has a margin of 23%. The two numbers are easy to mix up:
| Markup on cost | Margin on sales |
|---|---|
| 10% | 9.1% |
| 25% | 20% |
| 50% | 33.3% |
| 100% | 50% |
To reach a target margin, divide cost by (1 − margin). For a 25% margin on a ₹500 item: ₹500 ÷ 0.75 = ₹667.
GST and markup
For a registered business that claims input tax credit, markup is calculated on cost before GST, and GST is added on top of the selling price. For a business that cannot claim credit, such as a composition dealer, the GST paid on purchases is part of cost.
In practice
Many traders keep a standard markup by category and adjust for fast and slow movers. Checking the realised margin each month shows whether discounts at the counter are eating the planned markup.