The GST mistake that flatters every margin report you have ever run

The error

An item is bought for ₹100 plus GST and sold at ₹150 including GST. Subtract one from the other and the margin looks like ₹50, or 33%.

At an 18% rate the actual selling price net of tax is about ₹127. The real margin is ₹27, not ₹50. The report was overstating it by nearly double, and it overstates every line the same way, so nothing looks out of place.

This is the single most common reason a shop's margin report disagrees with its bank balance.

Cost is more than the supplier invoice

• Freight, which on low-value bulky goods can exceed the margin entirely.
• Loading, unloading and any handling paid in cash and never recorded against the goods.
• Purchase-side discounts and schemes, which reduce cost only if they are attributed to the lines they came on.
• Anything non-creditable, which is a genuine cost rather than a recoverable tax.

A landed cost that ignores freight is not a cost, it is a supplier's rate.

Sort by contribution, not by percentage

A 6% margin on something selling forty units a day contributes far more than 40% on something that moves twice a year. Ranking by percentage puts the second at the top of the report and steers buying in exactly the wrong direction.

Margin multiplied by volume is the number that pays the rent.

The cost that has not been updated since 2019

Most shops enter a purchase rate when an item is first created and never revisit it. Supplier rates move, sometimes several times a year, and a margin report running on a five-year-old cost is not slightly wrong, it is fiction.

Worth spot-checking twenty lines against the most recent purchase invoice before trusting any margin report. In most shops several will be badly out.