Purchase price vs selling price vs MRP
Three numbers, three legal meanings. Purchase price drives margins and ITC, selling price drives the bill, MRP is the legal ceiling.
Step by Step
- Purchase price is always captured excluding tax — tax goes to the ITC register.
- Selling price is what you charge (≤ MRP — enforced by a hard lock).
- MRP is printed on the pack and can never be exceeded (Legal Metrology).
- The margin report compares purchase vs selling per batch, including free-quantity schemes.
A Worked Example
| Per strip | |
|---|---|
| Purchase price (before GST) | ₹20.00 |
| GST paid to distributor (5%) — ITC | ₹1.00 |
| MRP printed on pack (includes GST) | ₹30.00 |
| Selling price charged | ₹30.00 (cannot be more) |
| Taxable value of the sale | ₹28.57 (₹30 ÷ 1.05) |
| Gross margin before GST | ₹8.57 |
Why It Matters
Margin should be measured on prices before GST, because the GST you collect is paid to the government after setting off the GST you paid. Free quantities from schemes lower your real purchase price — record them as free in the GRN so margin reports stay true.
FAQ
- Can I sell below MRP? Yes. MRP is a ceiling, not a fixed price.
- Does MRP include GST? Yes. MRP is the maximum price including all taxes.
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