What is GMV vs net revenue?
Reviewed by CA Apurav GargLast reviewed
In short
GMV (gross merchandise value) is the total value of orders placed, at the prices customers saw. Net revenue is what the business actually earns from them, after GST, discounts, cancellations, returns and RTOs.
Two different numbers
GMV measures demand: everything customers ordered, at the prices shown, usually including GST and before anything is cancelled or returned. Marketplaces and dashboards report it because it is large and grows quickly.
Net revenue measures what the business earned. It is the figure your profit and loss account starts from, and the figure every margin should be measured against.
Getting from GMV to net revenue
Take out, in this order:
- Cancellations before dispatch.
- RTOs: orders shipped but never delivered.
- Customer returns: orders delivered and later sent back, once refunded.
- Discounts and coupons you fund. A discount funded by the marketplace, where it pays you the full price, does not reduce your revenue.
- GST. GST charged to the customer is collected for the government. It is not income.
What is left is net revenue.
Fees are costs, not deductions from revenue
When you sell on a marketplace, you are the seller and the customer is your customer, so your revenue is the price of the goods. The marketplace's commission, closing fee, shipping fee and payment charges are expenses for its services, even though they are deducted before you are paid. In the accounts, sales are shown in full and the fees as expenses.
The position is different when a platform buys your stock, as under the quick-commerce PO model. Then your revenue is your invoice to the platform, not the price the customer pays.
Why the gap matters
- Margins: a margin worked out on GMV looks much better than one on net revenue. A brand with a high RTO and return rate can grow GMV while net revenue stalls.
- Fundraising: investors read both. Present GMV and net revenue side by side, with the bridge between them, so neither looks like a claim it is not.
- Tax: GST is reported on taxable value, which is close to net revenue, not GMV. GST TCS is collected on the net value after returns.
Track the GMV-to-net-revenue ratio every month, for each channel. A falling ratio is an early sign of rising returns, RTOs or discounting.
Example in rupees
One month's sales for a brand selling on its website and two marketplaces:
| Line | Amount |
|---|---|
| GMV: orders placed at listed prices, including GST | ₹50,00,000 |
| Cancelled before dispatch | −₹3,00,000 |
| RTO (shipped, not delivered) | −₹4,00,000 |
| Customer returns | −₹2,50,000 |
| Discounts and coupons funded by the brand | −₹2,00,000 |
| Delivered and kept, including GST | ₹38,50,000 |
| GST included in those prices | −₹4,90,000 |
| Net revenue | ₹33,60,000 |
Net revenue is about two-thirds of GMV. Marketplace commission, shipping and payment fees are not deducted here: they are costs, and they come out at CM2. The figures are illustrative.
Related terms
Work it out for your business
Want help applying this to your own accounts?
We handle bookkeeping, reconciliation, GST and TDS for D2C and marketplace sellers, and can walk you through how this works in your business.
General information only, not professional advice. Rules and rates change — check the official source before you act.