What is ROAS?

Reviewed by CA Apurav GargLast reviewed 26 Oct 2026

In short

ROAS (return on ad spend) is the revenue credited to ads divided by what the ads cost. A ROAS of 4 means ₹4 of sales for every ₹1 spent. Break-even ROAS is the level below which ads lose money.

The formula

ROAS = revenue credited to ads ÷ ad spend

ROAS is a ratio, not a profit figure. It says how much revenue each rupee of ads is credited with, not whether that revenue made money.

Break-even ROAS

Ads pay for themselves when the margin earned on the sales they bring in covers their cost. The margin left before marketing is CM2, so:

Break-even ROAS = 1 ÷ (CM2 ÷ net revenue)

If CM2 is ₹420 on every ₹1,000 of net revenue, break-even ROAS is 1,000 ÷ 420, about 2.4. Below that, each order the ads bring in loses money at CM3. Above it, the ads contribute towards fixed costs and profit.

Products with thin margins need a much higher ROAS than products with rich ones. A single ROAS target for the whole catalogue usually overspends on low-margin SKUs.

Dashboard ROAS and net ROAS

Ad platforms work out ROAS on the purchase value they record, which is not net revenue:

It usually includes GST, which is not your income.
It counts orders later cancelled, returned or sent back as RTO. For cash-on-delivery-heavy brands this gap can be large.
It credits sales by the platform's own attribution rules, and two platforms can both claim the same order.

Convert dashboard ROAS to net ROAS before comparing it with break-even, and allow time for returns and RTOs to come in.

MER: blended ROAS

MER (marketing efficiency ratio) = total net revenue ÷ total marketing spend, across all channels. It does not depend on any platform's attribution, so it is a useful check on the platform figures. If every platform reports a healthy ROAS but MER is falling, the platforms are claiming the same sales.

ROAS and new customers

A first order can be unprofitable at CM3 and still be worth buying if the customer comes back. In that case set the limit by CAC and LTV rather than first-order ROAS, and check the cohort's repeat orders before scaling up the spend.

Example in rupees

Using the contribution margin example, where each ₹1,000 order leaves CM2 of ₹420:

Figure	Amount
CM2 per rupee of net revenue: ₹420 ÷ ₹1,000	0.42
Break-even ROAS on net revenue: 1 ÷ 0.42	about 2.4

The Meta ads dashboard shows a ROAS of 3.0 for the month: ₹3,00,000 of purchases from ₹1,00,000 of spend. But that ₹3,00,000 includes GST, and some orders later came back as RTO or returns:

Step	Amount
Purchases credited to the ads, including GST	₹3,00,000
Less GST, RTOs and returns	−₹90,000
Net revenue from the ads	₹2,10,000
Net ROAS: ₹2,10,000 ÷ ₹1,00,000	2.1

A dashboard ROAS of 3.0 is a net ROAS of 2.1, below the break-even of about 2.4. These ads lost money at CM3. The figures are illustrative.

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.