Net revenue after returns = gross order value, minus RTO (orders that never reached the customer), minus refunded customer returns, giving net sales. For net marketplace revenue, also subtract commission, shipping, return and other deductions shown in the settlement report, and add approved claims or reversals. Work from settlement data, excluding GST, and match each line to your seller agreement.
What net revenue after returns actually means
Most dashboards show gross sales, which counts every order placed or shipped. That figure overstates what you keep. Between the order and your bank credit, some orders are cancelled, some come back as RTO, some are returned by customers, and the marketplace deducts commission and charges.
It helps to track two numbers separately:
- Net sales after returns: order value that stayed sold, after RTO and customer returns.
- Net marketplace revenue: net sales after returns, less marketplace deductions, plus any reversals or recoveries.
The first tells you about demand and product quality. The second tells you what the channel really pays you.
The formula, step by step
- Start with gross order value for the period, excluding GST so that tax does not inflate revenue.
- Subtract cancellations made before dispatch, if your gross figure includes them.
- Subtract RTO value for shipments returned to you without reaching the customer.
- Subtract customer returns that were refunded, at the value refunded.
- The result is net sales after returns.
- Subtract marketplace deductions: commission, fixed or collection fees, shipping and reverse shipping, and any penalties or ad charges you include in channel cost.
- Add reversals and recoveries: fee corrections, approved claims for lost or damaged returns, and similar credits.
Net marketplace revenue is the result of steps 5 to 7.
Where to find each number
Do not rebuild these from your own order system alone. Use the marketplace documents that drive the money.
- Sales and order report: gross order value, order status, dispatch and delivery dates.
- Returns report: return type (RTO or customer return), return date, refund value, return reason and the condition of the item received.
- Settlement report: the commission, fees, shipping charges, adjustments and the payout actually credited.
- Seller agreement and rate card: the terms that fees should follow. Fee rates, return charges and GST or TCS treatment change, so confirm the latest version with the marketplace and your tax adviser instead of relying on old figures.
Treat RTO and customer returns differently
RTO and customer returns look similar in a total, but they behave differently and need different fixes.
- RTO usually points to address quality, cash-on-delivery refusals, courier failures or delivery attempts. The order may never count as a completed sale, yet you can still pay forward or return shipping.
- Customer returns usually point to size, fit, quality, product description or expectation gaps. A refund is issued and the item needs to come back in sellable condition.
Calculate the two rates separately. A common approach is RTO rate = RTO orders / shipped orders, and return rate = returned orders / delivered orders. Whichever definition you choose, keep it fixed so months can be compared.
Mistakes that distort the number
- Mixing periods: an order sold in March and returned in April hits April's refunds. Decide whether you report by order date or by settlement date, and be consistent.
- Using GST-inclusive values for some lines and exclusive for others.
- Ignoring return-related charges that were deducted in settlements but not shown in the returns report.
- Counting the refund but not the lost stock: if a returned item is damaged, wrong or never received, the refund still happened and the stock is gone. That is a recovery case, not just a loss.
- Assuming fees are right: compare each deduction with your agreed terms instead of accepting the settlement total.
Close the loop with recoveries and monthly reconciliation
Once you have the number, check what sits between the report and the bank credit. Mismatched commission, repeated fee deductions, returns marked received but not credited back to inventory, and unclaimed lost-in-transit cases all reduce net revenue silently.
Keep a simple recovery log: order ID, issue, amount in question, date raised, status and amount recovered. Review it every month with the settlement. Tools such as MarketplaceMetrics by Fundle can reconcile sales and settlements, check fees against agreed terms and track return and recovery cases; Myntra Excel reports are reviewed today, and other marketplaces are a matter for discussion.
Worked example
Illustrative example only. These ₹ figures are made up to show the method and are not benchmarks or real fee rates.
| Line | Amount (₹, illustrative) |
|---|---|
| Gross order value (excl. GST) | 10,00,000 |
| Less: RTO value | 1,00,000 |
| Less: customer returns refunded | 1,80,000 |
| Net sales after returns | 7,20,000 |
| Less: commission and fees as per settlement | 1,30,000 |
| Less: shipping and return charges | 55,000 |
| Add: approved claims and fee reversals | 12,000 |
| Net marketplace revenue | 5,47,000 |
Here, RTO rate on shipped value is 10% (1,00,000 / 10,00,000). Return rate on delivered value is 20% (1,80,000 / 9,00,000). Net marketplace revenue is 54.7% of gross order value, which is a very different picture from the gross figure.
Questions and answers
Should RTO be included in the returns rate?
Keep them separate. RTO is measured against shipped orders and signals delivery or address problems, while customer returns are measured against delivered orders and signal product or expectation issues. Combining them hides which problem you need to fix.
Should I calculate net revenue with or without GST?
Use values excluding GST so tax collected does not inflate revenue, and apply the same basis to every line. Treatment of GST and TCS depends on your registration and the latest rules, so confirm it with your tax adviser.
Do I subtract marketplace commission to get net revenue?
Net sales after returns does not include commission. Net marketplace revenue does. Take commission, fees and shipping from the settlement report, and compare them with your seller agreement or rate card rather than assuming they are correct.
How often should I recalculate net revenue after returns?
Monthly is a sensible minimum, aligned with settlement cycles, because returns arrive weeks after the sale. Revisit the previous month's figures too, as late returns, fee adjustments and claim outcomes can change them.