What ROAS and break-even ROAS mean
ROAS (return on ad spend) is the revenue your ads bring in divided by what you spent on them. Spend ₹10,000 and get ₹30,000 in sales, and your ROAS is 3x.
Break-even ROAS is the ROAS at which an order makes zero profit: below it, every order loses money; above it, you're in profit. The simple formula is:
Break-even ROAS = 1 ÷ profit margin per order (before ads). Example: a 40% margin gives a break-even ROAS of 1 ÷ 0.40 = 2.5x.
That formula is correct - but only if your margin is calculated honestly. For Indian D2C brands, it usually isn't.
Why Meta's ROAS looks better than reality
Meta Ads Manager reports purchase value as the full order value, at the moment the order is placed. For an Indian store, three things are hiding in that number:
- GST. If your price includes 18% GST, part of every rupee goes to the government, not to you.
- COD orders that never arrive. Meta counts the purchase when the order is placed. If 25% of your COD orders come back undelivered, that revenue never arrives - but the shipping costs do.
- Return shipping and fees. Every RTO adds return shipping, and every delivered order carries payment gateway or COD remittance fees.
Put together, a ROAS that looks profitable in Ads Manager can be losing money in your bank account. Our guide to reducing RTO covers how to bring the returns down.
A worked example: 1.49x vs 2.40x
Take an example order (illustrative numbers):
| Item | Value |
|---|---|
| Order value (incl. 18% GST) | ₹999 |
| Product cost | ₹250 |
| Shipping and packing per order | ₹80 |
| Payment and COD fees | 2% of delivered value |
| Orders paid by COD | 50% |
| COD orders returned (RTO) | 25% |
| Return shipping per RTO | ₹60 |
The simple way: margin = (999 − 250 − 80) ÷ 999 = 67%, so break-even ROAS = 1 ÷ 0.67 = 1.49x. Anything above 1.49x looks profitable.
The honest way: remove GST (₹999 ÷ 1.18 = ₹847 of real revenue), and account for 12.5% of all orders coming back (half the orders are COD, and a quarter of those return). The profit per order placed, before ads, works out to about ₹417. That's the most you can spend on ads per order and break even - a break-even ROAS of ₹999 ÷ ₹417 = 2.40x.
So a campaign showing 2x ROAS in Ads Manager looks comfortably profitable by the simple formula - and is actually losing money on every order.
What about GST on Meta ads?
Advertising in India is generally taxed at 18% GST, and that applies to Meta ads too. How it's charged depends on how your account is billed: an Indian invoice includes the GST, while an invoice from an overseas entity is usually handled through reverse charge.
If you're GST-registered and can claim input tax credit, the GST on ads is usually recovered, so use your spend before tax in ROAS calculations. If you can't claim it, the 18% is a real cost - add it to your ad spend, which raises your break-even ROAS. Check your situation with your accountant, as the details depend on your registration and invoices.
Break-even ROAS is the floor, not the target
Break-even only covers the costs of each order. Your target ROAS needs to sit above it, by enough to cover:
- Fixed costs - salaries, rent, software, agency fees.
- The profit you actually want to make.
- The fact that some returning customers will buy again without ads, which can justify a lower first-order ROAS for brands with strong repeat purchase.
Once you know your break-even and target, judge campaigns on delivered revenue and cost per delivered order, not just the ROAS Ads Manager shows.
Calculate your own break-even ROAS
Our free break-even ROAS calculator does the maths above with your own numbers: order value, GST, product cost, shipping, fees, COD share, RTO rate and return shipping - plus a switch for the 18% GST on ads if you can't claim it. It takes about a minute.
Want help hitting a ROAS above your break-even? Get a free growth audit: we'll review your ads and store within 48 hours and show you where the margin is leaking.
Frequently asked questions
What is a good ROAS for an Indian D2C brand?
There's no universal number. A good ROAS is one comfortably above your break-even ROAS, which depends on your margins, COD share and RTO rate. Work out your break-even first, then set a target above it.
Should I calculate ROAS with or without GST?
For your own profit maths, use revenue without GST, because the GST goes to the government. Meta reports purchase value including GST, so expect its ROAS to look higher than your real return.
How does COD affect ROAS?
Meta counts COD orders when they're placed. Orders that come back undelivered never bring revenue but still cost shipping, so a high COD RTO rate raises the ROAS you need to break even.
Is break-even ROAS the same as target ROAS?
No. Break-even ROAS only covers the cost of each order. Your target ROAS should be higher, to cover fixed costs and leave a profit.
