Indian industry margin benchmarks

| Industry | Gross Margin | Net Margin | |---|---|---| | IT Services | 28–35% | 15–22% | | Pharma | 55–70% | 12–20% | | FMCG | 40–55% | 8–15% | | Retail | 25–35% | 3–8% | | Restaurant (QSR) | 55–65% | 5–12% | | Real Estate | 20–35% | 8–15% | | E-commerce | 25–40% | -5% to 5% (many still loss-making) |

The GST impact on margins

For B2C businesses, GST is a pass-through — collected from customers and remitted to government. For B2B businesses with proper ITC, GST should be neutral. The key: don't confuse GST collected with revenue, and ensure you're claiming all input tax credits.

Why India's service businesses often have hidden high margins

Software, consulting, and professional services in India often have gross margins of 60–80% — among the highest globally — because India's skilled labour cost is 5–10x lower than developed market rates while billing is partially on international rates.

Margin improvement levers for SMEs

  1. Annual price revision: Don't fear 5–8% annual price increases — your costs are rising by that much anyway
  2. Reduce cash discounts: Early payment discounts often cost 12–18% annualised — worse than a loan
  3. Product mix management: ABC analysis — identify top 20% SKUs by margin and focus marketing on those
  4. Supplier negotiation: Even a 2% reduction in COGS on ₹50 lakh purchases saves ₹1 lakh