The article will explain the method for calculation of settlement value when order is returned. It is highly recommended to understand all the deductions made during calculation of settlement value when order is shipped.
Before we jump to calculation of settlement value, we need to understand that in case of returns what happens to all the deductions made earlier when order was shipped.
- Order item value needs to be completely refunded to customer in case of returns. Even in replacement scenario order item value is added into new replacement order. Therefore order item value is completely reversed in case of returns.
- In case of returns, policy for channel fees varies from channel to channel.
- Within the same channel as well, policy may depend on the type of returns (Courier returns or Customer returns).
- Some component of channel fees may be reversed completely, some may be reversed partially and some may not be reversed at all.
- In some cases, additional fees may be charged by channel for reverse shipping of returned items from customer to seller.
- Sales tax deposited at the time of sales can be claimed back in case of returns. Therefore deductions made under reimbursement of sales tax head is reversed back completely in case of returns. Similarly Input GST credits which was added back in the settlement value when product was sold will be deducted now when the product has returned.
- Eshopbox fees will not be reversed back when the product has returned. Eshopbox had done all the activities while the order was shipped (pick, pack and ship). Additionally, eshopbox doesn't charge any extra fees for processing returns.
Table 1 : Understanding return policy, in case of returns what happens to deductions made at the time when order is shipped.
|
Description |
In case of returns, What happens to deductions made when order was shipped? |
Remarks |
|
|---|---|---|---|
| Order item value |
Completely reversed |
||
| Channel fees |
Partially or completely reversed. |
Policy varies from channel to channel and may depend on type of returns. Some channel may charge additional fees for reverse shipping of items from customer to seller. |
|
| Reimbursement of sales tax |
Completely reversed |
||
| Eshopbox fees |
Management fees |
Not reversed |
No additional fees are charged by eshopbox for processing of returns. |
| Transaction fees |
Not reversed |
||
| Input GST credits |
Completely reversed |
||
Settlement value calculated in case of returns is done as below :
Settlement value = order item value
- reversed channel fees charged at time of sales
+ additional fees charged by channel for returns
- reversal of sales tax deducted at time of sales
+ reversal of input GST credits added at the time of sales.
The above calculation is elaborated using example illustrated in table 2.
In this example,
- Order item value of INR 850 is completely reversed at the time of returned.
- Channel margin deducted at the time of sales is partially reversed ( assumed to be 80% for sake of explanation. Actuals may vary based on channels and type of return )
- Additional fees of INR 60 is charged by channel for reverse shipping of items (assumed for sake of explanation)
- eshopbox platform fees are not reversed.
- Input GST refund added in payment is reversed back
Table 2 : Example illustrating settlement value calculation when order is returned.
|
Description |
Reference |
Calculation when order was Shipped |
Status of deductions in case of returns |
Returned |
Net effect (shipped + returned) |
| MRP |
1000 |
||||
| Discount % |
20% |
||||
| Selling price |
A |
800 |
Completely reversed |
-800 |
0 |
| Shipping fee collected from customer |
B |
50 |
Completely reversed |
-50 |
0 |
| Order item value |
C= A+ B |
850 |
Completely reversed |
-850 |
0 |
| Channel margin (assumed to be 35%) |
D= 35%*C |
297.5 |
Assumed to partially reversed. 80% is reversed.* |
-238 |
59.5 |
| Additional fees charged for reverse shipping* |
60 |
60.0 |
|||
| Reimbursement of taxes |
5% |
40.5 |
Completely reversed |
-40.5 |
0.0 |
|
Eshopbox platform fees |
|||||
| a. Management fee (fixed fees) |
fixed fee |
55.00 |
55.00 |
||
| b. Transaction fee (assumed to be 4%) |
4%*C |
34.00 |
34.00 |
||
| Total |
F |
89.00 |
Not reversed |
0 |
89.00 |
| Input GST refund (+) |
G |
22.6 |
Completely reversed |
-22.6 |
0.0 |
|
Settlement Value |
H = C-D-E-F+G |
445.6 |
|
-654.1 |
-208.5 |
* Values are assumed for sake of explanation. Actual policy and value may vary based on channel and type of return - courier or customer.
Also notice the net effect column in the table. It is calculated as sum of values in the shipped and returned section. This will actually show the actual cost incurred by brands in case of returns.