Short answer
Break-even ROAS is the order value divided by what the order earns before ad spend. If a ₹1,499 order earns ₹693 after GST, product, shipping, fees and returns, break-even ROAS is about 2.16. Below that, each ad order loses money. The free ROAS calculator on this site does the sums for your own numbers.
Free tools for this
ROAS in one line
Return on ad spend is the sales your ads report divided by what you spent on them. A ROAS of 3 means ₹3 of sales for every ₹1 of ad spend. It says nothing about profit until you set it against your margin.
The formula
Break-even ROAS = order value ÷ what one order earns before ads. What an order earns before ads is the price without GST, minus product cost, shipping and packaging, payment fees and the cost of returns and failed deliveries. It is also the most you can pay to get one order.
Try it now: Break-even ROAS Calculator → · Shopify Profit Margin and Fees Calculator →
A worked example
An order of ₹1,499 including 18% GST has ₹1,270 of sales before GST. Take off product cost of ₹450, shipping and packaging of ₹85, a 2% payment fee of about ₹30 and ₹12 for returns. The order earns about ₹693 before ads.
Break-even ROAS is 1,499 ÷ 693, which is about 2.16. Spend ₹693 to get one order and you break even. Spend less and you profit. The numbers here are an example, not a quote of anyone's rates.
Why GST is in the top and out of the bottom
The ad platform reports the order value the customer paid, GST included, so the top of the sum includes it. But GST belongs to the government, so what the order earns is worked out without it.
From break-even to a target
Break-even means no profit. To earn a margin, subtract it from what each order earns before ads, and divide the order value by what is left. At a 10% margin on the example, the most you can pay per order falls to about ₹566 and the target ROAS rises to about 2.65.
The conversion rate behind it
Divide your cost per click by the most you can pay per order. At ₹12 a click and ₹693 per order, that is about 1.7%. If your store converts fewer than 1.7% of clicks into orders, the ads lose money however good the creative is.
This is why conversion rate and ROAS move together: a store that converts better can afford a lower ROAS.
When to run below break-even
Only when the first order leads to repeat orders you can count, and you have measured that repeat rate. A hoped-for repeat is not a margin. Also check your tracking: a reported ROAS is only as true as the sales your tracking catches.