← All guides

GST & Sales Tax Explained (Add, Remove, Reverse)

Tax · 5 min read · Last updated September 2026

Adding tax to a base price

Removing tax from a gross price (reverse GST)

This is the calculation businesses need for invoices quoted tax-inclusive, and shoppers need to see how much of a price is actually tax.

Common GST/VAT/sales tax rates

Rates change and reduced categories apply to specific goods — confirm with your tax authority for filings.

Common mistakes

• Removing tax by subtracting rate% of the gross (11,800 − 18% = 9,676 ❌) instead of dividing (11,800 ÷ 1.18 = 10,000 ✓).
• Applying one national rate to items that fall in reduced or exempt slabs.
• Ignoring compounding sub-taxes in US state/county/city stacks.

How the GST chain works across the supply chain

Because registered businesses claim input tax credits, the government effectively collects tax only on the value each stage adds. At 18% GST: a manufacturer sells components for ₹12,000 and remits ₹2,160. A wholesaler buys those components, sells assembled goods for ₹15,000 — charging ₹2,700 in tax but crediting the ₹2,160 already paid, so the wholesaler remits only ₹540. A retailer sells to you for ₹18,000 — charging ₹3,240, crediting ₹2,700, remitting ₹540. Total collected: 2,160 + 540 + 540 = ₹3,240 = exactly 18% of the final ₹18,000 price — the same as taxing the final sale once. This is why GST is called a value-added tax in most of the world.

Worked example: GST/VAT Calculator at its default inputs

A worked example is only useful if you can reproduce it. The defaults on GST/VAT Calculator give exactly the figures in this section, with no rounding done by us.

Default inputs

Input	Default
Amount	100
Tax Rate (%)	18

Result: Tax: $18.00 | Total: $118.00

The steps behind that answer

1. Step 1: Tax = $100 × 18% = $18.00
2. Step 2: Total = $100 + $18.00 = $118.00

Sensitivity: Amount from half to one-and-a-half times

Same calculator, same fields, one change: amount.

Sensitivity: Amount from half to one-and-a-half times

Amount	Result
50	Tax: $9.00 | Total: $59.00
100	Tax: $18.00 | Total: $118.00
150	Tax: $27.00 | Total: $177.00

The middle row is the default. The outer two show how far the answer drifts when amount is wrong by half or by a half in the other direction.

Related guides

• Freelance Rates
• The Freelance Rate Card
• Business Days
• Profit Margin

Inclusive and exclusive prices

A price quoted exclusive of tax needs the rate added; a price quoted inclusive already contains it, so the tax is the price multiplied by rate divided by one plus rate, not simply the rate. Mixing the two conventions on one invoice is the most common arithmetic error in small-business bookkeeping.

If a customer is quoted 100 inclusive at 18%, the tax is 15.25 and the net is 84.75. Applying 18% to 100 would overstate the tax by nearly three points and understate the net.

Input credit changes the real cost

A registered business usually reclaims the tax it paid on purchases against the tax it collects on sales. For them, the tax is a cash-flow item rather than a cost. An unregistered consumer cannot reclaim anything, so the same rate is a real cost.

That asymmetry explains why business-to-business pricing often quotes exclusive of tax while retail pricing must show the inclusive amount. It is also why comparing quotes from registered and unregistered suppliers needs care.

Multiple rates and mixed baskets

Where a jurisdiction applies different rates by category, a single basket can contain several. The right method is to apply each rate to its own line and sum the tax, not to average the rates across the basket.

Bundled goods and services are the hard case: a package that includes a standard-rated item and an exempt one may need to be split on the invoice, depending on local rules. When in doubt, show the lines separately.

Rounding and invoice totals

Tax is usually rounded at the invoice level or per line, and the two can differ by a small amount on a long invoice. Pick the method your accounting system uses and stay consistent, because a mismatch between the invoice and the return is an audit question even when the amount is trivial.

Keep the rate, the taxable base and the tax amount visible on every invoice. A total alone cannot be reconciled later, and reconstruction is where the errors appear.

FAQ

Is GST calculated on discounted price?

Yes — tax applies to the actual transaction value after discounts, not the pre-discount tag.

Do businesses get GST back?

Registered businesses typically claim input tax credits on purchases used for taxable supplies, so they pay tax only on value added. Rules and documentation requirements vary by country.

What is inclusive vs exclusive pricing?

Inclusive = the sticker price already contains tax (common in VAT countries). Exclusive = tax is added at checkout (common in the US and on B2B invoices). The reverse formula above converts between them.