Saved

Utilix knowledge base

How to Calculate GST and VAT

Published Apr 17, 2026

GST (Goods and Services Tax) and VAT (Value Added Tax) are consumption taxes applied to the sale of goods and services. Although the names differ by country, the mathematics is identical. Both are expressed as a percentage of the sale price.

Key Concepts

TermDefinition
Tax-exclusive price (net)Price before tax is added
Tax-inclusive price (gross)Price with tax already included
Tax amountThe portion that is tax

Adding Tax to a Net Price

When you know the net (pre-tax) price and want to find the gross (tax-inclusive) price:

Tax amount  = Net price × (Tax rate ÷ 100)
Gross price = Net price + Tax amount
            = Net price × (1 + Tax rate ÷ 100)

Example — add 20% VAT to £80:

Tax amount  = 80 × 0.20 = £16
Gross price = 80 + 16   = £96

Extracting Tax from a Gross Price

When you know the gross (tax-inclusive) price and want to find the original net price and tax amount:

Net price  = Gross price ÷ (1 + Tax rate ÷ 100)
Tax amount = Gross price − Net price

Example — extract 20% VAT from £96:

Net price  = 96 ÷ 1.20 = £80
Tax amount = 96 − 80   = £16

Common mistake: Multiplying the gross price by the tax rate (e.g. 96 × 0.20 = £19.20) gives the wrong answer. Always divide first.

Common Tax Rates by Country

CountryTaxStandard RateReduced Rate
UKVAT20%5% (energy, children's car seats)
EU (average)VAT~21%Varies by country and product
AustraliaGST10%— (exemptions, not reduced)
IndiaGST18%5%, 12%, 28% tiers
CanadaGST5%— (+ provincial HST/PST)
USASales TaxVaries by state (0–10%+)

Note: The USA uses a retail sales tax collected at point of sale, not a VAT/GST collected at each stage of the supply chain.

Multi-Stage VAT (Supply Chain)

VAT is collected at each stage of production but the tax is only paid once — each business claims back (reclaims) the VAT it paid on inputs:

Manufacturer sells to retailer: charges VAT, pays it to government
Retailer claims back that VAT, charges VAT on sale to consumer
End consumer bears the full tax; no reclaim available

This input-tax credit system prevents cascading taxes (tax on tax), which is one of the main advantages of VAT over older turnover taxes.

Tax-Inclusive vs Tax-Exclusive Pricing

  • B2C (consumer) prices are typically shown tax-inclusive (especially in Europe). Customers see the price they pay.
  • B2B (business) prices are often shown tax-exclusive because businesses reclaim VAT anyway.

Always confirm which basis applies before comparing prices or building quotes.

Use the GST/VAT Calculator to quickly add or remove tax from any price.