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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
| Term | Definition |
|---|---|
| Tax-exclusive price (net) | Price before tax is added |
| Tax-inclusive price (gross) | Price with tax already included |
| Tax amount | The 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
| Country | Tax | Standard Rate | Reduced Rate |
|---|---|---|---|
| UK | VAT | 20% | 5% (energy, children's car seats) |
| EU (average) | VAT | ~21% | Varies by country and product |
| Australia | GST | 10% | — (exemptions, not reduced) |
| India | GST | 18% | 5%, 12%, 28% tiers |
| Canada | GST | 5% | — (+ provincial HST/PST) |
| USA | Sales Tax | Varies 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.