The Goods and Services Tax (GST) is a value-added tax levied on most goods and services sold for domestic consumption. For businesses, understanding how to calculate and apply GST is crucial for compliance and pricing strategy.
How GST Works
GST is a destination-based tax. It is collected by the seller at the point of sale and passed on to the government. However, businesses can claim Input Tax Credit (ITC) on the GST they paid on their purchases, meaning the tax is ultimately borne by the final consumer.
Adding vs. Removing GST
- Adding GST (Exclusive): If a product costs $100 and the GST rate is 10%, the final price is $110.
- Removing GST (Inclusive): If a product sells for $110 (including 10% GST), the base price is $100, and the GST portion is $10.
Calculating inclusive GST manually can be tricky because you divide by (1 + rate) rather than just multiplying. To avoid errors in your invoicing, always use a reliable GST Calculator.