How GST and VAT Are Calculated: Add, Remove and CGST/SGST Split

GST and VAT are both taxes on the value a business adds when it sells something, collected at each step and passed on to the government. For a customer or a small business owner, the maths comes down to two questions: what is the total when tax is added to a price, and how much of an inclusive price is tax?

Net, tax and gross

Three numbers appear on every invoice. The net amount is the price before tax, the tax is the GST or VAT charged on it, and the gross amount is what the customer pays. The relationships are simple.

• Tax = net × rate ÷ 100
• Gross = net + tax = net × (1 + rate ÷ 100)
• Net = gross ÷ (1 + rate ÷ 100)

For a net amount of ₹10,000 at 18%, the tax is ₹1,800 and the gross is ₹11,800. The GST VAT Calculator returns all three at once and works in any currency, so the same method applies to VAT in other countries. Check the current rate for your goods, because rates differ by item, by country and over time.

Removing GST or VAT from a total

When you only know the tax-inclusive price, you must divide, not subtract. From a gross of ₹11,800 at 18%:

Net = 11,800 ÷ 1.18 = ₹10,000, so the tax is ₹1,800.

Subtracting 18% of 11,800 gives ₹9,676. That is ₹324 too low, because the 18% applies to the smaller net amount, not to the gross.

The Indian split: CGST, SGST and IGST

In India, GST on a sale inside one state is split equally between the central government (CGST) and the state (SGST). On a sale between states, a single integrated tax (IGST) is charged instead.

For the ₹10,000 net amount at 18%:

• Within one state: CGST ₹900 plus SGST ₹900, total tax ₹1,800.
• Between states: IGST ₹1,800.

Either way the customer pays ₹11,800. The split matters for the invoice and for the tax returns, not for the total. The calculator shows both breakdowns.

A second example at a lower rate

A product has a net price of ₹2,499 and attracts GST at 5%. The tax is ₹124.95 and the gross price ₹2,623.95. Working backwards, a gross of ₹1,050 at 5% is ₹1,000 of net and ₹50 of tax.

VAT-inclusive pricing

In the UK, the EU and many other countries, consumer prices usually include VAT. A shelf price of 120 at a 20% rate holds 100 of net and 20 of VAT. When you send your own invoice you often need to show the net, the VAT and the gross separately, which is the same division.

What the calculator does not handle

It applies one flat rate to one amount. It does not calculate input tax credit (the tax you paid on purchases, which you can offset), reverse-charge rules, exemptions, or invoices that mix several rates. For a bill with items at different rates, calculate each line separately, then add the results.

Practical tips for small businesses

1. Decide whether your price list is net or gross, and say so on the price list.
2. Show the rate, the tax amount and the total on every invoice.
3. Round the tax per line or per invoice consistently, and keep the same method.
4. Use the Percentage Calculator to check a margin after tax, and the Profit Margin Calculator to make sure the net price still leaves the margin you need.
5. For the general idea of adding and removing a sales tax, see how to add and remove sales tax.