GST vs VAT, and How to Correctly Remove Tax From a Price
GST and VAT are the same kind of tax under different names. The trap is extracting the tax from a tax-inclusive price: divide by 1 + rate, never subtract the percentage.
To add tax: multiply the net price by (1 + rate). To remove tax from a tax-inclusive price: divide by (1 + rate) — for example £120 ÷ 1.20 = £100 net + £20 VAT. Subtracting 20% from £120 gives £96, which is wrong.
GST vs VAT — is there a difference?
Functionally, no. Both are consumption taxes collected in stages along the supply chain, with businesses reclaiming the tax they paid on inputs so the burden falls on the final consumer. 'GST' (Goods and Services Tax) is the name used in India, Australia, Canada, Singapore and others; 'VAT' (Value Added Tax) is used across the UK and EU. Sales tax (US) is different — it's charged only once, at the final retail sale.
Common standard rates
| Region | Standard rate | Notable reduced rates |
|---|---|---|
| India (GST) | 18% | 5%, 12%; 28% on luxury |
| UK (VAT) | 20% | 5% on home energy; 0% on most food & books |
| EU (VAT) | ~21% (varies by state) | Reduced rates on food, medicine, transport |
| Australia (GST) | 10% | 0% on basic food, health, education |
| Pakistan (GST) | 18% | See the Pakistan GST calculator |
Adding tax
Add 18% GST to a ₹10,000 net price
A business quoting a customer.
- Tax = ₹10,000 × 18%
- ₹1,800
- Gross (inclusive) price
- ₹11,800
Invoice total ₹11,800, of which ₹1,800 is GST.
Removing tax — the part people get wrong
Extract 20% VAT from a £120 gross price
You have a receipt and need the tax portion for a claim.
- Wrong: £120 − 20%
- £96 ❌
- Right: £120 ÷ 1.20
- £100 net
- VAT portion = £120 − £100
- £20
The £120 contains £100 net + £20 VAT.
Subtracting the percentage overstates the tax and understates the net. Always divide the gross by (1 + rate).
Why the two directions aren't symmetric
Adding tax works on the net price; removing tax works on the gross price, which is bigger. 20% of £100 is £20, but £20 is only 16.67% of the £120 gross. The reverse calculation has to account for that.
Add or remove GST/VAT
Pick a direction, enter the amount and rate, and get the net price, tax amount and gross price.
Open the GST / VAT calculator