GST / VAT کیلکولیٹر

Adding tax multiplies; removing it divides

The [msm_tool slug="gst-vat-calculator"] shows net, tax and gross together specifically because the two directions are not mirror images of each other: adding tax to a net price is a multiplication, and taking it back out of a gross price is a division, not a subtraction. Taking 20% out of a gross price means dividing by 1.2, because the original 20% was calculated against the smaller net figure, not the gross one being worked backwards from.

Why subtracting the percentage gives the wrong answer

On a gross price of 120 at a 20% rate, the correct net is 100 and the tax is 20. Subtracting 20% from the gross instead gives 96, because that percentage is being taken from a base six times larger than the one the tax was actually calculated on in the first place. That single mismatch between the base used and the base available is the source of most tax arithmetic errors.

The rate is a legal question before it is an arithmetic one

Most tax systems carry reduced rates and outright exemptions for categories such as food, books, medicine and transport, which is why the rate here is entered rather than picked from a fixed list — a list would inevitably go stale, and which rate genuinely applies to a specific supply is a determination the arithmetic itself cannot make.

A business below the registration threshold sits outside this entirely

A business trading under the applicable threshold does not charge tax on what it sells and cannot reclaim tax on what it buys, so neither the net nor the gross figure produced here actually applies to it — the whole calculation assumes a registered, tax-charging business.

An invoice needs the tax shown separately

A single combined total does not let a customer reclaim input tax; a proper invoice states the net amount, the rate, the tax amount and the gross figure as four distinct lines rather than one number that happens to be correct.

GST and VAT are largely the same idea under different names

Both describe a consumption tax collected in stages along the supply chain, with registered businesses reclaiming what they paid on their own inputs. GST is the term used in India, Australia, Canada and New Zealand; VAT is the term used across the UK, the EU and much of the rest of the world for essentially the same mechanism.