GST and VAT work identically — a percentage tax added at each stage of the supply chain and ultimately borne by the end consumer. The calculation methods are simple once you understand the correct formulas.
Adding GST/VAT to a Net Price
Gross price = Net price × (1 + rate/100). For 10% GST: multiply by 1.10. For 15% NZ GST: multiply by 1.15. For 20% UK VAT: multiply by 1.20.
Example: Product costs A$500 ex-GST. GST-inclusive price = 500 × 1.10 = A$550. GST component = A$50.
Removing GST/VAT from an Inclusive Price
Net price = Gross price ÷ (1 + rate/100). For 10% GST: divide by 1.10. For 20% UK VAT: divide by 1.20.
GST amount = Gross price − Net price. Or equivalently: for 10% GST, GST = Gross ÷ 11 (the 1/11th rule). For 15% NZ GST, GST = Gross × 3/23.
Why the Percentage Shortcut Is Wrong
Common mistake: to find the GST in a $110 price, people multiply by 10% to get $11 — wrong. The correct answer is $10. Why? The 10% is applied to the net price, not the gross price. $100 × 10% = $10 GST = $110 gross. But $110 × 10% = $11 — that would imply the original price was $99. Divide by 1.10 (not multiply by 10%) to extract GST from a gross price.
GST and VAT Rates by Country
- 🇬🇧 UK VAT: 20% standard, 5% reduced (fuel, car seats), 0% (food, books, children's clothing)
- 🇦🇺 Australia GST: 10% flat (with some GST-free items: fresh food, medical, education)
- 🇳🇿 New Zealand GST: 15% on almost everything (very few exemptions)
- 🇩🇪 Germany VAT: 19% standard, 7% reduced
- 🇫🇷 France VAT: 20% standard, 5.5% food, 2.1% medicine
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