GST: Adding vs Removing Tax From a Price, Explained

GST calculations trip people up in a specific, predictable way: they assume that removing GST from a price is just the reverse of adding it, using the same percentage in the opposite direction. It isn't quite that simple, and the mix-up usually happens because of how percentages behave.

Adding GST is the straightforward case. If you have a base price that doesn't yet include tax, you calculate the GST amount as a percentage of that base price, then add it on top. A base price of 1000 with 18% GST means a GST amount of 180, for a total of 1180. That part matches most people's intuition.

Removing GST is where it gets less obvious. If you're given a final price that already includes GST, say, that same 1180, you can't just calculate 18% of 1180 and subtract it, because 18% of 1180 is not the same as 18% of the original 1000. Instead, you have to divide the GST-inclusive amount by (1 + tax rate) to find the original base price, then the difference between that and the total gives you the actual GST amount. For our example, 1180 divided by 1.18 gives back exactly 1000, the correct base price, with 180 as the GST portion.

This distinction matters most when you're reading an invoice or a price tag and need to know exactly how much of what you're paying is tax versus the actual cost of the item or service, or when you're pricing something and need to back-calculate what to charge so that, after tax, it lands on a specific total.

Rather than doing this division by hand every time, our GST Calculator has both directions built in, choose "Add GST" when you have a tax-exclusive amount, or "Remove GST" when your amount already includes tax, and it handles the correct formula for each case automatically.