GST inclusive vs exclusive pricing, with worked examples

The two directions of the same tax

An exclusive price is the value of what you supplied before tax. An inclusive price is what the customer actually pays. Both describe the same transaction, just from a different side of the invoice.

If you know the exclusive amount, GST is simple multiplication: tax equals amount multiplied by rate divided by 100. If you know only the inclusive amount, multiplication is wrong. You have to divide to take the tax back out.

Worked example: adding GST

A design retainer is quoted at 1,40,000 rupees before tax at 18 percent. GST is 25,200 rupees, so the invoice total is 1,65,200 rupees. For an intra-state supply the invoice usually shows CGST of 12,600 rupees and SGST of 12,600 rupees instead of a single GST line.

Worked example: extracting GST

A listed price of 1,65,200 rupees already includes 18 percent GST. The taxable value is 1,65,200 multiplied by 100 divided by 118, which is 1,40,000 rupees. The tax is 25,200 rupees. Notice that you cannot take 18 percent of 1,65,200, which would be 29,736 rupees. That would be taxing tax.

Extracting tax matters when you publish retail prices that include GST, or when a client says their budget is all-inclusive and you need to know what you are actually earning before tax.

Practical invoicing notes

Whether GST applies, at what rate and under which place-of-supply rule is a legal determination that depends on your registration, the goods or services, and the buyer's location. A calculator only does arithmetic.

• Round tax consistently and state your rounding convention if amounts repeat.
• Show the rate, taxable value, tax amount and total on the invoice.
• For inter-state supplies, the same tax amount is typically shown as IGST rather than CGST plus SGST.
• Keep sequential invoice numbering and retain copies for the period your jurisdiction requires.