GST and invoicing

Tax-inclusive price: how to work out GST from a price

Definition

Tax-inclusive price: A tax-inclusive price already contains GST, so the customer pays exactly that amount; a tax-exclusive price has GST added on top.

Also called: Price inclusive of GST, GST-inclusive price, Inclusive of all taxes, Tax-exclusive price, Reverse GST calculation

Inclusive and exclusive prices

A price can be quoted two ways. A tax-exclusive price is before GST: ₹100 plus 18% GST means ₹118 to pay. A tax-inclusive price already contains GST: a shelf price of ₹118 at 18% is ₹100 of value and ₹18 of tax, and the customer pays ₹118.

Shops selling to consumers usually work with inclusive prices, because that is what the customer pays, and many packs say MRP inclusive of all taxes. Manufacturers and distributors selling to businesses often quote exclusive prices, because the buyer claims the GST back as input tax credit.

How to calculate GST from an inclusive price

Divide, do not multiply. The taxable value is the inclusive price × 100 ÷ (100 + GST rate), and the GST is the inclusive price minus the taxable value.

At 18%: ₹1,180 × 100 ÷ 118 = ₹1,000 taxable value and ₹180 GST.
At 5%: ₹525 × 100 ÷ 105 = ₹500 taxable value and ₹25 GST.
Shortcut for the tax alone: at 18% it is 18/118 of the price, and at 5% it is 5/105.

Common mistakes with GST-inclusive prices

A tax invoice must still show the taxable value and the tax separately under Rule 46, even when the customer sees only one price on the shelf. These are the mistakes that make the numbers go wrong:

Taking 18% of the inclusive price. 18% of ₹1,180 is ₹212.40, which overstates the tax; the correct figure is ₹180.
Forgetting that a discount on an inclusive price lowers the tax too: 10% off ₹1,180 is ₹1,062, which is ₹900 plus ₹162 GST.
Mixing inclusive and exclusive prices in one price list, so staff are never sure whether to add GST.

Worked example

A Diwali gift hamper

A Jaipur gift shop sells a hamper with a shelf price of ₹1,770, and the product is taxed at 18%. Taxable value = ₹1,770 × 100 ÷ 118 = ₹1,500, so the GST is ₹270, shown as CGST ₹135 and SGST ₹135. With a 10% festival discount, the customer pays ₹1,593: a taxable value of ₹1,350 and GST of ₹243.

In managemate

managemate has one setting for this: Selling prices include GST, under Taxes in Settings. Turned on, a selling price of ₹118 at 18% stays ₹118 on the bill and is shown as ₹100 taxable value plus ₹18 GST; turned off, GST is added on top of the price. It applies to sales orders and counter sales, while purchase prices are always entered before GST. Line discounts come off the price first, and the invoice shows Subtotal (incl. GST), the taxable value and the CGST and SGST or IGST split, with a note that prices include GST. With the setting on, the product editor also shows how much GST a selling price contains.