The tax math people get wrong is stripping an embedded tax out of a final price — it's a division, not a subtraction. Here's inclusive vs exclusive tax, a global reference table, and how import duties stack.
How to add and strip out GST/VAT (inclusive vs exclusive), why you divide rather than subtract embedded tax, a global GST/VAT reference, and how customs duties stack on imports.
See also: Percentage calculator · Formula cheat sheet
Multiply the pre-tax price by (1 + rate). An item at $100 with 18% GST: 100 × 1.18 = $118.
To pull the tax out of a tax-inclusive total, divide; do not subtract the rate:
Base price = Total ÷ (1 + rate)
Why not just subtract 18%? Because the 18% was charged on the smaller base (₹1,000), not on the ₹1,180 total. Subtracting 18% of 1,180 (₹212.40) would overstate the tax and understate the base.
| Region | System | Typical standard rate |
|---|---|---|
| United States | State & local sales tax (added at checkout) | ~0–10%, varies by state/city |
| United Kingdom | VAT (usually included in shelf price) | 20% standard |
| European Union | VAT (member states set their own) | ~17–27% |
| India | GST — split into CGST + SGST (or IGST) | 5% / 12% / 18% / 28% slabs |
In India, an 18% intra-state GST is split evenly into 9% CGST + 9% SGST; on ₹1,000 that's ₹90 to the central government and ₹90 to the state. For inter-state supply it's a single 18% IGST instead.
Cross-border charges apply in sequence, and later charges are often calculated on the running total — so they don't simply add. Import a good valued at $1,000 with a 10% duty, then 20% VAT charged on the duty-inclusive value:
The total add-on is 32%, not the 30% you'd get by adding 10% + 20%, because the VAT compounds on top of the duty. This sequential stacking is the same reason two discounts don't simply add.
Divide the total by (1 + the tax rate), don't subtract the rate. To strip 18% GST from 1,180, compute 1,180 / 1.18 = 1,000 base, meaning 180 was tax. Subtracting 18% of the total overstates the tax.
Multiply the pre-tax price by (1 + rate). A $100 item with 18% GST becomes 100 x 1.18 = $118.
For intra-state sales, GST is split evenly between the central government (CGST) and the state (SGST). An 18% GST is 9% CGST + 9% SGST. Inter-state sales use a single IGST instead.
Because VAT is usually charged on the duty-inclusive value, not the original price. A 10% duty then 20% VAT on a $1,000 import lands at $1,320 — a 32% add-on, not 30 — since the VAT compounds on top of the duty.
Links point to primary sources and standards bodies. Tax rates and official formulas change over time — verify against the source for current figures.