How to add or remove VAT from a price

Adding VAT (exclusive amounts)

If your price does not include VAT yet, you add it on top:

VAT = Amount × Rate ÷ 100 and Total = Amount + VAT

At 20%, a 1,000 price becomes 1,200 — 200 in VAT, 1,000 net.

Removing VAT (inclusive amounts)

This is the direction people get wrong. If the price already includes VAT, you cannot just subtract 20% — that gives the wrong base. You divide instead:

Base = Amount ÷ (1 + Rate ÷ 100) and VAT = Amount − Base

At 20%, a 1,200 inclusive price is 1,000 + 200 VAT. Subtracting 20% from 1,200 would give 960 — wrong, because the 20% has to come off the base, not the total.

The gap between "1,200 inclusive" and "1,200 plus VAT" (which is 1,440) is the most common billing error there is, and it is worth a full tax rate of margin.

VAT is not GST, and neither is a sales tax

They are all consumption taxes, but they are not interchangeable:

• VAT (most of Europe, the UK, and many others) is charged at each stage of the supply chain, with businesses reclaiming the VAT they paid on inputs.
• GST (India, Australia, Canada, Singapore, and others) works the same way but with its own rates and rules — India's slabs are 5%, 12%, 18%, and 28%.
• Sales tax (notably in the US) is charged once, at the final sale, and is usually not built into listed prices.

For Indian GST specifically, our GST calculator handles every slab in both directions, and GST and EMI calculators every Indian business needs covers the invoicing mistakes to avoid.

Get the direction right first

Before you compute anything, decide which way you are going: is this price net of VAT (add) or gross (remove)? The VAT calculator does both at common rates, so an invoice is right the first time. Pick the rate for the country you are selling into, confirm reduced-rate goods with your accountant, and let the formula handle the rest.