Frequently asked questions
What is the difference between VAT and sales tax?
VAT is collected at each stage of production and supply, with businesses reclaiming input VAT. Sales tax is applied once at the final retail sale. For consumers, the end effect is similar at the same rate, but the collection mechanism differs.
How do I remove VAT from a gross price?
Divide the gross amount by (1 + VAT rate as decimal). For 20% VAT: net = gross ÷ 1.20. Do not simply subtract 20% of the gross — that gives the wrong answer because the percentage is based on the net, not the gross.
What VAT rate should I use?
Standard VAT rates vary by country: UK 20%, Germany 19%, France 20%, India GST 18%, Australia GST 10%. Some goods have reduced or zero rates. Use the rate applicable to your specific product and jurisdiction.
Is GST the same as VAT?
Functionally yes. GST (Goods and Services Tax) is the name used in India, Australia, Canada, Singapore, and others for what Europe calls VAT. The calculation is identical — only the name and specific rates differ.
Can VAT be applied on top of VAT?
No. VAT is not compounded. It is calculated once on the net (tax-exclusive) price. If you see VAT being added to a price that already includes VAT, the first VAT should be removed before applying the new rate.