You see it all the time. A product costs $1,100. But is that $1,100 including GST? Or is GST going to be added on top? This is a simple question. But getting it wrong can cause problems with your invoices, pricing and bookkeeping.
If you run a GST-registered business, it is important to know the difference between GST-inclusive and GST-exclusive prices. Let’s make it simple.
What does GST-inclusive mean?
A GST-inclusive price already includes GST. There is nothing extra to add. For example, you sell a service for: $1,100 including GST. The $1,100 is the total amount your customer pays. It is made up of: Price before GST: $1,000, GST: $100. Total: $1,100. So when someone tells you a price is GST-inclusive, the GST is already included in the amount.
What does GST-exclusive mean?
GST-exclusive means the price does not include GST. GST needs to be added to the price. For example, you quote: $1,000 + GST. The GST is: $1,000 × 10% = $100. So the customer pays: $1,000 + $100 = $1,100. The $1,000 is the GST-exclusive price. The $1,100 is the GST-inclusive price.
The easiest way to remember it
Think about it this way: GST-exclusive = GST still needs to be added. GST-inclusive = GST is already included. That one difference can save you from a lot of confusion.
Example 1: Selling a service
Let’s say you run a consulting business. You charge $2,000 excluding GST for a project. GST is 10%. So: $2,000 × 10% = $200 GST. Your invoice total becomes: $2,200 including GST. The customer pays $2,200. You have: $2,000 as the price before GST. $200 as GST. $2,200 as the total.
Example 2: The price already includes GST
Now imagine your customer has agreed to pay $2,200 including GST. You need to work backwards. To find the GST component, divide the GST-inclusive amount by 11: $2,200 ÷ 11 = $200 GST. Then: $2,200 − $200 = $2,000. So the price before GST is $2,000. This is where people often make a mistake. Don’t calculate 10% of $2,200 to find the GST. That would give you $220. The correct GST component is $200.
Example 3: Buying business equipment
The same idea applies when you are buying something for your business. Suppose you buy a computer for $3,300 including GST. The GST component is: $3,300 ÷ 11 = $300. So: Price before GST: $3,000. GST: $300. Total: $3,300
If the purchase is for your business and meets the requirements, you may be able to claim the $300 as a GST credit. This is why it is useful to know whether the price you are looking at includes GST.
Example 4: Comparing two quotes
Imagine you receive two quotes for the same service. The first business quotes: $5,000 + GST. The second business quotes: $5,500 including GST. At first glance, the quotes look different. But they are actually the same. The first quote: $5,000 + $500 GST = $5,500.
The second quote: $5,500 including GST. Both have the same final price. So when comparing quotes, always check whether the amounts are GST-inclusive or GST-exclusive.
How to convert GST-exclusive to GST-inclusive
This one is easy. Take the GST-exclusive price and multiply it by 1.1. For example: $4,000 × 1.1 = $4,400. So: GST-exclusive: $4,000, GST: $400, GST-inclusive: $4,400. You can also calculate it in two steps: $4,000 × 10% = $400 GST. $4,000 + $400 = $4,400. Both methods give you the same result.
How to convert GST-inclusive to GST-exclusive
Now let’s go backwards. Suppose the total price is $4,400 including GST. Divide by 1.1: $4,400 ÷ 1.1 = $4,000. Or find the GST first: $4,400 ÷ 11 = $400 GST. Then: $4,400 − $400 = $4,000. Again, both methods give you the same answer.
A quick GST cheat sheet
Keep these formulas handy.
To add GST: GST = GST-exclusive price × 10%, GST-inclusive price = GST-exclusive price × 1.1
To remove GST: GST-exclusive price = GST-inclusive price ÷ 1.1, GST component = GST-inclusive price ÷ 11
These are simple calculations. But they are useful ones to know.
Why does this matter when setting your prices?
This is especially important when you prepare quotes. Let’s say you want to receive $1,000 before GST from a customer. Your quote should be: $1,000 + GST. The customer will pay $1,100.
But if you tell the customer the total price is $1,000 including GST, your business only receives $909.09 before GST. The GST component would be: $1,000 ÷ 11 = $90.91. And your price before GST would be: $909.09.
That is a big difference. So always be clear about whether your prices include GST.
What should your invoices show?
If you are GST registered and making taxable sales, your invoices need to meet the relevant tax invoice requirements. For GST-inclusive prices, the invoice should make the GST treatment clear.
For example: Total including GST: $1,100, GST included: $100. For a GST-exclusive quote, you might show: Service: $1,000, GST: $100, Total: $1,100.
Clear invoices make things easier for both you and your customer.
Don’t assume every price includes GST
This is another common mistake. You see a price of $500 and assume GST is included. But that may not always be the case. If you are buying from a business that is not registered for GST, for example, there may be no GST to claim.
Some goods and services can also be GST-free or input taxed. So don’t automatically add 10% or assume that 1/11th of a price is GST. First, understand the GST treatment of the transaction.
GST-inclusive vs GST-exclusive: The simple difference
At the end of the day, it comes down to one thing.
GST-exclusive: GST is added to the quoted price. GST-inclusive: GST is already part of the quoted price.If you remember that, the calculations become much easier.
And if you are running a business, always make it clear on your quotes and invoices. Because saying “$1,000” is not always enough. Say “$1,000 + GST” or “$1,100 including GST.” That small clarification can prevent a very awkward conversation later.
