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GST math for traders

Inclusive and exclusive prices, taking GST out of an MRP, input tax credit and your net GST payable.

By Manoj Sahukar October 2026 7 min read

How numbers are rounded on these pages. Calculations are done at full precision and rounded only at the end, half up. Rupee amounts are rounded to the nearest rupee unless shown with paise, in which case to the nearest paisa. Percentages are shown to two decimal places, and days to one decimal place. Break-even quantities and reorder levels are rounded up to the next whole unit, because rounding down would leave you short. Economic order quantity is rounded to the nearest whole unit. Interest for a number of days uses a 365-day year. All examples and quiz questions are Hypothetical: they show the method, not real prices or rates.

GST math for traders

For a trader registered under the regular GST scheme, GST is not your income and not your cost. You collect it on sales (output tax), you pay it on purchases (input tax), and you pay the government the difference, after setting off the input tax credit you are eligible for. So for pricing, margins and break-even, work with values excluding GST.

The two everyday calculations are going from a price excluding GST to the invoice total, and going back from a GST-inclusive price (such as an MRP, which is inclusive of all taxes) to the taxable value and the GST inside it. The common mistake is to take 18% of the inclusive price; that overstates the GST.

The rates used on this page (5% and 18%) are examples only. Actual GST rates depend on the product and change from time to time; check the current rate for your goods. Input tax credit is available only when the conditions in the GST law are met, for example a valid tax invoice, receipt of the goods, and the supplier having reported the invoice. Traders under the composition scheme cannot collect GST from customers or claim input tax credit, so these calculations do not apply to them as written.

The standard formulas

From a price excluding GSTGST = Taxable value × GST rate100Invoice value (GST-inclusive) = Taxable value + GST
Back-calculating from an inclusive priceTaxable value = Inclusive price × 100100 + GST rateGST included = Inclusive price × GST rate100 + GST rate
Which GSTWithin a state: CGST = SGST = half the GST rate eachBetween states: IGST = full rate
Monthly or quarterly liabilityNet GST payable = Output tax − Eligible input tax credit

Terms used

Taxable value
The value of the supply on which GST is calculated, excluding GST itself.
Output tax
GST you charge on your sales.
Input tax / input tax credit (ITC)
GST you paid on purchases for your business. If you meet the conditions, you can set it off against your output tax.
CGST, SGST, IGST
Central and State GST, charged in equal halves on a sale within a state; Integrated GST, charged on a sale from one state to another.
Inclusive / exclusive price
An inclusive price already contains GST; an exclusive price has GST added on top.

Worked examples

HypotheticalBasicFrom taxable value to invoice total

A trader in Pune sells goods with a taxable value of ₹10,000 to a shop in Pune. Assume GST at 18%.

  • GST = ₹10,000 × 18% = ₹1,800, charged as CGST ₹900 + SGST ₹900 (a sale within the state).
  • Invoice total = ₹10,000 + ₹1,800 = ₹11,800

If the buyer were in another state, the same ₹1,800 would be charged as IGST.

HypotheticalIntermediateBack-calculating GST from an inclusive price

A customer is quoted ₹2,360 including 18% GST. How much is GST?

  • Taxable value = ₹2,360 × 100 ÷ 118 = ₹2,000
  • GST included = ₹2,360 × 18 ÷ 118 = ₹360
  • Common mistake: 18% of ₹2,360 = ₹424.80, which overstates the GST by ₹64.80.

At an example rate of 5%: ₹1,050 inclusive = ₹1,000 taxable value + ₹50 GST.

HypotheticalAdvancedInput tax credit and net GST payable for a month

A distributor's month (example rates; all ITC assumed eligible):

Taxable valueRateGST
Purchases₹6,00,00018%₹1,08,000
Purchases₹2,00,0005%₹10,000
Sales₹7,00,00018%₹1,26,000
Sales₹2,40,0005%₹12,000
  • Input tax credit = ₹1,08,000 + ₹10,000 = ₹1,18,000
  • Output tax = ₹1,26,000 + ₹12,000 = ₹1,38,000
  • Net GST payable = ₹1,38,000 − ₹1,18,000 = ₹20,000

If a supplier does not report an invoice, or a credit is not eligible, the ITC falls and the cash you pay rises by the same amount.

Quiz: GST math for traders

Pick an answer to see at once whether it is right, with a short explanation. Each question takes one try; your score appears at the end. No answers are sent anywhere. (Without JavaScript, open “Show answer” under each question.)

  1. GST · BasicTaxable value ₹5,000, GST at 18% (example rate). What is the invoice total?
    Show answer

    Answer: (b) ₹5,900

    ₹5,000 + 18% of ₹5,000 (₹900) = ₹5,900.

    Why the other options are wrong:

    • (a) That is the GST only.
    • (c) That subtracts GST instead of adding it.
    • (d) That adds 1.8% instead of 18%.
  2. GST · BasicA sale within the same state, taxable value ₹20,000, GST at 18%. How is the GST charged?
    Show answer

    Answer: (c) CGST ₹1,800 + SGST ₹1,800

    18% of ₹20,000 = ₹3,600, split equally: CGST 9% = ₹1,800 and SGST 9% = ₹1,800.

    Why the other options are wrong:

    • (a) That charges the full 18% twice.
    • (b) IGST is for sales from one state to another.
    • (d) That is only 9% in total.
  3. GST · IntermediateA price of ₹1,180 includes 18% GST. How much GST is inside it?
    Show answer

    Answer: (b) ₹180.00

    GST = ₹1,180 × 18 ÷ 118 = ₹180. Taxable value = ₹1,000.

    Why the other options are wrong:

    • (a) That takes 18% of the inclusive price; GST is 18% of the taxable value.
    • (c) That is the taxable value, not the GST.
    • (d) A decimal slip on the wrong method (1.8% of ₹1,180).
  4. GST · IntermediateAn MRP of ₹105 is inclusive of GST at 5% (example rate). What is the taxable value?
    Show answer

    Answer: (b) ₹100.00

    ₹105 × 100 ÷ 105 = ₹100.00 taxable value; GST ₹5.00.

    Why the other options are wrong:

    • (a) Taking 5% off the inclusive price removes too much.
    • (c) That adds GST again.
    • (d) That is the GST, not the taxable value.
  5. GST · IntermediateThis month your output tax is ₹54,000 and your eligible input tax credit is ₹41,000. What is your net GST payable?
    Show answer

    Answer: (d) ₹13,000

    ₹54,000 − ₹41,000 = ₹13,000.

    Why the other options are wrong:

    • (a) Credits are subtracted, not added.
    • (b) That ignores your input tax credit.
    • (c) That is the credit, not the amount payable.
  6. GST · AdvancedYou buy goods with a taxable value of ₹3,00,000 and sell them for a taxable value of ₹3,60,000, both at 18%. All ITC is eligible. What is your net GST payable?
    Show answer

    Answer: (a) ₹10,800

    Output tax ₹64,800 − ITC ₹54,000 = ₹10,800, which is 18% of your ₹60,000 value added.

    Why the other options are wrong:

    • (b) That ignores input tax credit.
    • (c) That adds the purchase GST instead of subtracting it.
    • (d) That is your gross profit, not GST.
  7. GST · AdvancedYou quote ₹5,900 “all inclusive” (18% GST). Your landed cost excluding GST is ₹4,800 (ITC claimed). What is your margin?
    Show answer

    Answer: (b) 4.00%

    Taxable value = ₹5,900 × 100 ÷ 118 = ₹5,000. Profit = ₹200. Margin = ₹200 ÷ ₹5,000 = 4.00%.

    Why the other options are wrong:

    • (a) That counts the GST you collect as if it were your profit.
    • (c) That is a markup that also counts GST as profit.
    • (d) That is the markup (÷ cost), not the margin.
  8. GST · AdvancedPurchases: ₹1,00,000 at 5% and ₹2,00,000 at 18%. Sales: ₹1,20,000 at 5% and ₹2,30,000 at 18% (taxable values, example rates, all ITC eligible). Net GST payable?
    Show answer

    Answer: (c) ₹6,400

    Output = ₹6,000 + ₹41,400 = ₹47,400. ITC = ₹5,000 + ₹36,000 = ₹41,000. Net = ₹6,400.

    Why the other options are wrong:

    • (a) That ignores input tax credit.
    • (b) That applies 18% to everything.
    • (d) That applies 5% to everything.
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