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How do you calculate GST in an invoice or gas bill?

Expert: Julia Germain

Mandy asked:

How do you calculate the Gst when it is included in a price.

For example, Total Purchases was $39.07 GST is $2.22. What is the formula for getting the answer?

Julia Germain answered:

By the example you gave, it is most probably a gasoline receipt. For gasoline - the GST is a piggybacked tax. The final tax on top of other taxes.

The formula for calculating the GST on gasoline using your example :$ 39.07 divide by 1.06 = $ 36.86 (net cost)$ 36.86 multiply by .06 = 2.21 (I guess the gas company rounded up to $2.22)

Since your example is a non-harmonized tax province, I won't get into the HST.

Other calculations would be a little different if there is Provincial Sales Tax involved.

For example in Ontario the PST is 8%.

Thus if you bought a chair for $ 100 - the GST would be $ 6.00 but the total outlay of money for the chair including all taxes would be $ 114.00. For accounting purposes - the cost of chair is $ 108 and the GST for business purposes reduces the amount that has to be remitted to CRA.

If a receipt states - GST Included and there is no specific amount for the GST stated - then if there is a GST # included - there is 6% GST built into the total outlay of money. But you must be aware of what has PST built inalso.

Examples would be:

  • Taxi's & Limos - Receipts always say GST included with the GST # stated -thus the formula to calculate the GST is the same as for Gasoline.
  • Parking - Receipts will quote GST #'s but not always state the GST amountbut parking is normally subject to PST.

    Thus your formula could be :

    • $ 15.00 (outlay of cash) divided by 1.14 = $ 13.16 (net cost)
    • $ 13.16 multiply by .08 = $ 1.05 which is the PST portion built in
    • $ 13.16 multiply by .06 = $ 0.79 which is the GST portion built in.

Beware of receipts that show GST amounts and/or state GST included that do not state the GST #.

In order to collect GST - the GST number must be supplied. Please refer to previous Ask The Expert response "Should GST be paid".

About the author

Julia Germain is an accounting and business consultant specializing in setting up accounting systems, budgets, cash flow and helping businesses grow servicing companies in York Region. Julia runs Ask the Accountant Inc., a company operating in the Greater Toronto Area. Contact Julia at Ask the Accountant Inc., Tel : 416-573-4229.

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