GST (Goods and Services Tax)

Let’s say you’re a shopkeeper and you sell headphones. You want to receive eighty dollars for the headphones. But in New Zealand, you can’t just charge eighty dollars. You also have to charge GST — Goods and Services Tax. That means you need to add a bit more to the price. How much more? Fifteen percent. Fifteen percent of eighty dollars is twelve dollars. So the customer pays eighty dollars plus twelve dollars — which is ninety-two dollars in total.

You’ll hear two important phrases when dealing with GST. GST inclusive means the price already includes GST — it’s the total the customer pays. In our example, ninety-two dollars is the GST inclusive price. GST exclusive means the price without GST — it’s the amount before GST is added. In our example, eighty dollars is the GST exclusive price.

Now let’s learn how to calculate GST. A laptop costs one thousand two hundred dollars before GST. To find fifteen percent, we convert: fifteen percent becomes zero point one five. ‘Of’ becomes multiply. And the amount stays the same.

On your calculator, type one thousand two hundred times zero point one five. That gives us one hundred and eighty dollars. The GST is one hundred and eighty dollars.

Now, what if we want to find the price including GST? A phone costs six hundred dollars before GST. To increase by fifteen percent, we multiply by one point one five. Why one point one five? Because one hundred percent plus fifteen percent equals one hundred and fifteen percent, which is one point one five.

On your calculator, type six hundred times one point one five. That gives us six hundred and ninety dollars. The price including GST is six hundred and ninety dollars.

Now the trickiest type — finding the price before GST. A TV costs nine hundred and twenty dollars including GST. What was the price before GST? We need to think about what number we’d increase by fifteen percent to get nine hundred and twenty. How do we increase a number by fifteen percent? We multiply by one point one five. So one point one five times something equals nine hundred and twenty. Let’s call the unknown x. To solve, we do the opposite to both sides. We divide both sides by one point one five. On the left, one point one five divided by one point one five cancels out, leaving just x. On the right, nine hundred and twenty divided by one point one five is eight hundred. x equals eight hundred. The price before GST was eight hundred dollars.