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Inclusive and Exclusive Tax in GST Invoice – Tally Prime

Inclusive and Exclusive Tax in GST Invoice

Understanding GST calculation and recording in Tally Prime

1. Understanding Inclusive vs. Exclusive Tax

When preparing a GST invoice, it is important to understand whether the selling price already contains GST or whether GST has to be added to the selling price.

INCLUSIVE TAX

Tax Included in the Rate

The item rate already includes GST. The GST portion is included within the selling price.

Example:
Selling price = ₹118
GST rate = 18%

Taxable value = ₹100
GST = ₹18
Total = ₹118
Taxable Value = Inclusive Price × 100 ÷ (100 + GST Rate)
EXCLUSIVE TAX

Tax Added to the Rate

The item rate does not include GST. GST is calculated separately and added to the item value.

Example:
Item price = ₹100
GST rate = 18%

Taxable value = ₹100
GST = ₹18
Total = ₹118
GST = Taxable Value × GST Rate ÷ 100

2. Quick Comparison

Particulars Exclusive Tax Inclusive Tax
Meaning GST is added separately GST is already included
Rate entered Rate excluding GST Rate including GST
Example rate ₹100 ₹118
GST @ 18% ₹18 ₹18 included
Invoice total ₹118 ₹118
Invoice display Tax shown separately Tax included in item rate
Key point: Both methods can result in the same final selling price. The difference is how the GST amount is treated and calculated from the rate entered in the transaction.

3. GST Calculation Examples

A. Exclusive GST Calculation

Suppose a product is sold for ₹1,000 and GST is 18%. The ₹1,000 is the taxable value before GST.

GST = ₹1,000 × 18 ÷ 100 = ₹180

Invoice Total = ₹1,000 + ₹180 = ₹1,180
Particular Amount
Taxable Value ₹1,000
GST @ 18% ₹180
Total Invoice Value ₹1,180

B. Inclusive GST Calculation

Suppose the customer is charged ₹1,180 as the final price and this amount already includes 18% GST.

Taxable Value = ₹1,180 × 100 ÷ 118 = ₹1,000

GST = ₹1,180 – ₹1,000 = ₹180
Particular Amount
Inclusive Selling Price ₹1,180
Taxable Value ₹1,000
GST @ 18% ₹180
Total Invoice Value ₹1,180

4. Configuring GST in Tally Prime

Before recording GST transactions, GST needs to be enabled and the relevant GST configuration should be checked.

  1. Go to Gateway of Tally → F11 (Features) and open the statutory/GST configuration.
  2. Enable GST and enter the applicable GST details required for the company.
  3. In voucher entry, open F12 (Configure) and enable the relevant option for inclusive/exclusive tax calculation, if available in your Tally Prime configuration/version.
  4. While creating or editing stock items, configure the appropriate GST/tax details and rate.
  5. During sales entry, enter the rate according to whether the price is inclusive or exclusive of GST.
Important: Menu names and configuration options can vary depending on the Tally Prime release, GST configuration, and voucher settings. Always verify the GST setup before entering live transactions.

5. Creating GST Ledgers

GST tax ledgers are generally created under the Duties & Taxes group.

Ledger Group Tax Type Use
CGST Duties & Taxes GST Central GST component
SGST Duties & Taxes GST State GST component
IGST Duties & Taxes GST Integrated GST component
Remember: CGST + SGST generally applies to an intra-state supply, while IGST generally applies to an inter-state supply, subject to the applicable GST rules.

6. Recording a Sales Voucher in Tally Prime

Scenario A: Exclusive Tax

  1. Open Gateway of Tally → Vouchers → Sales (F8).
  2. Select the required customer/party and sales details.
  3. Select the stock item and enter the quantity and rate excluding GST.
  4. Select the appropriate GST ledgers, such as CGST and SGST or IGST, according to the transaction.
  5. Tally calculates the applicable GST separately.
  6. The invoice total becomes the taxable value plus GST.
Example:
Item value = ₹5,000
GST @ 18% = ₹900
Invoice Total = ₹5,900

Scenario B: Inclusive Tax

  1. Open the Sales Voucher.
  2. Open F12 (Configure) and use the applicable inclusive-tax/rate configuration available in your Tally Prime setup.
  3. Enter the item rate including GST.
  4. Tally works backwards to determine the taxable value and GST contained in the inclusive price.
  5. The final invoice value remains the inclusive selling price.
Example:
Inclusive item value = ₹5,900
GST @ 18% included = ₹900
Taxable value = ₹5,000
Invoice Total = ₹5,900

7. Practical Example: Same Final Price

Consider a product where the final customer price is ₹11,800 and GST is 18%.

Particulars Exclusive Tax Inclusive Tax
Rate entered ₹10,000 ₹11,800
Taxable value ₹10,000 ₹10,000
GST @ 18% ₹1,800 ₹1,800 included
Final invoice value ₹11,800 ₹11,800
Customer sees ₹10,000 + GST ₹1,800 ₹11,800 inclusive of GST
Simple rule:
Exclusive = Add GST to the price.
Inclusive = Remove GST from the final price to find the taxable value.

8. Common Mistakes to Avoid

  • Entering ₹118 as an exclusive rate when the intended customer price is ₹118 inclusive of 18% GST.
  • Calculating 18% directly on an inclusive amount. For example, GST included in ₹118 is ₹18, not ₹21.24.
  • Using CGST + SGST or IGST incorrectly.
  • Forgetting to configure the correct GST rate for the stock item or transaction.
  • Not checking whether the invoice rate is meant to be tax-inclusive or tax-exclusive.
Exam tip: If a question says “₹1,180 including 18% GST”, do not calculate GST as 18% of ₹1,180. First find the taxable value: ₹1,180 × 100 ÷ 118 = ₹1,000.

9. Formula Cheat Sheet

Situation Formula
GST on exclusive price Taxable Value × GST Rate ÷ 100
Total with exclusive GST Taxable Value + GST
Taxable value from inclusive price Inclusive Price × 100 ÷ (100 + GST Rate)
GST contained in inclusive price Inclusive Price − Taxable Value
Example: ₹5,900 inclusive of 18% GST Taxable Value = 5,900 × 100 ÷ 118 = ₹5,000 GST = 5,900 − 5,000 = ₹900

10. Practice Questions

Question 1 — Basic

A product is sold for ₹1,000 excluding GST. GST is 18%. Calculate the GST and final invoice value.

Show Answer

GST = ₹1,000 × 18% = ₹180

Invoice Total = ₹1,000 + ₹180 = ₹1,180

Question 2 — Inclusive Tax

A product is sold for ₹2,360 inclusive of 18% GST. Find the taxable value and GST amount.

Show Answer

Taxable Value = ₹2,360 × 100 ÷ 118 = ₹2,000

GST = ₹2,360 − ₹2,000 = ₹360

Question 3 — CGST and SGST

An item has a taxable value of ₹10,000. GST is 18% and the supply is intra-state. Calculate CGST, SGST and the invoice total.

Show Answer

Total GST = ₹10,000 × 18% = ₹1,800

CGST @ 9% = ₹900

SGST @ 9% = ₹900

Invoice Total = ₹10,000 + ₹900 + ₹900 = ₹11,800

Question 4 — Inclusive Pricing

A retailer wants to sell an item for a final price of ₹5,900, inclusive of 18% GST. What rate should represent the taxable value before GST?

Show Answer

Taxable Value = ₹5,900 × 100 ÷ 118 = ₹5,000

GST = ₹900

Question 5 — Tally Prime

You are entering a sales invoice in Tally Prime for an item priced at ₹1,180 including 18% GST. Should you treat ₹1,180 as an exclusive or inclusive rate?

Show Answer

It should be treated as an inclusive rate, because the ₹1,180 already contains the 18% GST.

Question 6 — Conceptual

What is the main difference between inclusive and exclusive GST?

Show Answer

In exclusive GST, GST is calculated on the taxable value and added separately.

In inclusive GST, the final price already contains GST, so the taxable value has to be derived from the final price.

11. Quick Revision

Remember Rule
Exclusive GST Price + GST = Final Price
Inclusive GST Final Price already contains GST
18% Exclusive Example ₹100 + ₹18 = ₹118
18% Inclusive Example ₹118 = ₹100 + ₹18
Inclusive Formula Price × 100 ÷ 118
One-line memory trick:

Exclusive → Add tax.
Inclusive → Extract tax.
GST Invoice Learning Guide • Inclusive & Exclusive Tax • Tally Prime