How to Calculate Tax (GST, VAT, Sales Tax) Accurately in Quotations

Calculating taxes correctly on a commercial quote is vital. Underquoting tax causes profit loss, while inaccurate tax calculations trigger regulatory rejection or customer disputes. ### 1. Tax-Exclusive Calculations (Add-on Tax) In tax-exclusive pricing, the unit rates do not include tax. The tax is added to the subtotal: ``` Tax Amount = Net Subtotal * (Tax Rate / 100) Grand Total = Net Subtotal + Tax Amount ``` ### 2. Tax-Inclusive Calculations (Tax Embedded in Price) In consumer-facing retail and certain European/Australian markets, prices are stated inclusive of tax: ``` Taxable Base = Gross Total / (1 + (Tax Rate / 100)) Tax Amount = Gross Total - Taxable Base ``` ### 3. Handling Multiple Taxes (e.g. CGST + SGST in India) In intra-state sales in India under GST, an 18% total tax is split equally: - Central GST (CGST) = 9% - State GST (SGST) = 9% Both apply to the taxable value after line discounts are deducted. ### Avoiding Decimal Rounding Errors Always calculate line items with full floating or arbitrary precision (like Decimal.js) and only round to 2 decimal places at the grand total level to prevent discrepancies.