Alex is Sprintlaw’s co-founder and principal lawyer. Alex previously worked at a top-tier firm as a lawyer specialising in technology and media contracts, and founded a digital agency which he sold in 2015.
Contents
If you run a small business in New Zealand, you’ve probably seen the phrases “GST inclusive” and “GST exclusive” everywhere - supplier invoices, quotes, website pricing, and even contracts.
And while it can feel like a small detail, getting it wrong can quickly turn into a cashflow issue, an awkward customer dispute, or a margin hit you didn’t budget for.
This guide breaks down what it means for a price to be “inclusive of GST” in practice, when GST-inclusive vs GST-exclusive pricing is typically used, and how to avoid common traps (especially when you’re quoting, signing agreements, or selling online).
What Does “Inclusive Of GST” Mean (And Why It Matters)?
In New Zealand, GST (Goods and Services Tax) is generally charged at 15% on most goods and services sold in NZ by GST-registered businesses.
When a price is inclusive of GST, it means the GST has already been built into the number you’re looking at.
- $115 (GST inclusive) means the customer pays $115 in total.
- Within that $115, $15 is GST and $100 is the base (GST exclusive) price.
When a price is exclusive of GST, GST still needs to be added on top (assuming you’re charging GST on that supply):
- $100 (GST exclusive) means the customer pays $100 + $15 GST = $115 total.
So, “inclusive” tells you the total payable, while “exclusive” tells you the base price before tax.
Why this matters for your business: the difference changes your margin, your pricing presentation to customers, and your record-keeping. If you accidentally quote a price thinking it’s exclusive when it’s actually inclusive (or vice versa), you can end up either:
- charging more than you intended (and facing complaints), or
- earning less than you intended (and wearing the GST yourself).
GST Inclusive vs Exclusive: What’s The Difference For Small Businesses?
“GST inclusive vs exclusive” sounds like a maths problem, but for small businesses it’s really about clarity and risk management.
GST Inclusive Pricing (The “Total Payable” Approach)
GST-inclusive pricing is the simplest for most customers, because it tells them what they’ll actually pay.
You’ll often see GST-inclusive pricing used when selling to the general public (B2C), like:
- retail stores and ecommerce sites
- cafes and hospitality
- consumer services (beauty, fitness, repairs, home services)
Business advantage: fewer “surprise” costs at checkout, and lower risk of misleading pricing.
Main risk: if you quote “$1,000 inclusive of GST” and you mentally treated $1,000 as your base price, you’ve accidentally reduced your margin - because you only receive $869.57 (plus GST of $130.43) to make the $1,000 total.
GST Exclusive Pricing (The “Plus GST” Approach)
GST-exclusive pricing is common in B2B transactions, where the other party is often GST-registered and more focused on the underlying cost.
You’ll often see GST-exclusive pricing used for:
- trade supply agreements
- professional services
- wholesale arrangements
- commercial leases and property-related invoices (depending on the arrangement)
Business advantage: it’s easier to see your true revenue and margins.
Main risk: if you don’t clearly disclose “+ GST”, you can end up in disputes about what the customer thought they were agreeing to.
In other words, GST-exclusive pricing can be completely normal - but only if you’re being clear about it.
When Should You Use GST Inclusive vs Exclusive Pricing?
There isn’t one rule that fits every business. But there are some good “defaults” that keep you on the right side of customer expectations and reduce confusion.
1) If You Sell To Consumers, GST-Inclusive Is Usually Safer
If your customers are everyday people (not businesses), GST-inclusive prices are usually the most straightforward and are less likely to cause complaints.
This also aligns with the general “don’t mislead customers” principle under the Fair Trading Act 1986 - meaning your pricing and advertising should be clear and not likely to create a false impression.
A common example: advertising “$50” for a service and only mentioning at checkout that it’s “+GST” can be risky if the overall impression is that $50 is the total payable.
2) If You Mostly Sell B2B, GST-Exclusive Can Be Fine (But Be Consistent)
If you mainly quote other businesses, GST-exclusive pricing is common and usually expected. But consistency matters.
For example, if your quotes are GST exclusive, but your invoices suddenly become GST inclusive (or vice versa), you’re creating the perfect conditions for:
- billing disputes
- delayed payment (because the customer wants clarification)
- messy admin and reconciliation issues
One practical approach is to pick a default and then clearly label every figure.
3) If You’re Not GST-Registered, Don’t Mention GST-Inclusive Pricing At All
This is a big one for new businesses.
If you’re not GST-registered, you generally shouldn’t describe your prices as “including GST” or add GST on top, because you’re not collecting GST to pass on to Inland Revenue.
In practice, that means:
- your advertised price is just the price
- your invoices shouldn’t show a GST component
If you’re unsure whether you should be registered, or you’re close to the GST threshold, it’s worth getting accounting advice early - because pricing changes can affect customer expectations and your profitability.
How To Calculate GST Inclusive And GST Exclusive (Without Guessing)
Even if you use accounting software, it’s still worth knowing the basic calculations - especially when you’re negotiating, preparing quotes, or checking supplier invoices.
To Add GST (Convert Exclusive To Inclusive)
GST inclusive price = GST exclusive price × 1.15
- $200 exclusive → $200 × 1.15 = $230 inclusive
To Remove GST (Convert Inclusive To Exclusive)
GST exclusive price = GST inclusive price ÷ 1.15
- $230 inclusive → $230 ÷ 1.15 = $200 exclusive
To Calculate The GST Portion From A GST-Inclusive Price
GST component = GST inclusive price × (15/115)
- $230 inclusive → $230 × (15/115) = $30 GST
These calculations come up a lot when you’re comparing supplier pricing, checking whether a quote “includes GST”, or working out what you really earned from a job once GST is accounted for.
Common GST Inclusive vs Exclusive Mistakes (And How To Avoid Them)
Most GST problems for small businesses aren’t about tax law complexity - they’re about communication and documentation.
Here are some of the most common issues we see.
1) Quotes That Don’t Say Whether GST Is Included
If you send a quote that says “Total: $5,000” but doesn’t say “+ GST” or “incl. GST”, you’re leaving the door open for disagreement.
A simple fix is to make your quote format unmissable, for example:
- Subtotal (excl. GST): $5,000
- GST (15%): $750
- Total (incl. GST): $5,750
If you’re doing regular work for clients, it can also help to have your pricing rules reflected in your Terms of Trade so it’s consistent across quotes and invoices.
2) Contracts That Aren’t Clear About GST Treatment
For longer projects or ongoing services, the GST-inclusive vs GST-exclusive issue often ends up in the contract - and if the contract is vague, it can become a real dispute when the first invoice goes out.
For service-based businesses, having a properly drafted Service Agreement can help spell out whether fees are inclusive or exclusive of GST, and what happens if GST status changes.
3) Changing Your GST Registration Status Without Updating Your Pricing
Let’s say you start out not GST-registered. You set your prices (and your customers get used to them). Later, you register for GST because your business grows.
If you don’t update your pricing approach, you might accidentally:
- keep charging the same “headline price” but now have to return 15% GST out of it (reducing your margin), or
- increase your prices by adding GST on top without preparing customers (causing pushback).
This is where planning matters - not just from a tax perspective, but from a customer communication perspective too.
4) Website Or Social Media Prices That Are Ambiguous
If you advertise a price online, you should assume people will treat that as the total payable unless you clearly say otherwise.
This is especially important if you sell online or take payment through a booking system.
It’s a good idea to ensure your checkout, invoices, and legal terms are aligned - for example, your Website Terms and Conditions can reflect how pricing works, and your cancellation/refund process should stay consistent with what you’ve represented publicly.
5) Confusion Between “GST Inclusive” And “Including All Costs”
Sometimes businesses use “inclusive” informally to mean “all up” - but GST is only one part of the total price.
For example, a quote might be “GST inclusive” but still exclude:
- delivery fees
- travel charges
- card/payment processing surcharges
- after-hours rates
To avoid misunderstandings, it’s smart to itemise what is included and what isn’t. This is especially relevant if you sell products and provide shipping, where a clear Shipping Policy can reduce complaints and chargebacks.
How To Communicate GST Clearly In Quotes, Invoices, And Advertising
If you want to avoid GST-related disputes, the goal is simple: make it difficult for anyone to misread your pricing.
Here are practical ways to do that.
Use Labels Every Time (Even If You Think It’s Obvious)
In your quotes, invoices, proposals, and emails, use one of these phrases next to the price:
- “incl. GST”
- “including GST”
- “excl. GST”
- “+ GST”
If you include multiple figures, label each one (subtotal, GST, total) rather than only the final number.
Be Careful With Deposits And Progress Payments
If you take deposits or progress payments, be clear whether those amounts are GST inclusive or GST exclusive, and whether GST is charged at the deposit/progress payment stage. The GST timing can depend on the “time of supply” rules, when an invoice is issued, and when payment is received - so it’s worth checking your specific setup with an accountant or Inland Revenue guidance if you’re unsure.
This can matter a lot for cashflow - and for customer expectations if they believe they’ve already “paid GST” as part of the deposit.
Align Your Legal Documents With Your Pricing Practice
Your contracts and policies should match what you do in real life.
Depending on your business, that might include:
- a Customer Contract that clearly defines fees and GST treatment
- terms and conditions that address pricing changes and additional charges
- invoice templates that always show GST in a consistent format
This is one of those “legal foundations” steps that protects you from day one - because if there’s ever a disagreement, you’ll want your written terms to back up your position.
Don’t Forget The Fair Trading Act (It’s Not Just A Tax Issue)
Even though GST is a tax, unclear pricing can become a consumer law problem if your advertising creates a misleading impression.
As a business owner, you want your pricing to be transparent so customers can make informed decisions. That’s good legal compliance, and it’s also just good business.
Key Takeaways
- GST inclusive means the price already includes GST - it’s the total payable.
- GST exclusive means GST must be added on top (if you’re charging GST).
- For many small businesses, the biggest risk isn’t the GST calculation - it’s unclear communication in quotes, invoices, websites, and contracts.
- If you sell to the general public, GST-inclusive pricing is often the clearest approach and reduces the risk of pricing complaints.
- If you mainly sell B2B, GST-exclusive pricing can be normal, but you should clearly label prices as “+ GST” and stay consistent across documents.
- If you’re not GST-registered, you generally shouldn’t describe your prices as “including GST” or add GST to invoices.
- Strong written terms (like Terms of Trade and customer/service agreements) help prevent disputes about whether your prices are GST inclusive vs exclusive.
Important: This article is general information only and isn’t tax advice. GST can get complex depending on what you sell, who you sell to, and how/when you invoice and get paid - so consider speaking with your accountant or checking Inland Revenue guidance for your situation.
If you’d like help getting your contracts and website terms aligned with how you price (including GST wording that actually works in practice), you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.
