How Retail Discounts and Taxes Work
Whether you are shopping during a holiday sale or calculating business expenses, knowing exactly how much you are paying (and saving) is essential. Our calculator computes both the markdown of the discount and the markup of the sales tax (like GST) in real time.
The Order of Operations
In standard retail, taxes are applied after the discount is taken off the original price. The formula is:
Discount Amount = Original Price × (Discount % / 100)
Discounted Price = Original Price - Discount Amount
Tax Amount = Discounted Price × (Tax % / 100)
Final Checkout Price = Discounted Price + Tax Amount
Discounted Price = Original Price - Discount Amount
Tax Amount = Discounted Price × (Tax % / 100)
Final Checkout Price = Discounted Price + Tax Amount
Example Calculation
Imagine buying a smartphone priced at ₹50,000 during a 20% off sale, with an 18% GST applied at checkout.
- The 20% discount saves you ₹10,000.
- Your new subtotal is ₹40,000.
- The 18% GST is applied to the ₹40,000 subtotal, adding ₹7,200.
- Your final checkout price is ₹47,200.