In working out both your income and costs, you should essentially ignore VAT. All you are doing is collecting it on the sales side and reclaiming it on the purchasing side: all you are is an (unpaid) collection agent for Revenue, so it's neither a sale nor cost item.
In the example you give, your cost/unit is 7.32 and your sales revenue/unit is 10.00. Your gross margin is 10.00 minus 7.32 minus any other direct cost of sales items (delivery, packaging?).
In terms of pricing, it depends on whether you're selling to a business or retail. Businesses will always look at the net price, consumers the price inclusive of VAT.