Hi,
Yes, you have to enter your products prices without VAT. Then, the VAT system will add automatically the VAT on the front end.
If you already have all your prices with VAT, you could change them rapidly with a MySQL query in your PHPMyAdmin like that:
UPDATE jos_hikashop_prices SET price_value = price_value/1.196;
If you want to change the way the VAT/total is displayed in your invoices, you can edit the file "invoice" of the view "order" for your back end template via the menu Display->Views and change the code there to your needs.