From what I understand, Accounts of type Tax capture the Tax Rate. So while setting up Item Tax (in Tax Templates as well), the tax rates automatically gets set. Other than this I don’t really see any benefit of having separate Tax Accounts.
If we have 3 items which has different tax rates then in Item Tax table we need to add SGST, CGST and IGST.
If we create different account for each tax SGST 2%, SGST 9 % SGST 18% then we need to update 9 tax rate in each item then only Tax get correctly calculated.
So we need best practice to create sales and purchase tax account.
Yes. As per GST Invoicing rules, GST rate and type needs to be shown separately. So technically speaking if your Invoice has items with different rate, you have to show on Printed Invoice. And that is easily achievable if you have separate COA ledgers created.
I guess No. Answered above.
By separate account you mean, separate COA child. I do not think that is necessary. Capturing Output GST (on SI) anf Input GST (on PI) in the same ledger is not a problem. Because one would have +ve number and another would have -ve numbers, so separating them for reporting is possible in excel export.
I’m still struggling with GSTR1 & GSTR2 reports build as of today. There are problem in bifurcating correctly between IGST, CGST, SGST. So not confident on how GSTR1 & 2 would separate line items from single account.
No! This is not right. A Item will have only ONE rate. Its treatment of whether its IGST at full rate or CGST/SGST at 50% rate depends on the location of Supply. So in the item master you will always have maximum three tax type - of same rate but IGST, CGST, & SGST.
In the Item Tax Master, I have defined rates of GST as prescribed by the GST Rules connected to HSN code. Also, I have created all the Purchase Tax templates and Sales Tax template of all the possible combinations of In State and Out of State.
As per the manual, under Item wise tax note… This is written, "… Please note that item’s tax rate will be pulled from the item master only if you have selected same tax account (GST 16% in this case) in both Item master and in Sales Order under Taxes and Charges section… " (extract from link https://erpnext.org/docs/user/manual/en/accounts/item-wise-taxation)
But when I select higher tax as attached into Purchase Tax template, it is not being adjusted with lower tax or zero tax as defined under Item Tax Master… Basically its not working the way, its mentioned in the manual, any clue?
You are right, Item Tax doesn’t seem to work as documented. ERPNext master 10.1.42
Edit: My bad, this works perfectly well!
@kolate_sambhaji - It was because of my configuration which used two separate accounts. In this case, having only a single account (SGST, CGST and IGST) for each tax would be the right way. You can set default rate which will be set in Tax template and in Item Tax change the rate after selecting the account. (Earlier, i was trying with separate accounts).
It’s terribly failing. And there is no option of Line Item wise GST rate, so we are in catch 22 situation. I’m wondering how the big companies who have implemented ERPNext in India would be managing their Accounting & GST Compliance. They might be continuing with legacy/tally for accounting.
Our main trouble in adding each taxes in each Item Tax table.
Every time user need to check tax calculated correctly or not, and many times it fails to calculate correctly.
You have to put zero tax rates in tax template and sales invoice, but in this case you need to update all item with tax details.
From user manual please check this: "If you want to have tax rate always applied from the Item master, then you should update Rate for the tax account as zero in the Taxes and Charges Template master."
How? Can you post a picture of COA. As Anoop mentioned, for Tax type of account, one has to create an individual account because it saves tax rate. I mean in your case when the GST rate is 5%, it needs to have three accounts in COA: CGST 2.5%, SCGT 2.5% and IGST 5%. If you do not do this, the tax will not be calculated correctly.
Now, if you have items falling under 12%, 18%, 28% then each rate will need three more accounts.
That will remain an issue, unless it is linked as a template inside Item Table or Rates are connected to HSN code.
This is a bad design then. It illogical to select 0% just to capture tax from the item table. Let us say, I have four items on my SI, two items have 5% rate captured in item table and the other two does not have anything at the item level. But the other two are eligible for 12%.
If I go with what is written in manual, it means I MUST define Item level tax in all the Items OR I can only create Invoice having a single rate of GST.
This needs to enhanced. What do you think? I can work with you from the functional side to solve this.
We can work together & you will get all the functional support & front-end testing help.
There are issues with GSTR1 & GSTR2 reports of ERPNext. I have highlighted them to nabin, and he is planning to get them sorted.
I don’t feel this work. Bcoz when you select tax template, the rates specified as line items gets applied. So for each category of rates % --5, 12, 18, 28, and 0% (zero rated)-- one needs to make templates. In total there would be 10 tax templates, two for each rate: in state and out of state.
Also, all these rates to be captured as part of GST setting to impact reports.
I have done as above, if someone did better way to handle it. Please share.
@FinForce i guess we’re back to the days of vat where we had multiple tax ledgers in tally. This could work if these accounts were made by default so it wont get tedious.
there will be the issue of month end tax adjustment and adjusting these many accounts keeping in mind the government defined process would be tedious but, an idea just came up. what if we build a default custom jv workflow to automate this process. something 3B report shouuld be doing but is missing from erpnext.
i am proposing
create all the tax ledgers including those differential tax ledgers as part of India specific chart of accounts.
a custom jv work flow that would automagically adjust all the accounts and present the user to make a tax payment entry.
this should solve most of the issues. i would love to hear your inputs on this idea
Could you please elaborate this step wise. I don’t understand, sorry!
Your India specific COA idea is good, and in the v10 one setup account (for one rate) is already exist. Which acts as a template to keep replicating for other applicable rates. This might have been done to give user flexibility of making COA item only applicable to them.
3B does not exist. i know that. i meant the tax adjustment at month end should be automated somehow and if that happens, we will not mind the 10+ tax ledgers because everything would be done automatically
Tax adjustment you mean GST input and GST output, then yes, it will be booked in same ledger account and hence it would show the net amount. But for the GSTR1, 2, & other returns, it needs to be bifurcated into +ve & -ve numbers (sales tax, purchase tax), which is possible by filtering the reports.