I have an incoming (purchase) invoice for restaurant services on which I should pay 120 to the supplier. Supplier’s revenue is 100 and they should pay 20 VAT to the government. I cannot deduct this VAT because the regulations do not allow it, so in my financials I should simply have cost = 120, current liabilities = 120.
Although we can’t deduct this 20 of VAT, we must be able to create a report with all incoming invoices showing to tax authorities for which invoices we deducted VAT and for which we did not. For each purchase invoice we must show net amount, deductible VAT, non-deductible VAT.
How can I record this in ERPNext? I understand the report we will have to create on our own, but don’t understand how to record the non-deductible VAT.
If I try to process the invoice through Purchase Invoice and use sales tax rates, VAT gets recorded on a separate current assets account and financials are not correct (100 cost + 20 current assets and it should be 120 cost).
If I use Journal Entry and connect the liability to the supplier - financials are OK since I book them manually, supplier info I can live with (does not show this transaction in total purchases), but I have no record of 20 non-deductible VAT which I have to report about tomorrow.
I like ERPNext a lot, don’t expect an automatic solution for this, don’t mind spending more time to process such exceptions, but we absolutely have to record them and I simply can’t see how.