How to set up for non-VAT-registered business?

I’m using Erpnext for a small family business. We are not eligible for VAT registration, therefore cannot claim any input taxes against output taxes. If I enter the VAT on my purchase invoices, all my material costings are net of tax. However, since I cannot reclaim the input taxes, this is unrealistic. How can I set the system up to include VAT in my purchased material costings/prices?

Is no one else using ERPNext in a non VAT-registered business?


This for elaborating your query.

You should create VAT account on the liability side. As soon as purchase invoice is booked, posting of VAT will be made on the expense side. Since you are not getting any set-off, it should be booked under expenses right-away.

The process of applying taxes on transaction will be just the same. Only that VAT account in your ERPNext account will be created on the Expense side, and not on the liability side.