Tax rate on Differential Amount Only

ERPNext India Compliance
1

Hello Friends,

Is it possible to set-up a tax rate in ERPNext which applies only on the differential amount?

Actually one of my friend is using ERPNext for his Business of Used Cars.

We are in to the business of Used Cars i.e. Buying and Selling the Used Cars.

As per GST rule no. 32(5) of CGST Rules, 2017 and GST Notificaiton no. 9/2018 -Integrated Tax (Rate) dated 25.01.2018, We need to deposit the GST only on the Differential/Profit Amount.

To Simplify the issue, lets have an example:

  1. We Buy a Second Hand/Used Car from an Unregistered person at a price of 1 lakh rupees. We create a Purchase Receipt to take the car in stock and a Purchase Invoice to pay the seller. We do not apply any GST at this purchase invoice.

  2. We spent another 20K rupees for getting it repaired and booked these expenses under expenses included in valuation of stock.

  3. We create a landed cost voucher which makes the Cost of Car is 1.2 Lakhs.

  4. Now We sell this second hand car to another unregistered person at a price of 1.25 Lakhs. We Create a Delivery Note to take the car our of our stock and a Sales Invoice to receive the payment from customer. We put the sale value of car i.e. 1.25 Lakhs on Sales Invoice.

  5. Now to comply with Government Guidelines, we need to deposit GST @ 12% on the differential/profit amount i.e. on 5K (1.25 Lakhs - 1.20 Lakhs). In this case our tax liablity is 600 Rupees only.

  6. But if we apply 12% GST on Sale Invoice, It is applied on total sales value i.e. on 1.25 Lakhs and our tax Liability goes to 15K rupees which puts us in loss due to wrongly applied GST tax.

Can anyone please advise us how to setup the GST in ERPNext so that the tax is calculated only on the Differential/Profit Amount?

We shall be thankful if someone can help us in setting up a tax template or any other method to implement the above calculation in ERPNext.

Regards
Trackomatic India

2

The way it’s done in Germany (e.g. as per tax laws) is to have an account where you add up the liabilities as soon as they “come into being” (by selling something; the language in the law texts is somewhat strange because it kind of hides, but very imperfectly so, that people are forced to pay the taxes to have it redistributed by the “administrations” they “elect”, as opposed to decide themselves what and where to contribute to in society, as if they were unable to decide such matters themselves, e.g. are we really all monsters?), and you have another account where all the deductible tax amounts “created” by bying supplies or services are added.
At each tax period’s term (monthly, yearly, depends on size of revenue turnaround) the deductable tax is substracted from the due tax and the difference is paid to the state.

To me, with my zero knowledge of Indian tax laws, it looks, from your description, like the Indian system is basically the same, but you have to check your tax and account laws to be sure.

3

In Simplest Form:- You cannot do it in the standard system.

But, you can try this.

  1. Line item 1 - Car Item with Nil-rated tax.
  2. Line item 2 - Service Charge - The differential amount, with 12% Gst.

Now, The question here is it exposes the cost of the item/car to the customer , right?

But anyway, if you are calculating the taxes on the differential amount, it also exposes the cost of the item.

I would like to hear your response.

Thank you.

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