Purchase Taxes and Charges Template

Purchase Taxes and Charges are levied on commodities or services purchased by the company. Taxes and charges are established in templates, which create uniform application to purchase transactions.

The Purchase Taxes and Charges Template operates similarly to the Sales Taxes and Charges Template. Templates specified here can be utilized in Purchase Orders, Purchase Receipts, and Purchase Invoices, ensuring uniform tax calculation and reporting.

For accounts to be used in tax templates, make the Account Type Tax in the Chart of Accounts. This is to account correctly in ledgers and reports.

To navigate to:

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1. Adding Purchase Taxes/Charges Using a Template

Before creating a new template, note that ERPNext has default templates for most commonly used tax types.

Steps to create a new template:

Click on New.
Give a Title Name to the tax template.
In Type, specify how the tax is to be calculated. There are five options:

Actual: Tax on the actual amount entered and does not depend on item values.
On Net Total: Tax calculated on the net total value of all items in the document.
On Previous Row Amount: Compound tax, such as cess on a tax amount in the previous row.
On Previous Row Total: Same as above but on previous row total invoice amount inclusive of the tax.
On Item Quantity: (freshly updated in v15) – charges by quantity and not value, useful for taxes or fees per item.

Enter the Rate or Amount as the case may be.
Select the Account Head, which should be of type Tax. You can take advantage of pre-defined accounts or create new ones under Chart of Accounts.
Make the Default option enabled if this template needs to be automatically applied to fresh purchase transactions.
Save the template.

Taxes and Charges

This automatically applies the given tax or charge each time the template is applied to purchase documents.

Is Inter State

This is much useful for Indian GST compliance:

While Purchase Invoice / Purchase Order, ERPNext checks the supplier's GST details and company's place of supply.
If state codes are different, ERPNext automatically applies the tax template with Is Inter State marked (i.e., IGST).
Where the state codes are the same, ERPNext will apply the default intra-state tax template (i.e. CGST + SGST).
Sales Invoices and Delivery Notes are governed by the same logic so that applicable taxes are charged in a consistent fashion based on the place of supply and shipping location.

This automation will avoid this human mistake, and this will also be achieved to avoid the tax imposition in the area.

2. Features

2.1 Purchase Taxes and Charges Table

Consider Tax or Charge For:
Total – Tax/charge is posted on the total net amount of all items in the document.
Valuation – Tax/charge is posted on every item and affects the valuation of inventory (useful for landed cost calculation).
Valuation and Total – The tax/charge is added to item value as well as the document total. It may be to bring things into line such as on customs duty that can affect landed cost and purchase total.
Add or Deduct:
Provide an option for whether the tax/charge is to be added to the total or deducted.
Deduction will be helpful where discounts or subsidies at the tax side are involved.
Reference Row #:
Once the tax/charge type is set to either On Previous Row Total or On Previous Row Amount, you can enter the row number here and it will be the calculation base.
It automatically looks at the immediately previous row, but you can choose any previous row when performing compounding calculations (e.g., cess on a specific tax).