Tax on another tax amount
At times, you might need to tax the value of a prior tax rather than the item value.
For instance, assume that there are 5 items and a Service Charge is charged on the Net Total of such items. A 5% VAT also has to be charged only on the Service Charge, not on the total Net Total of the bill.
How to set this up in ERPNext is as follows:
- In the Sales Invoice, go to the Sales Taxes and Charges area and create the first row. Click on the Type and select On Net Total and select the needed Account Head. If the Rate is not pre-defined, put the Rate in the Rate field. The amount of this row will be calculated and shown in the Amount column.
- Then, insert an additional row to tax the amount of the previous row (the Service Charge). For this row, assign the Type as On Previous Row Amount. Choose the Account Head and Rate accordingly. Expand this row and assign the Reference Row # as 1.
The Sales Taxes and Charges section will now display Row 1 as the Service Charge on Net Total, and Row 2 as VAT calculated on the Service Charge amount.