Sales Tax Settings

Sales Tax Settings

Sales tax settings allow you to configure how taxes are calculated and applied to sales invoices, quotations, and orders. Proper tax configuration ensures compliance with tax regulations and accurate tax calculations.

Accessing Sales Tax Settings

To configure sales tax settings:

1. Navigate to Settings → Sales Settings → Sale Settings
2. Look for the Tax Settings section
3. Alternatively, go to Settings → Tax Settings for comprehensive tax configuration

Default Sale Tax

Set a default tax rate that will be automatically applied to new sales documents:

• Default Tax Selection: Choose a tax from the dropdown list
• Applied To: This tax will be pre-selected when creating new invoices
• Override: You can still change the tax for individual invoices or items
• Common Defaults:
  • GST 18% (India)
  • VAT 20% (UK)
  • Sales Tax 8% (US)
  • No Tax (for tax-exempt businesses)

Tax Types and Structures

EquiBillBook supports various tax structures:

GST (Goods and Services Tax)

• CGST + SGST: For intra-state transactions (India)
• IGST: For inter-state transactions (India)
• UTGST: For union territories (India)
• CESS: Additional cess on specific goods
• Configuration: Set up tax groups with multiple tax components

VAT (Value Added Tax)

• Single VAT Rate: One tax rate applied to all items
• Multiple VAT Rates: Different rates for different item categories
• VAT Exempt: Items exempt from VAT
• Zero-Rated: Items at 0% VAT

Sales Tax

• State Sales Tax: Tax based on state/jurisdiction
• Local Tax: Additional local taxes
• Combined Tax: Multiple tax components

Tax Calculation Methods

Configure how taxes are calculated:

Item-Level Tax

• Tax is calculated on each item individually
• Different items can have different tax rates
• Tax = (Item Price × Quantity) × Tax Rate
• Best for: Items with different tax rates

Invoice-Level Tax

• Tax is calculated on the total invoice amount
• Single tax rate applied to entire invoice
• Tax = Invoice Subtotal × Tax Rate
• Best for: Uniform tax rates across all items

Tax on Discounted Amount

• Tax calculated after applying discounts
• Tax = (Subtotal - Discount) × Tax Rate
• Most common and recommended approach
• Ensures accurate tax on actual sale amount

Tax Configuration Options

Tax Inclusive vs Tax Exclusive

• Tax Exclusive: Tax is added to the item price
  • Item Price: ₹100
  • Tax (18%): ₹18
  • Total: ₹118
• Tax Inclusive: Tax is included in the item price
  • Item Price (incl. tax): ₹118
  • Tax (18%): ₹18 (embedded)
  • Base Price: ₹100

Place of Supply Rules

• Intra-state: Same state - CGST + SGST
• Inter-state: Different states - IGST
• Configuration: Set up based on customer location
• Automatic: System can determine based on addresses

Tax Exemptions

Configure tax exemptions:

• Tax-Exempt Customers: Customers who don't pay tax (e.g., government, non-profit)
• Tax-Exempt Items: Items that are tax-exempt (e.g., essential goods, medicines)
• Tax-Exempt Categories: Entire categories exempt from tax
• Configuration: Set up in customer, item, or category settings

Reverse Charge Mechanism

Configure reverse charge for applicable transactions:

• Reverse Charge: Customer pays tax directly to government
• Use Cases: Specific services, imports, certain B2B transactions
• Configuration: Enable in tax settings or item settings
• Compliance: Important for GST/VAT compliance

Tax Groups

Create tax groups for complex tax structures:

• GST Group: CGST 9% + SGST 9% = 18% total
• Multiple Tax Components: Combine different taxes
• Configuration: Create in Tax Settings → Tax Groups
• Application: Apply to items or invoices

HSN/SAC Codes

Configure HSN (Harmonized System of Nomenclature) or SAC (Services Accounting Code):

• HSN Codes: For goods/products
• SAC Codes: For services
• Purpose: Required for GST compliance (India)
• Configuration: Set up at item level
• Reporting: Included in tax reports and invoices

Tax Rounding

Configure how tax amounts are rounded:

• Round Up: Round to next higher value
• Round Down: Round to next lower value
• Round to Nearest: Standard rounding (0.5 rounds up)
• No Rounding: Keep exact calculated amount
• Compliance: Follow local tax authority rules

Tax on Shipping and Other Charges

Configure tax on additional charges:

• Shipping Charges: Taxable or tax-exempt
• Handling Fees: Tax treatment
• Other Charges: Tax configuration
• Settings: Configure in invoice settings

Best Practices

• Set correct default tax: Match your most common tax rate
• Verify tax rates: Ensure rates match current tax regulations
• Configure exemptions properly: Set up tax-exempt customers and items
• Test calculations: Verify tax calculations on sample invoices
• Stay updated: Update tax rates when regulations change
• Document settings: Keep records of tax configuration
• Consult tax professional: Ensure compliance with local regulations

Tax Compliance

Ensure tax compliance:

• Accurate Calculations: Verify tax calculations are correct
• Proper Documentation: Ensure invoices show tax details correctly
• Tax Reports: Generate accurate tax reports for filing
• Audit Trail: Maintain records of tax transactions
• Regular Updates: Update tax rates and rules as needed

Tax Reports

Generate tax-related reports:

• Tax Summary: Total tax collected in a period
• Tax by Item: Tax collected by product/service
• Tax by Customer: Tax collected by customer
• GST Reports: CGST, SGST, IGST breakdowns
• Tax Liability: Tax payable to authorities

Troubleshooting

Tax not calculating correctly:

• Verify tax rate is set correctly
• Check tax calculation method (item-level vs invoice-level)
• Review tax inclusive/exclusive settings
• Ensure discounts are applied before tax calculation

Wrong tax rate applying:

• Check default tax setting
• Verify item tax settings
• Review customer tax settings
• Check tax group configuration

Tax exemption not working:

• Verify tax exemption is enabled for customer/item
• Check exemption settings
• Review tax configuration
• Test with a new invoice

Integration with Other Features

Tax settings work with:

• Items: Item-specific tax rates
• Customers: Customer tax exemptions
• Invoices: Tax calculation on invoices
• Reports: Tax reporting and analysis
• Accounting: Tax account tracking

What's Next?

After configuring tax settings, you should:

1. Set appropriate default tax rate
2. Configure tax groups if using GST or multiple taxes
3. Set up tax exemptions for applicable customers/items
4. Test tax calculations on sample invoices
5. Generate tax reports to verify accuracy

Proper tax configuration ensures accurate tax calculations, compliance with tax regulations, and smooth tax reporting and filing processes.