Tax Calculations on Invoices
Accurate tax calculation is essential for compliance and proper invoicing. EquiBillBook automatically calculates taxes based on your configuration, item settings, and customer information.
How Tax Calculation Works
Tax is calculated automatically based on:
- Item tax settings (each item can have a tax rate)
- Customer tax settings (customer-specific tax rules)
- System tax configuration (GST/VAT rates)
- Place of supply rules (for GST)
- Tax calculation method (inclusive or exclusive)
Tax Types Supported
EquiBillBook supports various tax systems:
- GST (India): CGST, SGST, IGST, UTGST, CESS
- VAT: Value Added Tax
- Sales Tax: Sales tax systems
- Custom Taxes: Configurable tax types
GST Calculation (India)
For GST, the system calculates:
- CGST + SGST: For intra-state transactions (same state)
- Tax is split between Central GST and State GST
- Example: 18% GST = 9% CGST + 9% SGST
- IGST: For inter-state transactions (different states)
- Integrated GST applies to the full rate
- Example: 18% IGST
Place of Supply
The place of supply determines tax type:
- Same state: CGST + SGST applies
- Different state: IGST applies
- Union Territory: CGST + UTGST applies
- System automatically determines based on customer and business location
Item-Level Tax
Each item can have:
- Tax rate assigned (e.g., 5%, 12%, 18%, 28%)
- HSN/SAC code for tax classification
- Tax type (GST, VAT, etc.)
- Tax exemption status
When you add an item to an invoice, its tax rate is automatically applied.
Tax-Inclusive vs Tax-Exclusive Pricing
Your system may use either method:
- Tax-Inclusive:
- Price includes tax
- Example: ₹1,180 (includes ₹180 GST at 18%)
- Tax amount = Price × (Tax Rate / (100 + Tax Rate))
- Tax-Exclusive:
- Price excludes tax
- Example: ₹1,000 + ₹180 GST = ₹1,180
- Tax amount = Price × (Tax Rate / 100)
Tax on Discounts
Tax calculation after discounts:
- Tax is usually calculated on the discounted amount
- Item discount reduces taxable amount
- Invoice discount reduces taxable subtotal
- Tax is calculated on the net amount (after discounts)
Multiple Tax Rates
If items have different tax rates:
- Each item's tax is calculated separately
- Tax amounts are summed for total tax
- Invoice shows breakdown by tax rate (if configured)
- Tax summary shows total tax by type (CGST, SGST, IGST, etc.)
Tax Exemptions
Some items or customers may be tax-exempt:
- Items marked as tax-exempt (0% tax)
- Customers with tax exemption certificates
- Export transactions (zero-rated)
- Special tax exemptions based on rules
Reverse Charge Mechanism
For reverse charge (if applicable):
- Customer pays tax directly to government
- Invoice indicates reverse charge
- No tax collected from customer
- Compliance with tax regulations
Viewing Tax Breakdown
The invoice typically shows:
- Subtotal (before tax)
- Tax breakdown by type (CGST, SGST, IGST, etc.)
- Total tax amount
- Grand total (subtotal + tax)
- Tax rates applied
Editing Tax
You may be able to:
- Override item tax rate (if permitted)
- Apply different tax rate manually
- Remove tax for specific items
- Add tax to exempt items
Note: Tax editing may be restricted based on permissions and compliance requirements.
Tax Configuration
Configure tax settings in:
- Settings → Tax Settings: Set up tax rates and types
- Item Settings: Assign tax rates to items
- Customer Settings: Configure customer tax preferences
- Invoice Settings: Set tax calculation method
HSN/SAC Codes
Harmonized System of Nomenclature (HSN) or Service Accounting Code (SAC):
- Required for GST compliance in India
- Assigned to items in item master
- Appears on invoice for tax reporting
- Helps in tax return filing
Best Practices
- Keep tax rates updated in your system
- Verify item tax settings are correct
- Review tax calculations before finalizing invoices
- Ensure HSN/SAC codes are accurate
- Understand place of supply rules for your region
- Consult with your accountant for tax compliance
- Regularly review tax reports for accuracy
Troubleshooting
Common tax calculation issues:
- Tax not calculating: Check item tax settings and system configuration
- Wrong tax rate: Verify item tax rate and customer settings
- Wrong tax type: Check place of supply and customer location
- Tax amount mismatch: Review tax calculation method (inclusive vs exclusive)
- Missing HSN code: Ensure items have HSN/SAC codes assigned
Tax Reports
Use tax reports to:
- Verify tax calculations
- Prepare tax returns
- Reconcile tax collected
- Identify discrepancies
- Comply with tax regulations
Compliance Considerations
- Tax calculations must comply with local regulations
- Invoices must show tax breakdown as required
- Tax rates must be current and accurate
- Tax exemptions must be properly documented
- Consult with tax professionals for complex scenarios
Accurate tax calculation is critical for compliance and maintaining proper financial records. Ensure your tax settings are configured correctly and review calculations regularly.