Tally.ERP 9 Series A Release 6.0.2, July, 2017

Highlights

Printing HSN/SAC code on the invoice

Some customers faced issues while printing the HSN/SAC on their invoices. We have solved this problem.

Customers can define HSN/SAC at any level as needed and Tally.ERP 9 will take care of printing the HSN/SAC code on the invoices.

See this help topic or watch this video to understand how the codes and rates are processed by Tally.ERP 9. This will also help you make use of the powerful flexibility offered in setting rates at different levels.

Viewing existing data in the previous release after upgrade

Some customers want to view their data in their old release of Tally.ERP 9 after upgrading to Release 6.

With this upgrade, Tally.ERP 9 Release 6.0.2 will be installed in a new folder. Restore backed up data in a different folder, and open the company in the previous release of Tally.ERP 9. The Tally.ERP 9 license will work for both releases seamlessly.

Note: Always remember to restore your backed up data in a different folder to prevent overwriting the upgraded data.

VAT – Jammu and Kashmir

Exporting VAT Annexure 49 to MS Excel was taking an extremely long time.

This has been addressed. You will find that exporting is much quicker now.

GST

     You can set up GST rates for a particular price range/slab for multiple stock items from GST Rate Setup screen.

     The company’s GSTIN/UIN was not displayed in the invoice printout when the secondary address of the company was selected for printing. This issue is resolved.

     If you enabled the option Print company logo? in the Receipt Printing Configuration screen, the company’s GSTIN/UIN was not displayed in the printed advance receipt. This issue is resolved.

     In the GST sales invoice printout, the state codes of consignor and consignee were printed incorrectly in neat mode when:

o     Multiple addresses were enabled for the party.

o     The option Allow separate buyer and consignee names? was enabled in the Voucher Configuration screen.

This issue is resolved.

     The address details in the Buyer section of the invoice printout was shrinking when the options Print State Name & State Code? and Print Place of Supply? were set to Yes in the Invoice Print Configuration screen. This issue is resolved.

     The HSN/SAC was not displayed in the printed invoice when it was recorded with:

o     Stock items predefined with HSN/SAC.

o     Sales/purchase ledgers predefined only with tax rate and not the HSN/SAC.

This issue is resolved. Now, if the HSN/SAC is not defined in the sales/purchase ledger, but is available in any of the masters linked to the transaction, the same will be printed in the invoice.

     When the sales invoice or delivery note was printed from voucher display mode, the Place of Supply was not displayed. This occurred even when the option Print Place of Supply? was set to Yes in the Invoice Print Configuration screen. This issue is resolved.

VAT

Jammu and Kashmir

     The data export to MS Excel templates is enhanced as given below:

o     Values are exported invoice-wise in a single row, with values of each tax rate displayed in respective columns. When there is more than one tax rate belonging to the Other % column of the template, the column will be left blank. The values of both tax rates will be consolidated and displayed in Amount (Other %) column. This is provided in Annexure 48, 48C, 48I, 48IS, 48L, 48S, 49, 49I, and 49S.

o     The Commodity name predefined for the stock item with the highest value in the invoice is captured in the Nature of Goods column of Annexure 48IS, 48L, 48S and 49S.

     Exporting data to the MS Excel template of Annexure 49 was taking too long. This issue is resolved.

Rajasthan

     Data export to the latest template of Form 10 is supported for filing e-returns. The details of VAT/CST payment vouchers are captured from row 33 instead of row 27 of the Details of Tax Due sheet of the template VATForm10_2015.xls.

TDS/TCS

     The latest File Validation Utility (FVU) tool version 5.5 is supported to validate the forms for E-TDS/TCS before filing returns.

The following changes are supported as per the latest FVU tool version 5.5:

o     The nature of payment Payment of Cash Consideration by Real Estate Developer to Property Owner has been renamed as Payment Under Specified Agreement with the Payment code of 41C.

o     As per the changes in section code 206CC, in the party ledger, when PAN/IT No. is defined as PANAPPLIED or PANINVALID or PANNOTAVBL for sales made with the nature of goods Timber Obtained by Any Mode Other Than Forest Lease, the transaction will be marked as C in the data exported to the text file for filing e-returns.

Licensing

     Tally.ERP 9 Release 6 moved to educational mode without any notification when there were incompatible Account TDLs or Addons. Tally.ERP 9 Release 6.0.2 does not move to educational mode, and allows you continue to use Tally.ERP 9.

However, you need to contact your Tally Partner to make your customisations compatible with Release 6 or later.

Data Management

     The installation path of Tally.ERP 9 has been changed to C:\Program Files\Tally\Tally.ERP9 to avoid overriding of installation of releases prior to 6.0.2.

     When the data backup failed, the messages displayed were incomplete as the next course of action was not mentioned in them. The issue is resolved.

Now, the error messages display the corrective course of action such that you can resolve the problem yourself.

Click here for release notes

Click here for download

Managing HSN Codes/SAC and Tax Rates in Tally

You can specify HSN code/SAC details and tax rates at different levels for the goods or services provided by your business. This is a flexibility provided for ease of use to accommodate your business needs.

It is recommended to specify the HSN code/SAC and tax rate at the same level.

Order in which HSN code and tax rate are applied for goods

Specifying HSN code and tax rate

Based on your business requirements, you can provide HSN codes and tax rates at different levels.

Business Requirement

Definition At

Most of the goods have the same HSN code and tax rate

Company

A group of items have the same HSN code and tax rate

Stock group

A few items have different HSN codes and tax rates

Stock item

Want to apply the same HSN code and tax rate for different transaction types

Sales/purchase ledger group

Want to segregate sales or purchase of items with the same HSN code and tax rate

Sales/purchase ledger

Change the tax rate (not HSN code) during transaction

Transaction

After defining a tax rate at the company level, if a group of items attracts another rate, specify at the stock group level. For the items in the group, the rate specified at the group level is applicable. After specifying tax rates at the stock group level, if a few items in the group attract a different rate (or the rate set at the company level), override using rate setup at the stock item level. For the items, the rates specified at the stock item level are applicable.

You can specify tax rates at the sales or purchase ledger level, or at the ledger group level. This helps in situations where a special tracking as per the nature of tax is required. For example, you can use a ledger called Diplomat-Sale for exempt sales of taxable goods when the buyer is a diplomat. Then the rate defined at the ledger level will override the tax rates set at the company, stock group, or stock item levels.

Note: For ease of maintenance and appropriate use of tax rates, specify the rates at the level where you mark the goods as taxable.

A similar order is applicable in the case of HSN codes.

In case you need to specify a separate tax rate for an item in a specific transaction, you can do so, and the rate specified during the transaction will get the highest priority.

Order in which SAC and tax rate are applied for services

Specifying SAC and tax rate

Based on your business requirements, you can provide SAC and tax rate at different levels.

Business Requirement

Tax Rate Definition At

Most of the services have the same SAC and tax rate

Company

A group of services have the same SAC and tax rate

Service ledger

Want to apply the same SAC and tax rate for different transaction types

Sales/purchase ledger group

Want to segregate sales or purchase of services with the same SAC and tax rate

Sales/purchase ledger

Change the tax rate (not SAC) during transaction

Transaction

After defining a tax rate at the company level, if a few services attract a different rate, specify the rate in the service ledger. For the services, the rates specified at the service ledger level are applicable.

You can specify tax rates at the sales or purchase ledger level, or at the ledger group level. This helps in situations where a special tracking as per the nature of tax is required. For example, you can use a ledger called Diplomat-Sale for exempt sales of taxable services when the buyer is a diplomat. Then the rate defined at the ledger level will override the tax rates set at the company level or at the service ledger level.

Note: For ease of maintenance and appropriate use of tax rates, specify the rates at the level where you mark the service as taxable.

A similar order is applicable in the case of SAC.

In case you need to specify a separate tax rate for a service in a specific transaction, you can do so, and the rate given during the transaction will get the highest priority.

GST- Ready Tally.ERP 9 Release 6

GST is India’s single largest tax reform since independence. GST aims to help replace the federal tax structure with a more unified one to help reduce the cascading tax on tax impact, and remove the barriers to trade across state boundaries.

gst-ready-tally

Highlights

You can quickly get started with GST in a few easy steps

Start Using Tally.ERP 9 for GST Compliance

To record a GST transaction, you have to activate GST and also update or create the required ledgers.

To use Tally.ERP 9 for GST compliance,

1.    Activate GST

2.    Set up tax rates

Note: You can find the list of HSN codes/SAC on the website of the department of revenue.

3.    Update or create ledgers as required.

Depending on the business requirements you will need to update the following ledgers, either immediately or later.

     Update stock items, and stock groups to include GST details.

     Update sales and purchase ledgers to use in GST transactions.

     It is recommended that you restart voucher numbering for GST transactions to ensure that unique voucher numbers are used for all your vouchers. If Automatic (Manual Override) is set as the method of voucher numbering, it ensures that unique voucher numbers are set for your vouchers.

     Update party GSTIN/UIN for parties buying from you or selling items to you.

     Create GST tax ledgers to calculate taxes in transactions.

     Create income and expense ledgers to distribute the expenses and incomes against items appropriately.

Your company is ready with all the masters. You can use TE9 for transactions.

     Recording Sales

     Recording Purchases

Click here for release notes

Click here for download

How are Imports and Exports Treated in GST

How-are-imports-and-exports-treated-in-GST-704x286

Taxation laws have laid down the taxes applicable on import and export of goods and services. In the current tax regime, laws of Customs duty, Excise, Service Tax and VAT lay down the tax treatment of imports and exports. In the GST regime, Excise, Service Tax and VAT will be subsumed into GST and customs duty will continue to be levied separately. Let us understand the tax implication on imports and exports under GST in comparison to the current regime.

Current Regime

Import of goods

In the current regime, a person who imports goods has to pay customs duty, countervailing duty (CVD), and special additional duty (SAD). CVD is levied at a rate equivalent to the rate of Excise on such goods, if they had been manufactured in India. SAD is equivalent to VAT on the goods in India. CVD and SAD are imposed to bring the imported product’s price to its true market price in India. If the importer uses the imported goods to manufacture dutiable goods in India or provide taxable services, CVD paid on inputs is available as tax credit. If the importer is just a trader, CVD on imports is not available as credit. SAD paid on import is eligible for refund, subject to conditions. However, no credit is given on customs duty paid and it becomes a cost for the importer.

Let us see an example to understand the levy of import duties in case of import of goods in the current regime.

Example: Manoj Apparel in Bangalore, Karnataka purchases apparel from a supplier, Oz Designs, in Sydney, Australia.

Tax calculation

Particulars Nos. Price per no. (Rs.) Amount(Rs.)
Women’s T-shirts 200 2,500 (51.68 AUD) * 5,00,000
Men’s T-shirts 100 5,000 (103.37 AUD) * 5,00,000
Total 300 10,00,000
Customs duty @ 10%       1,00,000
Customs education cess @ 3% on customs duty (1,00,000*3%)             3,000
Sub total     11, 03,000
CVD @ 12.5%       1,37,875
Sub total     12,40,875
SAD @ 4%          49,635
Total cost of import     12,90,510

* Exchange rate taken is 0.021 AUD = 1 Rupee

Import of services

A person who imports services has to pay Service Tax on the imported service at the Service tax rate applicable in India. The importer can claim tax credit of the Service Tax paid on imports.

For example: Rajesh Apparels in Hyderabad, Telengana, avails fashion designing services of Rs. 50,00,000 from Kaushi Designs in Colombo, Sri Lanka.

Tax calculation

Particulars Amount (Rs.)
Fashion designing services   50,00,000
Service Tax @14%     7,00,000
Krishi Kalyan Cess @0.5%        25,000
Swachh Bharat Cess @0.5%        25,000
Total cost of import  57,50,000

Exports

In the current regime, export of goods and services is zero rated, i.e. rate of tax on exports is 0%. An exporter can also claim refund of the tax paid on inputs used to manufacture/purchase/provide the exported goods or services.

GST Regime

Import of goods

In the GST regime, a person who imports goods has to pay customs duty and IGST. The difference here is that CVD and SAD levied on imports in the current regime will be replaced by IGST under GST. IGST will be levied at the rate applicable to the imported goods in India. An importer can claim full tax credit of IGST paid on imports. Hence, importers who were unable to claim credit of CVD or SAD in the current regime can now claim full tax credit of the IGST paid on imports. However, no tax credit will be given on customs duty paid and it remains a cost for the importer under GST also.

Let us take an example to understand the levy of import duties in case of import of goods in the GST regime.

Example: Manoj Apparel in Bangalore, Karnataka purchases apparel from a supplier, Oz Designs, in Sydney, Australia.

Tax calculation

Particulars Nos. Price per no. (Rs.) Total Price (Rs.)
Women’s T-shirts 200 2,500    (51.68 AUD) *   5,00,000
Men’s T-shirts 100 5,000    (103.37 AUD) *   5,00,000
Total 300 10,00,000
Customs duty @ 10%        1,00,000
Education cess @ 3% on customs duty (10,000*3%)              3,000
Sub total     11,03,000
IGST @18% **       1,98,540
Total cost of import     13,01,540

* Exchange rate taken is 0.021 AUD = 1 Rupee
**Assuming GST rate of 18% on apparel.

Import of Services

Under GST, a supply will be considered as an import of service when-

  1. The supplier of the service is located outside India.
  2. The recipient of the service is located in India and
  3. The place of supply of the service is in India.

For example: Rajesh Apparels in Hyderabad, Telengana, avails fashion designing services of INR 50,00,000 from Kaushi Designs in Colombo, Sri Lanka

Location of supplier: Colombo, Sri Lanka

Location of recipient: Hyderabad, Telengana

Place of supply: Place of supply will be the location of the recipient, i.e. Hyderabad, Telengana.

Hence, this supply is an import.

Tax calculation

Particulars Amount (Rs.)
Fashion designing services   50,00,000
IGST @ 18%*     9,00,000
Total cost of import  59,00,000

* Assuming GST rate of 18% on fashion designing services

Exports

Under GST, exports will be zero rated, similar to the current regime. An exporter can also claim refund of the tax paid on inputs used to manufacture/purchase/provide the exported goods or services.

Export of services

Specific conditions have been laid down for a supply to be considered an export of service under GST. These are:

  1. The supplier of the service is located in India.
  2. The recipient of the service is located outside India.
  3. The place of supply of the service is outside India
  4. The payment for the service has been received by the supplier in convertible foreign exchange and
  5. The supplier and recipient are not establishments of the same person.

For example: Rohan Consultants in Mumbai, Maharashtra, provides business consultancy services to Abey’s Engineering in Singapore. The payment for the service has been received in Singapore Dollars.

Here,

Location of supplier: Mumbai, Maharashtra

Location of recipient: Singapore

Place of supply: Place of supply will be the location of the recipient, i.e. Singapore.

Payment for the service: Payment for the service has been received in convertible foreign exchange, i.e. Singapore Dollars.

Relationship between the supplier and recipient: The supplier and recipient are distinct persons.

Hence, this supply qualifies as an export of service. Rate of tax on the supply will be 0%.

Export of service under GST

The levy of taxes and treatment of taxes in case of imports and exports largely remain the same under GST in comparison with the existing laws. In case of an importer, full input credit will be available on the IGST paid on imports and additional input credit will be available on the GST paid on all types of inputs used or intended to be used in the course of or for the furtherance of business. Similarly, in the case of an exporter, refund will be given on the tax paid on all inputs used in the course of business. Overall, costs of import and export are expected to reduce under GST and compliance is expected to become easier with the convergence of multiple tax laws into one law.

What are the Accounts and other Records you should Maintain under GST

Banner_GST-AccountsRecords_1

Accounts and records are the primary source of data for any organization’s financial reporting. Every law of Direct and Indirect Tax in our country also mandates that information in a prescribed manner has to be captured and preserved for a certain period of time. These accounts and records form the basis for returns filed by tax payers under each law.

Current regime

In the current indirect tax regime, every tax law mandates certain accounts and records of transactions to be maintained for a specific period of time, apart from the regular books of accounts.

Under Excise, the general records to be maintained are the RG-1 register (Daily stock account of excisable goods), Form IV register (Register of receipt or issue of raw material), invoice book and job work register

Under Service Tax, the suggested records include the bill register, receipt register, debit/credit notes register, CENVAT credit register, etc

Under VAT, the records to be maintained include purchase records, sales records, stock records, VAT account containing details of input and output tax, works contract account, etc

These records are required to be retained for at least 5 years from the end of the financial year in which they were effected.

GST regime

Under GST, the activities of manufacture, provision of taxable service and sale of goods will have a common law and hence, businesses can now maintain consolidated information which was maintained separately earlier.

Under GST, every registered taxable person is required to maintain correct accounts of the following details at the principal place of business specified in the registration certificate: –

  1. Manufacture of goods
  2. Inward and outward supply of goods and/or services
  3. Stock of goods
  4. Input tax credit availed
  5. Output tax payable and paid

If more than one place of business is specified in the registration certificate, accounts relating to each place of business must be kept at the respective places.

Maintaining books and records in electronic form will be ideal and convenient for accurate and timely compliance under GST.

Persons whose turnover during the financial year exceeds Rs. 1 crore

In addition to maintaining the accounts specified above, a registered person whose turnover during the financial year exceeds Rs. 1 crore is required to,

  • Get the accounts audited by a Chartered Accountant or Cost Accountant and
  • Submit a copy of the audited annual accounts and a reconciliation statement in Form GSTR- 9B while filing the annual return in Form GSTR-9.

In the reconciliation statement, the Chartered Accountant or Cost Accountant is required to certify that the value of supplies declared in the annual return reconciles with the audited annual financial statement.

Persons owning or operating a warehouse or godown

An owner or operator of a warehouse or godown or any other place used for storage of goods, irrespective of whether he is registered or not, is required to maintain records of the consignor, consignee and other details which are yet to be prescribed in the law.

How long should accounts and records be retained?

Every registered person is required to retain accounts and records for 5 years from the due date of filing of annual return for the year to which the accounts and records pertain.

For example: For accounts and records pertaining to Financial Year ’17-’18, annual return must be filed by 31st December ’18. These accounts and records must be retained till 31st December ’23.

Tally.ERP 9 Series A Release 5.5.2, February 2017

The new Tally.ERP 9 Release 5.5.2 is available now!

Whats new in Tally.ERP 9 Release 5.5.2

  • During certain licensing and product upgrade activities, Tally.ERP 9 had to be restarted manually in administrator mode. Now, Tally.ERP 9 will restart automatically in administrator mode if you have administrator rights. If you do not have administrator rights, you need to provide your Windows administrator user name and password to restart Tally.ERP 9 in administrator mode.
  • While splitting data, Tally.ERP 9 now recognizes excise duty classifications defined using earlier versions of Tally

Release 5.5.2 – Highlights

Telangana VAT and CST

  • Release 5.5.2 supports the latest format of Telangana VAT Form 200 and CST Form VI (for Purchase and Sales).

TDL:

  • Enjoy the newly supported data source types Rule Set, Num Set, and Flag Set, to populate data to a collection using the attribute Data Source

Accounting

  • In the Voucher Type Alteration screen after enabling the option Use advanced configuration?, under the columns Prefix Details and Suffix Details:
    • If a date was entered under the column Applicable From, and
    • If the column Particulars was left blank, the prefix and suffix details entered for the previous period was displayed for the subsequent periods.
  • This issue is resolved.
  • While recording or altering a voucher in single entry mode, if a line item was removed by pressing Ctrl+D, the preceding or succeeding line item was deleted. This issue is resolved.
  • When exported vouchers were imported, the voucher numbers were not retained. This occurred if the option Overwrite vouchers, instead of duplicating, during import? was enabled in F12: Configuration, and Automatic (Manual Override) method of numbering was selected, in the Voucher Type master.This issue is resolved.
  • In an invoice, if the party ledger selected was enabled with multiple mailing details, and predefined with the mailing name of another ledger, the Address Type of the other ledger was displayed in the Party Details screen.

This issue is resolved. Now, in addition to ledger mailing name, the corresponding ledger name is also displayed in the List of Address Types of the Party Details screen.

  • During verification of vouchers for audit, if the sampling method was set as manual sampling by clicking S: Set Manual Sampling in the Voucher Register report, the text Manually Sampled was not displayed against the voucher. This issue is resolved.

Banking

  • While configuring cheque printing by selecting the User Defined format for a bank ledger, the top and bottom lines for A/c Payee in the cheque was not displayed. This issue is resolved.

  • In the Bank Reconciliation screen, while creating a voucher for an unreconciled transaction imported from the bank statement, the field Transaction Type was displaying Cheque in case of payments and Cheque/DD in case of receipts if a different transaction type was set in the ledger master. This issue is resolved.

  • For DBS Bank, when you printed the Bank Reconciliation report, the Particulars column was blank in the print. This issue is fixed, and the Particulars column displays the values as seen in the report.

Payroll

  • An error file with the message Invalid found on line numbers was being generated while uploading the ECR text file. This was occurring as separator characters were getting added at the end of each line in the ECR text file. This issue is resolved.

Click here for release notes

Click here for download

Tally.ERP 9 Series A Release 5.5, January, 2017

The new Tally.ERP 9 Release 5.5 is available now!

Whats new in Tally.ERP 9 Release 5.5

  • Release 5.5 provides important improvements relating to the VAT, Payroll, and the overall product experience in your Tally.ERP 9.

Release 5.5 – Highlights

VAT

  Chhattisgarh, Himachal Pradesh, Jharkhand, and Uttarakhand: New statutory Experience

  • Generate accurate forms and annexures with ease. Also, experience faster exception handling. View and verify Included, Not-relevant and Incomplete transactions seamlessly. Enjoy the flexibility of defining tax rates at various levels, and create user-defined classifications.

Karnataka: Enhanced VAT Experience

  • If you have been using the VAT module in Tally. ERP 9 5.x series to file returns, you will be delighted with the speed with which you can now resolve exceptions. You can group exceptions item-wise or ledger-wise, and resolve multiple exceptions together.

    With Release 5.5 you can,

    o      Use the new Nature of Transactions that define goods at 0% CST against Form C.

    o      Filter e-Sugam voucher details as per the latest notification by the Commercial Taxes Department and as per invoice values defined by you.

    o      Maintain voucher totals even with transactions with discounts.

    o      Experience seamless CST apportionment and accurate voucher totals as CST amount is now added to purchase cost while making inter-state transactions.

Chandigarh: New template supported

  • Export Form VAT 15 as per the latest version (AMM_VAT15(CH).xlsx) prescribed by the Excise and Taxation department.

Haryana: Revised template supported

  • Export invoice-wise details of interstate branch and consignment transfers in the latest format TEMPLATE-VAT-RETURN-R1-LP5-LIST_OF_GOODS_IMPORTED.xls prescribed by the Excise and Taxation department. Click here to understand the changes in the revised template.

Delhi: Commodity details for labour charges collected made optional

  • From Release 5.5 onwards, you can skip entering the commodity name and code details for labour charges collected. This will not be listed as an exception on exporting the annexures from Form D VAT 16.

Payroll

  • New ESI monthly wage threshold of Rs. 21,000 is supported.

  • The revised format of the e-Challan Report (ECR) with support for Universal Account Number (UAN) is provided.

 

Click here for release notes

Click here for download

Tally.ERP 9 Series A Release 5.4.9, January, 2017

The new Tally.ERP 9 Release 5.4.9 is available now!

Whats new in Tally.ERP 9 Release 5.4.9

  • In this release, Tally has introduced the enhanced VAT experience for the states of Rajasthan and Uttar Pradesh, new annexure templates for Tamil Nadu, enhancement of the TDS Nature of Payments report, and the concept of Rule Set as a part of TDL.

Release 5.4.9 – Highlights

VAT

Tamil Nadu: New Annexure Templates

  • Commercial Taxes Department, Tamil Nadu has introduced new versions of Annexure 8 and Annexure 9 (V1.1.xls).  Using Tally.ERP 9 Release 5.4.9, you can export interstate purchases and purchase returns to the new templates.

Rajasthan and Uttar Pradesh: Enhanced VAT Experience

  • If you have been using the VAT module in Tally. ERP 9 5.x series to file returns, for the states of Rajasthan and Uttar Pradesh, you will be delighted with the speed with which you can now resolve exceptions. You can group exceptions item-wise or ledger-wise, and resolve multiple exceptions together.

Click here for release notes

Click here for download

How is the Value of Goods & Services Determined under GST?

Valuation of goods and services in GST

Tax Value of goods/services
Excise Based on transaction value or quantity of goods or MRP
VAT Based on sale value
Service Tax Based on taxable value of service rendered

Valuation of goods and services

Current tax regime

Let us look at how the value of goods and services is calculated in the current regime, with the help of an example:

Super Cars Ltd, a car manufacturer, sells spare parts to Ravindra Automobiles, their dealers for Rs 6,000. The MRP of the spare parts is Rs 10,000. The invoice that is issued to Ravindra Automobiles is illustrated below:

Value of goods and services for tax

Under GST Regime

We have used the same example as above to illustrate the method of valuation of goods and services in the GST regime:

GST Value Calculation
*Assuming GST of 18% on automobile spare parts

In the GST regime, the value of goods &/or services supplied is the transaction value, i.e. the price paid/payable, which is Rs 6,000 in the example.

Additional Charges and Expenses – in the GST Regime

How are additional charges and expenses such as discount, packing charges treated in the GST regime? Should they be included or excluded from the transaction value?

Let us consider this illustration.

Super Cars Ltd sells a car worth Rs 4,00,000 to Ravindra Automobiles.

  • They incur packing charges of Rs 5,000 on the car
  • They provide a discount of 1% on the price, as part of Diwali scheme
  • Super Cars Ltd agree to provide a further discount of 0.5% if Ravindra Automobiles makes payment by 31st of the month via net banking. Ravindra Automobiles makes the payment by 31st of the month using net banking.

The invoice issued to Ravindra Automobiles, under GST, will look like this:

discounts in GST
*Assuming GST of 18% on car

 In the invoice,

  • Packing charge of Rs 5,000 is included in the transaction value.
    Packing charges or any incidental expenses charged before or at the time of supply of goods or services must be included in the transaction value.
  • Discount of 1% is deducted from the transaction value.
    Discount given before or at the time of supply, and which is recorded in the invoice, can be deducted from the transaction value.
  • Discount of 0.5% is not deducted in the invoice. As discount of 0.5% is given after the supply, it will not be shown in the invoice. However, since the discount was known at the time of supply, and can be linked to this specific invoice, the discount amount can be reduced from the transaction value. For this, Super Cars Ltd will issue a credit note to Ravindra Automobiles for Rs 2,360 (0.5% of Rs 4,00,000 = Rs 2,000+ GST@ 18% on Rs 2,000 = Rs 360), and the same must be linked to the relevant tax invoice.
    Discount given after supply but agreed upon before or at the time of supply and can be specifically linked to relevant invoices, can be deducted from the transaction value.

What are the exceptions to this rule?

Answer: Discount given after supply, and not known at the time of supply.

Let us understand this with an illustration.

Super Cars Ltd sells a car to Ravindra Automobiles for Rs 4,00,000. As per the standing agreement, a credit period of 30 days is allowed for payment. However, due to a severe cash crunch, Super Cars Ltd requests Ravindra Automobiles to make the payment within 2 days, promising a discount of 2% on doing so. Ravindra Automobiles makes the payment within 2 days.

In this scenario, since the discount was not known at the time of supply, it cannot be claimed as a deduction from the transaction value for GST calculation.

A summary of the effect of discount on transaction value is given below-

Type of discount Effect on transaction value
If the discount is given before or at the time of supply, and is recorded in the invoice Can be claimed as deduction from transaction value
If the discount is given after supply, but agreed upon before or at the time of supply, and can be specifically linked to relevant invoices Can be claimed as deduction from transaction value
If the discount is given after supply, and not known at the time of supply Cannot be claimed as deduction from transaction value

 

Effect of various charges/expenses of supply on transaction value is shown below-

Charges/expenses related to supply Effect on transaction value
Incidental expenses such as commission and packing Included in transaction value
Interest/late fee/penalty charged by supplier for delayed payment Included in transaction value
Subsidies excluding those provided by the Central and State governments Included in transaction value
Any tax other than GST Included in transaction value
Any amount payable by supplier, but incurred by receiver Included in transaction value

It is expected that GST (Goods and Services Tax) will bring about marked changes in the tax scenario in the country. The various aspects of product pricing, valuation of goods and services, and others will experience significant transformation as the tax system is simplified.