Taxes in Adempiere are quite flexible if used correctly.
Taxes are derived from products and charges. A product or charge has a tax category assigned to it.
The tax category should be general and tied to the product type / charge type. A tax category can have many different rates depending on to who and where the product / charge is shipped.
Taxes are most easily understood by using an example. In Sweden there are four different VAT categories on sold goods and services. These are:
- Full tax
- Half tax
- Low tax
- No tax
Different products and services belong to these different categories.
- Food purchased at a store is half tax.
- Electronics equipment is full tax.
- A taxi ride is low tax.
- Insurances are no tax.
Each tax category must have at least one tax rate. The tax rate specifies:
- The rate in percent
- If it's charge when sold and/or purchased
- When the rate is valid. Sometimes politicians change the tax rate from one day to the other.
- From what location to what location this tax is valid. If no locations are given, the tax rate is valid for all locations.
Taxes in INDIA
- India has taxation at two labels. One type of taxes (like VAT) is levied at state level and the other types (like Excise, Service Tax) are levied by the Central Government.
- These taxes can be separate or concurrent, leading to cascading effect. To mitigate the cascading effect of taxes on the same commodity at various stages of trade and production cycle, set-off or abetment of input taxes are allowed.
- For example if INR 100 excise tax is paid on a raw material, which is used in the production of a final commodity which is also excisable then INR 100 set-off may be allowed from the final excise tax payable on commodity produced.
- While implementing the ERP, the implementer has to ensure that the proper accounts are set up to capture the taxes on debit as well as on the credit side. So as to allow the company to see the net tax payable in a snapshot.
- The tax structure in India at present is complex and the implementer needs to properly understand the basic rates, additional duties, multiple cess and their relations with the base rate.
Service Tax in INDIA
India has separate tax levy system on services rendered by businesses and is called 'Service Tax' which is at a flat rate of @12.36% of the value of services in most of the cases. In some cases the values are differently calculated.
The service tax is now levied on all services rendered in India, except on exempt services or on export of services.
The service tax is equivalent to excise tax on manufacturing of goods and can be set off against each other.
Excise Taxation in INDIA
Excise Tax or commonly known as 'EXCISE' is a tax levied by central government in India on manufacture of goods (not services).
Hence Excise levy is applicable only to manufacturers and not traders. But in some situations the traders and importers also need to deal with Excise tax in a significant way when they are trading in excisable goods.
The common rate of Excise is 12.36%, but it varies between different category of goods.
Excise tax paid on inputs (raw material) is allowed as a set off on excise levied on the finished manufactured goods in certain circumstances at the same or a different rate and hence the manufacturer pays excise tax only on the differential of input and manufactured value of goods.