To handle Excise Duty

This functionality is specific for India.

You can handle non-claimable excise duty in the following ways:

  • Manually calculate the excise duty and adding it to the item purchase price
  • Set up excise duty as expensed purchase tax
Add the Excise Duty to the item purchase price

For inventory items, project items, and service items, you can handle non-claimable excise duty as costs by manually calculating the excise duty and adding it to the item purchase price.

You can set up non-claimable excise duty in the following ways:

  • To obtain the correct default purchase price for an item on the purchase order line, you must enter the item purchase price including the excise duty in the price book.
  • If you do not add the excise duty to the price book, you must enter the purchase price including the excise duty, on the purchase order lines. Alternatively, you can copy the purchase price including the excise duty, from the purchase order acknowledgement from your supplier.
  • If you do not add the excise duty to the price book, project estimates will not include the excise duty. Your estimates for other costs must cover the excise duty.
  • Excise duty can also apply to other costs that appear on the purchase order. If the other costs are known beforehand, you can include the excise duty in the purchase order price. Otherwise, you must include the excise duty in the other costs on the purchase order.
Set up excise duty as expensed purchase tax

You can set up excise duty as expensed purchase tax if the following conditions are fulfilled:

  • The excise duty must be calculated over the net order line amount, excluding other costs.
  • The cost must be booked to inventory at the moment of purchase invoice registration rather than at the time of receipt.
  • Excise duty on additional costs must be handled in the same way as CST, LST, or VAT.

To set up excise duty as expensed purchase tax, take the following steps:

  1. You must set up a multiple tax code. In the Tax Codes by Country (tcmcs0136s000) session, select the Expense Purchase Tax check box.

  2. In the Multiple Tax Code Lines (tcmcs0135s000) session, define the following tax code lines:

    • A separate line for each type of excise duty. In the Calculation Method field, select Parallel.
    • A line for the CST, LST, VAT. In the Calculation Method field, select Cumulative.

  3. In the Multiple Tax Code Lines (tcmcs0535m000) session, enter the tax rates for each type of excise duty,

Example

If the value of an item is INR100, excise duty is 16%, education cess is 0.32% and VAT is 4%, the invoice amount is calculated as follows:

DescriptionTax rate or formulaAmount
Taxable amountnot applicableINR100
Excise duty16%INR16
Education cess2% of excise dutyINR0.32
Total amountTaxable amount + excise duty + Education cessINR116.32
Value Added Tax (VAT)4% of Total amountINR4.65
Invoice amountTotal amount + VAT (Normal rounding)INR121

 

The tax code for this example can be set up as a multiple tax code as follows:

  • Define a tax code and in the Tax Codes by Country (tcmcs0136s000) session, clear the Singular Tax check box.

  • In the Multiple Tax Code Lines (tcmcs0135m000) session, set up the following tax code lines for the tax code:

    • Line 1: Excise Duty

      • Sequence No. = 1
      • Description = Excise Duty
      • Calculation Method = Parallel
      • Expense Purchase Tax = Yes

      Line 2: Education Cess

      • Sequence No. = 2
      • Description = Education Cess
      • Calculation Method = Parallel
      • Expense Purchase Tax = Yes

      Line 3: VAT

      • Sequence No. = 3
      • Description = VAT
      • Calculation Method = Cumulative
      • Expense Purchase Tax = No

  • In the Multiple Tax Rates (tcmcs0133m000) session, set up the following tax rates for the lines;

    • Line 1: Excise Duty
      Tax Rate = 16 %
    • Line 2: Education Cess
      Tax Rate 2% of 16 % = 0.32 %
    • Line 3: VAT
      Tax Rate = 4 %
  • Assign the tax code by default to the transactions as described in To define default tax codes, or manually select the tax code for the purchase order line in the Purchase Order Lines (tdpur4101m000) session.

You can see the calculated tax amount in the Purchase Order - Lines (tdpur4100m900) session.

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