How to: Set Up VAT
VAT is levied for purchases and sales within the state. Sales tax is levied for interstate purchases or sales. You can set up VAT as part of the sales tax. You must set up VAT for the following:
States. You can also define the deferment period and the schedule codes for different states, as described in the State VAT Act. For more information, see State. You must also set up Tax Identification Number (TIN) and state information in the Company Information window, Customer Card window, and Vendor Card window. For more information, see How to: Set Up State Codes and Tax Identification Numbers for VAT.
Tax groups representing groups of inventory items or resources that are subject to identical tax terms. For more information, see Tax Group. You must also setup tax group code for item in the Item Card window. For more information, see Tax Group Code.
Tax jurisdictions that represent tax authorities. For more information, see Tax Jurisdiction.
Tax details. For more information, see Tax Detail.
Tax areas for customers and vendors. A tax area is a combination of tax jurisdictions. For more information, see Tax Area.
Tax area locations. For more information, see Tax Area Locations.
To set up VAT for states
In the Search box, enter States, and then choose the related link.
Fill in the fields as described in the following table.
Field Description Code
The unique state code. You can enter a maximum of 10 alphanumeric characters.
Description
The state code description. You can enter a maximum of 50 alphanumeric characters.
State Code for eTDS/TCS
The state code for the electronic filing of Tax Deducted at Source (e-TDS) or the electronic filing of Tax Collected at Source (e-TCS) in accordance with the government.
State Code for TIN
The state code for the Tax Identification Number (TIN). This field contains the first two numbers of the TIN.
Tax Account (Sales)
The tax account for sales. This field contains the general ledger account for posting the tax calculated on sales transactions.
CST Account (Sales)
The Central Sales Tax (CST) account for sales.
Tax Account (Purchases)
The tax account for purchases. This field contains the general ledger account for posting the tax calculated on purchase transactions.
VAT Deferred Account No.
The general ledger account number for posting the VAT deferred amount.
VAT Payable Account No.
The general ledger account number for posting the VAT payable amount.
VAT Refund Account No.
The general ledger account number for posting the VAT refund amount.
Excess Cr. C/F Account No.
The general ledger account number for posting the excess input VAT credit after the settlement process.
Branch Transfer Retention %
The retention percentage for interstate branch transfers.
Tax Period
The tax period prescribed under the State VAT Act for the VAT settlement process.
Deferment Period
The period for deferment. The value in this field must be 1Y (one year) for calculating deferments based on the financial year.
Financial Year
Select to specify whether the number of deferments has been calculated based on the financial year. This field is selected automatically when the deferment period is set to 1Y (one year).
Specified Period for Refund
The specified period prescribed under the State VAT Act, after which the excess credit carried forward can be applied for a refund.
Choose the OK button.
To set up VAT for tax groups
In the Search box, enter Tax Groups, and then choose the related link.
On the Home tab, choose New.
Fill in the fields as described in the following table.
Field Description Code
The unique code for the tax groups. You can use a maximum of 10 alphanumeric characters.
Description
The tax group description.
VAT Applicable
Select to indicate that VAT is applicable for the tax group.
Works Contract
Select to indicate that the work has been outsourced to a contractor.
Choose the OK button.
To set up jurisdiction deferment periods
In the Search box, enter States, and then choose the related link.
To define the jurisdiction deferment period, in the States window, on the Navigate tab, in the State group, choose Deferment Periods.
On the Home tab, choose New.
Fill in the fields as described in the following table.
Field Description State Code
The unique state code to which the deferment is linked.
Effective Date
The date from which the deferment is effective.
Starting Threshold Amount
The starting threshold amount. The deferment of the claimable portion of the input VAT on capital goods depends on the threshold amount.
Closing Threshold Amount
The closing threshold amount. The deferment of the claimable portion of the input VAT on capital goods depends on the threshold amount.
No. of Deferments
The number of deferments.
Choose the OK button.
To set up state schedules
In the Search box, enter States, and then choose the related link.
On the Navigate tab, in the State group, choose Schedules.
On the Home tab, choose New.
In the State Schedules window, fill in the fields as described in the following table.
Field Description Schedule Code
The state schedule code.
Schedule Description
The description for the state schedule code. This field is automatically generated from the schedule table. For more information, see Schedule Table.
Choose the OK button.
To set up VAT for tax jurisdictions
In the Search box, enter Tax Jurisdictions, and then choose the related link.
On the Home tab, choose New.
Fill in the required fields as described in the following table.
Field Description Code
The tax jurisdiction code. You can enter up to 10 alphanumeric characters.
Description
The tax jurisdiction code description.
Tax Type
The tax type for VAT.
State Code
The tax jurisdiction state code.
Retention Limit % (ITC NTS)
The retention limit percentage.
Retention Limit Loaded on Item
Select to specify that the retention limit is loaded on the item.
Choose the OK button.
To set up VAT for tax details
In the Search box, enter Tax Details, and then choose the related link.
On the Home tab, choose New.
Fill in the required fields as described in the following table.
Field Description Tax Jurisdiction Code
The tax jurisdiction code.
Tax Group Code
The tax group code.
Schedule Code
The schedule code.
Capital Goods
Select to include capital goods.
Creditable Goods
Select to include creditable goods.
Standard Deduction %
The standard deduction percentage.
VAT Retention Limit % on ITC
The VAT retention limit percentage.
Choose the OK button.
To set up VAT for tax areas
In the Search box, enter Tax Area, and then choose the related link.
On the Home tab, in the Manage group, choose Edit.
On the General FastTab, fill in the fields as described in the following table.
Field Description Code
The tax area code.
Description
The tax area code description.
On the Lines FastTab, fill in the required fields as described in the following table.
Field Description Tax Jurisdiction Code
The tax jurisdiction code.
Calculation Order
The tax calculation order.
Include Tax Base
Select to include the tax base calculation.
Choose the OK button.
To set up VAT for tax area locations
In the Search box, enter Tax Area Locations, and then choose the related link.
On the Home tab, choose New.
Fill in the fields as described in the following table.
Field Description Type
The type defined for the tax area location.
Dispatch / Receiving Location
The dispatch or receiving location.
Customer / Vendor Location
The customer or vendor location.
Tax Area Code
The tax area code.
VAT Applicable
Select to specify that VAT is applicable.
Choose the OK button.
See Also
Tasks
How to: Set Up State Codes and Tax Identification Numbers for VAT
How to: Post VAT Transactions
How to: Calculate VAT for Purchase Documents
How to: Set Up State Codes and Tax Identification Numbers for VAT
Concepts
VAT Overview
VAT Opening Overview
Assessable Value
Other Resources
State
State Schedule
Jurisdiction Deferment Periods
Tax Jurisdiction
Tax Detail
Tax Area
Tax Area Locations