Tax Calculation on Freight - Different Scenarios

[Prasoon]

Hi,

   I have seen many threads with different requirements of PO tax calculation with / without freight, freight to be relevant for VAT only, not for excise etc for INDIA. In this blog, I am just sharing some of the standard options for the different business scenarios.

Basic Settings:

1. Freight condition type with acrual flag inserted in MM pricing procedure with acrual key.

2. Tax procedure configured and tax codes with valid condition records.

Case 1: PO Tax should not be calculated over freight (Normal Case)

    If the freight condition type is with acrual key and no subtotal maintained against the condition type in MM pricing, then the condition wont be added to the net value / tax base and it wont affect the tax calculation.

MM pricing procedure:

Tax Procedure:

Test Case: PO with freight

PO price: 100 INR per 1 EA

Freight: 10% = 10 INR

Tax Calculation:

Note: Freight value wont be added to tax base and the freight has no effect on tax.

Case 2: The freight value should be added to tax base, so that all taxes (VAT, ED etc) will be calculated over the net + freight:

             In this case, maintain subtotal "4" against the freight condition in PO pricing procedure and maintain the base calculation procedure as 362 against the BASB condition in tax procedure:

MM Pricing Procedure:

Tax Procedure:

Test Case:

Tax Calculation:

Note: Freight value WILL be added to tax base.

Case 3: Freight Relevant for VAT only, NOT for excise:

Sample calculation:

PB00: 100

FRA1:  10

ED : 12.36 (12.36 % on net value :100 * 12.36%)

VAT 5% on net value + Freight + ED ( that is freight has to calculate over 100+10+12.36 = 122.36 and the value will be 122.36 * 5% = 6.12 )

In order to achieve the requirement, maintain the subtotal "6" against the freight condition in MM pricing procedure and maintain the base calculation 363 against BASB and the VAT condition type in tax procedure.

MM Pricing Procedure:

Tax Procedure:

Test Case: PO

Tax Calculation:

Result: The ED is calculated over net and VAT is calculated over NET + ED + Freight

Thanks for your time.

Regards,

AKPT