ERPNext is GST Ready

By Umair Sayyed July 6, 2017 ERPNext Features 9 comments

Consumption tax is the category of indirect tax which is applied on the consumption of goods and services. Following is the partial list of taxes which are categorized as a consumption tax.

  1. Good and Services Tax (GST)
  2. Value Added Tax (VAT)
  3. Harmonized Sales Tax (HST)

For managing consumption tax, companies need to separately maintain tax paid to the supplier and received from customers. The difference of balances of these accounts helps companies in determining the tax amount payable to the government authorities.

Let's consider a scenario to understand how consumption taxes are managed in ERPNext.

Gadget Technologies Pvt. Ltd. is a company based in India. They are into trading of computer peripherals. Products they deal in has 18% GST applied on it.

Setting up GST Accounts

Create a GST tax accounts based in the GST rate applicable on your items. Following is an example of how you can setup GST tax account can be created for the Company in your ERPNext account.





Also, you can consider creating separate GST accounts for tracking input GST (received from the Customer) and output GST (paid to Suppliers). The difference in both these accounts is what would be the amount payable to the government authorities.

Sales and Purchase Tax Masters

Create a Sales Taxes and Purchase Tax master based on the GST applied. For example, in india, the GST account applicable on a sales/purchase transaction differs based on your location and customer's location. Hence, you can create two separate sales and purchase tax masters, In State and Out State.



Posting in Tax Ledgers

Posting in tax ledger will happen on the submission of Sales Invoice and Purchase Invoice.


Purchase Invoice

Let's assume we made purchases of some computer peripherals on which tax is applied. If purchases were made of goods worth 1000, and 18% GST is applied on them, total tax amount would be 180.


Sales Invoice

If we sell an above-purchased item for 1500, with GST 18% applied, following would the general ledger for that Sales Invoice.


Paying Tax to the Government

The balance in each GST account will be composed on posting based on sales and purchase transaction. Considering our example, the GST payable will be 90.

Tax Balance Note
GST 18% 270 Tax received from Customers
GST 18%180 Tax already paid to Suppliers
Tax Payable 90 Tax payable to government 


Based on the periodicity of tax payment, you should post Journal Voucher. Select all the GST account and Bank Account from which tax payment is being made.



The following help video covers how you can use generate GST complaint invoices and reports in ERPNext, as per the Indian GST tax regime.


Umair Sayyed

Umair is the Chief Customer Officer at ERPNext. He has done more than 50 ERP implementations remotely and replies to most incoming inquiries.

9 comments
Jai July 7, 2017

Umair, I am on the mobile version and cannot see a link to the help video.

umair July 7, 2017

Fixed. Please check now, Thanks for notifying.

Sami Tayara July 22, 2017

Hello Umair. I need to discuss with you an ERPNext implementation in UAE market. Please send me email with your contacts so we can talk in detail. Thanks.

Umair Sayed July 24, 2017

Sami,

Thanks or your interest.

Feel free to reach me at umair [at] erpnext [dot] com or sales [at] erpnext [dot] com

Rakesh Agarwal October 2, 2017

Hi Umair, We are already using ERPNEXT but are facing issue's regarding GST Reports and Compliance and Implementation. Would be glad if you could help us out in our Implementation phase.

Umair Sayed October 5, 2017

@Rakesh, sure. Please feel free to reach us at +91-22-251-55-66-7. Or drop your contact information on sales [at] erpnext [dot] com, so that we can get back to you.

Chandrasekaran T D November 20, 2017

Hi Umair, Does the Virtual Box version is having the GST Setting and related feature?

umair November 20, 2017

Yes. This feature will be visible if India is selected as a country.

Sumeet Ahuja January 13, 2018

Hi Umair, We are Evaluating ErpNext for our Organisation and Plan to use Sales-Purchase Modules. We sell products which have Different Tax Percentage (i.e Some are 18 % and others are 12 %). We are struggling to create sale Invoice as it does not pick up Tax rates based on Product and applies full tax rates of 18 %. We tried to solve the issue but it does not seem to work for us. We are kind of Stuck at the moment. Can you please help.

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