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Taxation
Tax Rates

Tax Rates Management

Tax Rates management allows you to create and organize all the tax rates used in your business. You can set up individual tax rates like SGST, CGST, IGST, or create combined tax groups that automatically calculate total tax amounts.

Accessing Tax Rates

  1. Navigate to Settings from the main menu
  2. Click on Taxation from the settings categories
  3. Select Tax Rates from the taxation settings options

Tax Rates Overview

The Tax Rates page displays all your configured tax rates with the following information:

  • Display Name: The name you give to identify each tax rate
  • Rate (%): The percentage rate for the tax
  • Tax Type: The classification or type of the tax

You can search for tax rates by typing in the search bar to quickly find specific rates.

Types of Tax Rates

Simple Tax Rates

Individual tax rates that you manually set up with a specific percentage and type.

Examples:

  • SGST @ 9%
  • CGST @ 9%
  • IGST @ 18%
  • VAT @ 5%

Group Tax Rates

Combinations of multiple simple tax rates that automatically calculate the total percentage.

Examples:

  • Standard Rate 18% (combining SGST 9% + CGST 9%)
  • Premium Rate 28% (combining multiple tax components)
  • Service Tax (combining various service-related taxes)

Managing Tax Rates

Adding New Tax Rates

  1. Click the + New button at the top of the tax rates list
  2. Choose between creating a Simple or Group tax rate
  3. Fill in the required information
  4. Save the new tax rate

Editing Existing Tax Rates

  1. Click the Edit button for the tax rate you want to modify
  2. Update the information as needed
  3. Save your changes

Removing Tax Rates

  1. Go to the edit page for the tax rate you want to remove
  2. Click the Delete button
  3. Confirm the deletion

Important: You can only delete tax rates that are not being used in any transactions or other tax groups.

Creating Simple Tax Rates

Simple tax rates are individual taxes that you set up with a specific percentage and classification.

Required Information

Display Name (Required)

  • Enter a clear, descriptive name for the tax rate
  • Maximum 255 characters allowed
  • Examples: “SGST 9%”, “CGST 9%”, “IGST 18%”, “VAT 5%”
  • Use names that help you and your team identify the tax easily

Tax Rate Percentage (Required)

  • Enter the tax percentage (0% to 100%)
  • You can use decimal places for precise rates (e.g., 2.5%, 9.25%)
  • The system will automatically add the “%” symbol

Tax Type (Required)

  • Select the appropriate tax classification from the dropdown
  • Choose the type that matches your tax compliance requirements
  • Common types include GST components, VAT, service tax, etc.

Step-by-Step Creation

  1. Access Tax Rate Creation

    • Go to Tax Rates settings
    • Click + New and select Simple Tax Rate

  2. Enter Basic Information

    • Type a clear display name
    • Enter the exact tax percentage
    • Select the appropriate tax type

  3. Review and Save

    • Double-check all information for accuracy
    • Click Save to create the tax rate
    • Verify it appears in your tax rates list

Creating Group Tax Rates

Group tax rates combine multiple simple tax rates to create a single, combined rate that’s automatically calculated.

How Group Tax Rates Work

  • Select multiple simple tax rates to include in the group
  • The system automatically calculates the total percentage
  • The combined rate cannot exceed 100%
  • You can see exactly which taxes are included in each group

Required Information

Display Name (Required)

  • Enter a descriptive name for the group tax rate
  • Maximum 255 characters allowed
  • Examples: “Standard Rate 18%”, “Premium Rate 28%”, “Export Rate 0%”
  • Use names that clearly indicate the purpose or total rate

Tax Selection

  • Choose which simple tax rates to include in the group
  • Select taxes by checking the boxes next to each rate
  • The system shows you how many taxes are included
  • The total rate is calculated automatically

Step-by-Step Creation

  1. Access Group Tax Rate Creation

    • Go to Tax Rates settings
    • Click + New dropdown and select Group Tax Rate

  2. Enter Group Name

    • Type a clear display name for the group
    • Make it descriptive of the total rate or purpose

  3. Select Component Taxes

    • Review the list of available simple tax rates
    • Check the boxes for taxes you want to include
    • Watch the total rate update automatically
    • Ensure the combination makes sense for your business

  4. Review and Save

    • Verify the total rate is correct
    • Check that all intended taxes are selected
    • Click Save to create the group tax rate

Tax Rate Examples and Use Cases

Common GST Setup

Simple Tax Rates:

  • SGST 9% (State Goods and Services Tax)
  • CGST 9% (Central Goods and Services Tax)
  • IGST 18% (Integrated Goods and Services Tax)

Group Tax Rate:

  • Standard Rate 18% (combining SGST 9% + CGST 9%)

Multi-tier Tax System

Simple Tax Rates:

  • Base Tax 10%
  • Additional Tax 5%
  • Special Levy 3%

Group Tax Rates:

  • Standard Package 15% (Base Tax + Additional Tax)
  • Premium Package 18% (All three taxes combined)

Service-Based Business

Simple Tax Rates:

  • Service Tax 12%
  • Education Cess 2%
  • Additional Cess 1%

Group Tax Rate:

  • Total Service Tax 15% (combining all service-related taxes)

Best Practices

Naming Conventions

  • Use clear, descriptive names that indicate the rate and purpose
  • Include the percentage in the name for quick reference
  • Be consistent with naming across similar tax types
  • Avoid technical codes that team members might not understand

Tax Rate Organization

  • Create simple tax rates first, then build groups from them
  • Group related taxes logically (e.g., all GST components together)
  • Keep group names descriptive of their total rate or purpose
  • Regularly review and update rates when tax laws change

Business Operations

  • Set up all required tax rates before creating transactions
  • Train your team on which rates to use for different scenarios
  • Keep tax rates current with legal requirements
  • Document any special tax rate usage rules

Understanding Tax Calculations

Simple Tax Rate Application

When you apply a simple tax rate:

  • The rate is applied directly to the taxable amount
  • Example: ₹1000 × 9% SGST = ₹90 tax

Group Tax Rate Application

When you apply a group tax rate:

  • Each component tax is calculated separately
  • The total shows the combined effect
  • Example: ₹1000 × Standard Rate 18% = ₹90 SGST + ₹90 CGST = ₹180 total tax

Automatic Calculations

  • Group rates automatically update when component rates change
  • Total rates are capped at 100% maximum
  • The system prevents invalid combinations
  • All calculations are done automatically

Troubleshooting

Common Issues

Cannot Create Tax Rate

  • Check that display name is not already in use
  • Ensure all required fields are completed
  • Verify tax rate percentage is within valid range (0-100%)
  • Make sure you have permission to create tax rates

Group Tax Rate Not Calculating Correctly

  • Verify that component simple tax rates exist
  • Check that you’ve selected the intended tax rates
  • Ensure component rates are properly configured
  • Refresh the page and try again

Cannot Delete Tax Rate

  • Check if the tax rate is being used in transactions
  • Remove the tax rate from any active invoice templates
  • Update any other group tax rates that include this rate
  • Consider making the rate inactive instead of deleting

Tax Rate Not Appearing in Lists

  • Ensure the tax rate was saved successfully
  • Check that you’re looking in the correct tax type
  • Verify the tax rate is active and not disabled
  • Refresh the page or clear browser cache

Setup Recommendations

Initial Configuration

  • Start with simple tax rates for all individual taxes
  • Create group rates only after simple rates are established
  • Test tax calculations with sample transactions
  • Train users on proper tax rate selection

Ongoing Maintenance

  • Review tax rates regularly for legal compliance
  • Update rates when tax laws change
  • Archive old rates rather than deleting them
  • Keep documentation of rate changes for audit purposes

Legal and Compliance Considerations

Tax Law Compliance

  • Ensure tax rates match current legal requirements
  • Update rates promptly when tax laws change
  • Maintain proper records of rate changes
  • Consult tax professionals for complex tax structures

Audit Requirements

  • Keep records of all tax rate configurations
  • Document reasons for rate changes
  • Maintain audit trails of tax calculations
  • Ensure tax reporting matches configured rates

Business Impact

  • Incorrect tax rates can affect pricing and compliance
  • Regular rate reviews prevent calculation errors
  • Proper setup supports accurate financial reporting
  • Clear organization aids in tax filing and audits

Integration with Business Operations

Tax rates integrate with:

  • Invoice Creation: Applied automatically when creating invoices
  • Purchase Transactions: Used for input tax calculations
  • Price Management: Integrated with product pricing
  • Financial Reporting: Tax calculations appear in reports
  • Compliance Reporting: Support tax return preparation
  • Customer Communication: Tax details appear on customer documents

Proper tax rate management ensures accurate tax calculations, legal compliance, and efficient business operations while supporting clear financial reporting and audit requirements.

Taxation