Creating a Purchase Voucher (As Invoice) for VAT

Invoice can be classified into As Item Invoice and As Accounts Invoice. The VAT functionality though, is the same for both.

Given below are examples of transactions in Item Invoice with implementation of VAT.

As Item Invoice

The selection and display of the VAT classifications in the vouchers differ according to the settings in the F12: Configuration screen.

F12: Configuration screen

Use Common Ledger A/c for Item Allocation - NO

If you wish to use more than one ledger during a voucher transaction, you have to set this to No. This way, you need to select a ledger for every item during voucher entry. When you set this to No, you can see the VAT/Tax Class at the header region of the screen if the Allow Selection of VAT/Tax Class during entry field is set to Yes.

Allow Selection of VAT/Tax Class during entry?-YES

Once you select Yes, you have the option to select the VAT classifications in the field VAT/Tax Class which is in header region of the Voucher screen. If it is set to No, the VAT/Tax Class will not be displayed in the voucher screen and the classifications will be taken from the Ledgers.

Consider the following examples

The following is the entry for the purchase of item1 when VAT classification is Purchase @ 4%. This classification is selected from a drop down list at the header region of the screen as shown below.

Note: In the VAT/Tax Class field, there is an option called Not Applicable. You can select this option if you need different classifications for each item during voucher entry.

You will need to select the Duties and Taxes ledger after you are done with the entry of all items.

It will now calculate the VAT amount and add it to the Amount to give you the total.

F12: Configuration screen

Use Common Ledger A/c for Item Allocation-YES

When you wish to use the same Ledger for all items in a transaction, you can set this to Yes. Thus, you need not select a Ledger each time you enter an item during the voucher transaction.

The following example to demonstrate the functioning of Assessable Value is shown by setting this field to Yes.

Assessable Value: It is the value on which VAT is to be calculated. The value is arrived at after making proper deductions towards Trade discounts if any, and adjustments towards Excise/ED Cess payable. It is up to the user to calculate this and enter it under the Assessable Value column. This manual entry gives flexibility to the user to make the calculations as per the local statutory requirements.

As this example does not include discount or Excise/ED Cess taxes, the Assessable Value will be Rs. 5000, which is retrieved from the Amount column.

Let us assume we have:

1. Subtracting the discount amount: 5000 -200 = 4800

2. Adding the Excise tax amount : 4800+800= 5600

3. Adding the ED Cess amount : 5600+16= 5616

Therefore, our Assessable Value amount is Rs.5616.

VAT is now calculated on this amount automatically on the selection of the tax ledger (Rs.224), as shown below.

The entries are to be passed similarly for Sales Voucher and Credit/Debit notes.

Example 2: Purchase-Exempt

This example is to demonstrate the working of Tally

in the VAT exempted transactions

and also to show the type and patterns of reports generated for such transactions.

We are passing the following entry for the purchase of the VAT exempted item.

As it is exempt from VAT, this particular transaction does not affect the VAT amount in any way. Similarly for Inter-state Sales/Purchases.

Note: In the Voucher mode there is no option for selection of the VAT classification at the header region. Therefore, the VAT classification selected in the Ledgers will apply always.