1. we issue invoices where the totals are rounded to the nearest value.
but the Tax Transactions report does not show the rounded figure and there is a mismatch when we check the total sales on monthly / quarterly / yearly basis.
our customers usually file their monthly tax returns based on our invoice totals and we do the same. in this case the invoice total is a rounded value from the customer perspective.
also, every invoice has a waybill generated from the tax website where the invoice details are entered before the movement of goods. so at the end of every month the tax returns filed should match this data too.
we use the tax transactions report to prepare our monthly returns as it is impossible to prepare by manually checking every invoice.
so it would be better if the tax transactions report reflected the actual sales invoice generated.
2. regarding purchase invoices, we follow the method widely discussed on the forum to add the rounding value as a line item.
now, since this line item is not entered with a tax code associated with it, the tax transactions report ignores the same and gives a total which is not the actual as issued by the supplier.
i would recommend adding the same rounding options to purchase invoices which is already available for sales invoices (Round Up would need to be added). all invoicing software available globally would only follow either of the three rounding methods and the user can select the required option as per the invoice received.
Invoices rounding is an âafterâ tax calculation adjustment so it shouldnât be included in the tax reports.
If you charge a customer 1432.56 for an item plus 12 % (171.91) this totals 1604.47.
If you round that to 1600.00, the tax calculation doesnât change to suit the rounding, so the tax report remains at 1432.56 + 171.91 and the non tax rounding adjustment is -4.47.
Same with the purchase invoice, this canât be entered as 1600.00 and get the claimable tax as 171.91 as this wouldnât equal 12%, this would be entered as 1432.56 + 171.91 and the non tax rounding adjustment is -4.47.
Or put it this way, a suppliers decision to round after the fact doesnât alter their tax obligations as the selling price hasnât been amended, whereas a suppliers decision to adjust before the fact (discount) does alter their tax obligations as the selling price has been amended first.
The monthly tax returns should be based on the tax related transaction only, not on the tax related transactions plus roundingâs as those roundingâs have nothing to do with the tax act, they are a commercial decision.
i completely understand what you mean. but to prevent errors, the Indian tax law allows the amounts to be rounded to the nearest rupee.
Section 170 of the GST act states as below
The amount of tax, interest, penalty, fine or any other sum payable, and the amount of refund or any other sum due, under the provisions of this Act shall be rounded off to the nearest rupee and, for this purpose, where such amount contains a part of a rupee consisting of paise, then, if such part is fifty paise or more, it shall be increased to one rupee and if such part is less than fifty paise it shall be ignored.
so what we need is the tax reports to show what we actually did with our invoice. not what the software itself thinks is best for us. moreover the tax transactions report should be what transaction was actually made and not what was recorded on any software owned by a business.
The difficulty with what you suggest, @sharpdrivetek, is that the Indian approach is not used elsewhere. As @Brucanna explained, it would be illegal, allowing you to avoid legitimate taxes. The rounding feature was conceived as a convenience for sellers, not a response to provisions in one countryâs tax laws.
The approach described in the law you cited is somewhat like those countries where small-denomination coins or bills have been removed from circulation. In cases where that is true, Manager handles things differently by adjusting amounts to match available currency. But since paise is still a legal division of exchange for the rupee, Manager does not do that.
One thing is not clear from the text you quoted. Does the tax rounding apply on every single line item and transaction in commerce during a filing interval? Or, as would be more common, does it only apply to the net amount owed to or payable by the tax authority at a given filing time? The second option is extremely common, but is just another difference between tax accounting and financial accounting. Accounts are still kept at unrounded accuracy, and only your payment or refund is adjusted by a fraction of the currency unit.
To the contrary, permitting the rounding will compound the opportunity for errors.
What occurs if you have a Sales Invoice with a mix of tax code and non-tax code lines and rounding is applied, how can the programme tax reports know if the rounding is being applied to the tax transactions, the non-tax transactions or a mix of them both.
But isnât that currently occurring, the tax transactions entered on the sales invoice are being shown on the tax reports and the rounding not being shown as its not a tax transaction.
This clause appears to be only related to payments / refunds between the tax payer and the tax authority, not to transactions between taxpayers. As tax, interest, penalty, fines etc are not transactions normally conducted between taxpayers but are government related charges.
Rounding off must be made for the tax payable under the Act. It applies to each invoice as tax is payable on each invoice. Further, the rounding off must be made for each part of tax (CGST and SGST separately)
it is not illegal when the law clearly has such a provision. also, i do not think it would be that difficult to implement as @lubos have already provided solutions to have the invoice title changed and also the invoice total in words.
i hope this perspective can still be changed.
in India the tax exempted goods or service need to have the 0% rate selected. so these line items would still be included in the tax transactions report.
i was referring to the sum of a few invoices over a period of time. say we have three invoices of values 100.60 (rounded to 101) and 50.40 (rounded to 50) and 30.35 (rounded to 30), the returns would be filed for 101+50+30 = 181. but the tax transactions report would show a total of 181.35
the source of tax liability is still the transaction between two tax payers.
@sharpdrivetek, having read the entire 103 pages of the gazetted Act, you are misinterpreting tax payable.
Yes, the tax payable to the tax authority, the rounding clause under the miscellaneous chapter specifically refers to the amounts payable or refunded under the provisions of the Act.
For your point to have validity then the Act would need to stipulate that the rounding needs to be applied first by the Supplier before the tax becomes payable by the customer. But the Actâs rounding clause makes no reference to the charging nor the rounding of the tax by a supplier.
But the Act âdoesnâtâ contain any specific legal provisions with respect to the rounding of invoices.
Chapter 3 - LEVY AND COLLECTION OF TAX, Chapter 5 - INPUT TAX CREDIT and Chapter 7 - TAX INVOICE, CREDIT AND DEBIT NOTES donât grant any rights to the supplier to round their invoices so as to adjust the tax being charged.
But that is typical for the entire GST/VAT world, your Spend Money would show Tax Payable account 181.35, add a line Bank Charges & Tax Rounding -0.35 and the Tax Authority gets paid 181.00.
The end result between rounding individual invoices and rounding the tax payment (clause 170) is exactly the same 0.35, accept rounding individual invoices so as to adjust tax obligations is not legally permit able, but as stated earlier - invoice rounding is a commercial decision.
No, the source of tax âobligationsâ is the transaction between tax payers. The supplier has legal obligations to charge the customer and the customer has legal obligation to pay the supplier - a accounts receivable / accounts payable relationshipâŚ
Your Balance Sheet contains any tax liability via the Tax Payable account, your tax liability to the tax authority.
there is never a need for stipulation as in India the tax is always paid by the supplier to the tax authorities. the supplier simply charges the tax to the customer and collects the tax from them. the customer only gets inward credits for the tax amount paid to the supplier.
yes. but these chapters are like a preamble for the various headings while the GST act is only complete with all Sections. in this case Section 170 which clearly has not mentioned anything like âNotwithstanding anything contained in sections or sub-sectionsâ
not every time the tax is actually paid to the authorities, but is adjusted with the availed tax credits.
anyway, my initial topic was to show the invoice total on tax transactions exactly as it was issued to the customer and received from the supplier. but the topic seems to have been diverted and revolving around the tax rounding which is only optional. in the third post i did say the law allows us to round the tax, never did i mention anywhere it is mandatory. all i need is the reports to show what was mentioned on the document that was actually issued which is the only reference for the supplier or customer filing their tax returns.
Therefore in conclusion I will repeat my very first comment in this topic:
âInvoices rounding is an âafterâ tax calculation adjustment so it shouldnât be included in the tax reports.â
In another words, only transactions relating to a tax code get posted to the tax reports, therefore, as the invoice rounding transaction is not related to a tax code it canât be included in the tax reports.
Then everybody is using the wrong data set to complete their GST tax returns. In the below invoice example the value of the tax transactions should be used for the tax returns and not the values of the invoice total.
Both the suppliers and customers respective tax returns should include the tax transaction values of 7,000 + 840, and not the invoice total values of 4,700 + 840. If a taxpayer used the invoice total values for their return then they would be in breach of the Act.
Non tax code items, such as deposits and invoice rounding, should never be reflected in the GST tax reports. The GST tax returns should always reflect gross values, not nett values.
This is the universal system and Indiaâs tax system doesnât depart from this universal system.
i generate a waybill on the tax website with the above details to move the materials where i mention the invoice value as 2,40,307, tax amount 25747.20 and taxable value as 2,14,560.
for monthly returns i check the tax transactions report and i file the returns with invoice value as 2,40,307.20
the customer on his end files his tax returns based on my invoice as 2,40,307
the tax returns is rejected for both supplier and customer since the waybill, supplier returns and the customer returns do not match.
if there is a rounding option in Manager, it should be useful for accounting what was actually transacted and not assume the law itself. it is not a commercial decision. what is on the invoice reflects the actual transaction and not what is stored in the database of any accounting software.
also, i am sorry to say but no business who follow proper accounting would ever add negative line items to a tax invoice like you provided in your example. either the deposit is received to the Accounts receivable account prior or a journal entry from a separate deposit account would be made to the Accounts receivable account which would reflect in the Balance due of the invoice. adding a discount to line items would be a different thing as the taxable value would be adjusted accordingly.
For a start, your invoice doesnât add up: 2,14,560.00 + 25,747.20 = 240,307.20 so your invoice appears to have a mathematical problem and this is misleading to the customer. If you want to do invoice rounding then your invoice needs to be transparent like below.
Incorrect, the total invoice tax value entered should be 2,40,307.20, you canât reduce the tax transaction values by non tax transactions. If you hadnât rounded the invoice, what tax transaction values would you have entered - then these tax values donât change because you are invoice rounding.
Correct
Incorrect, the customer should be filing their returns based on their tax transaction report as it should be a mirror image of the your tax transaction report, assuming they had entered the tax transaction separately from the invoice rounding transaction.
Now all three items, waybill, supplier and customer returns are in alignment. You need to remember that the legally reportable tax transaction comes first, the optional commercial decision to round the invoice comes second and the action of the second canât change or modify the legal reporting requirements of the first.
Managerâs database can only reflect actual transactions, the contents of the invoice.
Why not ? It provides the customer with full disclosure as to the different deposits paid in relation to each invoice charge. Your acceptable alternatives donât provide the customer with that level of disclosure. Perhaps this alternate example you will find more acceptable.
i have customized my theme to not show the rounding. the law does not require an invoice to have the rounding value mentioned on an invoice. every tax payer in the country is aware of this law and they are aware of rounding to the nearest rupee.
like i have said many times the law allows to round to the nearest rupee. there is no question of if i hadnât rounded because why wouldnât i do it when our law allows us to do it and such a feature is available in Manager. a round figure helps maintaining proper accounts even for bank transactions.
how would this be possible when the customer only sees the invoice total on the invoice as 2,40,307. my tax transaction report is only visible to me and not to my customers.
i have been trying to explain from the beginning that this is not a commercial decision but something the law allows us to do. the legally reportable values are the totals shown on the invoice irrespective of whether rounding is applied or not. you cannot mention a different total on a waybill other than the total printed on the invoice. both invoice and waybill copies are carried together in transit.
the contents of the invoice have clearly been rounded to the nearest rupee and obviously this is not what the database is reflecting.
this is why we have customer and supplier statements. there is no necessity of disclosing complete accounts on a tax invoice. a tax invoice should only need to document an immediate transaction between the supplier and customer.
I think rounding off only applies when the GST portal automatically rounds off the TOTAL amounts (of all sales and purchases) and posts amounts to particular legders like e-liability and e-credit ledgers. @Brucanna is correct in saying that tax amounts have to be consistent.
I guess one could raise a query with the govt twitter handle if one has doubts.
Just so we have clarity, if a customer receives your invoice as per the orange panel in post #10, can you show a screenshot of how that customer would enter that invoice.
What law are you referring to here ?
They are aware of the rounding to the nearest rupee where ?
But which law are you now referring to ?
To round an invoice total doesnât require a law, its a supplierâs choice to round or not to round.
I didnât say that they could see âyourâ tax transaction report. If the supplier is using Manager to record their sales invoices and the customer is using Manager to record their purchase invoices, then any transactions between the supplier and the customer should be a mirror image within their respective tax transaction reports.
The conflict between your points 3 and 4 in post #10 was this:
Pt 3 - You were using your tax transaction report as the base to file the tax returns
Pt 4 - Your customer was using your invoices as the base to file the tax returns
My point was this - you and the customer should be using the same base - the tax transaction report, not different bases to file the tax returns.
Yes, the laws allows you to do but doesnât compel you to do, therefore itâs a commercial decision if you adopt what the law allows or you donât adopt.
The contents of the invoice have not been rounded, only the total of the invoice has been rounded and this is reflected in the database via the rounding transaction, otherwise when you click on view you wouldnât get the same invoice display. However, your invoice does not reflect whatâs in the database as it doesnât disclose the rounding.
In industries that invoice on âprogress claims as a % of completionâ, the progress claim invoice always details the progressive status (history), but thatâs outside the scope of this topic.
Section 170 which refers to the rounding of invoice values.
both on tax and invoice totals.
maybe other countries do not require a law. also maybe the reason you keep mentioning its a commercial decision. but the Indian GST act does have a section clearly mentioned for this.
the accounting software is a choice of business. there is no guarantee or compulsion to use the same software across the country or globally in case of exports. most business do not use any accounting software but a simple invoicing software. such software has provision to set the number format without decimals and therefore all values are automatically rounded. these are still acceptable as per law as long as the rounding is to the nearest rupee.
this is exactly the reason i created the topic. if the tax transaction report reflected the actual invoice issued, i would not have the need to go through the view screen of each invoice over the whole period when filing monthly returns.
exactly, its not a compulsion as i had already mentioned. but a tax payer cannot opt for it unless there was a law which allows to follow the same.
agreed only the invoice total is rounded. my choice of words were poor. but once the invoice is rounded, the final total is the rounded total. so this is the final value at which the invoice has arrived to. why just skip this after a step was purposely made on an invoice. are we not in control of the software?
i am not a know all guy and i am not an accountant either. but i am aware of the practices adopted in our country. and my views are based on this and the understanding of local law. so please ignore as this is anyway outside the scope of this topic as you said.
As I thought, you are confusing the application of clause 170.
Section 170 does not make any reference to the rounding of Invoice values, in fact the clause doesnât even make any mention of the word Invoice.
Section 170 only makes reference to the rounding of taxes. If you read the link you provided in post #14, the entire discussion is only about the rounding of taxes including âthe rounding off must be made for each part of the tax (CGST and SGST) separatelyâ.
In fact, under the section MCQs, Q2 asks âWhat are the amounts that can be rounded off as per this Section 170?â and the answers are âTax, interest, penaltyâ. There is absolutely no mention of any other amounts which can be rounded including other invoice values or totals.
Therefore the rounding of Invoices is entirely voluntary and doesnât require the permission of any law, however, the rounding of taxes and other charges under the GST Act is controlled by law.
Manager only has the feature for rounding Invoice totals, it doesnât have any built-in provisions for rounding the taxes separately, especially individual taxes.
In creating an invoiceâs rounded total, Manager creates an adjusting transaction to a P&L account. Manager canât reflect that transaction within the tax reports as the adjusting transaction has no relationship to any individual tax report transaction. Also, the rounded invoiceâs total, which becomes the Accounts Receivable balance, also has no relationship to any individual tax report transaction.
So to answer your topicâs heading question - the tax reports are not mismatched when the invoice is rounded as both the rounding adjustment and the rounded invoice total are not components of any tax reporting.
The only way to have your and your supplier invoice easily to be accepted is be transparent on the calculation. If they do not accept the submitted invoice on small differences in charges. You have to negotiate and have common ground of what is the best practices for the IRB not to âoverly penny wise, pound foolish attitudeâ.
For example, Royal custom in Malaysia always open on negotiation for settling the issues whenever we have controversial issue, confusing practices or rulings, inadequate of system capability and much more as long weâre not the wrong doers as to infringe the law or the rulings for tax avoidance.
moreover the tax transactions report should be what transaction was actually made and not what was recorded on any software owned by a business.
but once the invoice is rounded, the final total is the rounded total. so this is the final value at which the invoice has arrived to. why just skip this after a step was purposely made on an invoice. are we not in control of the software?