This section provides an overview of tax on tax adjustments and discusses how to: ■ Enter price adjustment details.
■ Define tax on tax calculation.
See "Working with Schedules and Adjustments" in the JD Edwards EnterpriseOne
Applications Advanced Pricing Implementation Guide.
6.5.1 Understanding Tax on Tax Adjustments
India tax regimes often base tax calculations on another tax, which is referred to as tax on tax. For example, the taxes for excise, service, TCS, and VAT tax types are calculated in two ways:
■ Based on the specific tax type.
■ Based on a percent of the specific tax type.
The system uses formulas to define calculations for tax on tax. For example, to set up a tax adjustment, TAX2, that is 25 percent of a prior tax price adjustment, TAX1, you: ■ Set up adjustment controls for each tax name on the Modify Adj. Controls form.
■ Add the adjustments to a schedule in sequential order, TAX1 then TAX2. ■ Define the TAX2 tax on tax formula as #(TAX1).
■ Define a price adjustment for TAX2 with a Basis Code of 7, Factor Value Numeric of 25, and Formula Name of TAX1 on the Price Adjustment Definition form.
6.5.1.1 Excise Tax
India defines excise duty as a tax on articles that you produce and intend for
consumption in the same country that administers the taxes. Excise tax is an indirect tax that the manufacturer passes on to the consumer. The liability for the tax occurs when you manufacture the goods. Although the tax is payable when you manufacture the goods, the tax is not accounted for until you ship the goods from your premises. When you receive products into inventory, you assign a lot number and the system calculates the taxes using landed cost. Landed cost enables the taxes to be attached to the lot that you received.
When you sell products or transfer products to another location within your company, you identify the lot number of the product during sales order entry or shipment confirmation. The system transfers the taxes calculated to the sales order by using landed cost. The system does not use the tax price adjustments to calculate excise tax. You must use the correct lot number for the system to transfer the landed cost amounts.
When you sell products that you purchased, you apply the same excise tax amounts that you paid to the manufacturer on the customer invoice. You include the excise tax in the price of the item. The system uses lot numbers to track the goods from purchase receipt to shipment confirmation to identify the taxes calculated by the manufacturer. Lot numbers enable you to transfer the excise tax from the purchase order to the corresponding sales order.
The Central Excise Department controls the central excise duty tax, which is a federal tax. The tax is applicable for excise-registered manufacturers or excise-registered dealers. India requires a Central Excise Registration for each physical location or licensed premise.
This example shows a typical tax calculation for excise tax:
Tax Name Calculation Based On Rate
PRM1 Base price minus item promotion discount
50 percent
BED Current price 16 percent
ECD Base price minus discounts plus BED tax
2 percent
AED BED tax 4 percent
If the base price for an item is INR 2000.00 (Indian Rupee), the system performs the following calculations to determine the final price:
Adjustment Calculation Price
PRM1 2000.00 × (50 ÷ 100) 1000.00 BED 1000.00 × (16 ÷ 100) =
160.001000.00 + 160.00
6.5.1.2 VAT
VAT applies when you ship a product to a customer whose receiving location is within the same state as your shipping location. When you transfer products to another location in your company that is in a different state, a retention percentage is retained. VAT consists of two tax types:
■ VAT
The system calculates VAT as the current taxable amount that includes the excise tax amount.
■ Additional Tax/Surcharge
The system calculates additional tax or surcharge based on the VAT amount. Continuing the example from excise tax, this table shows a typical tax calculation for VAT:
Tax Name Calculation Based On Rate
PRM1 Base price minus item promotion discount
50 percent
BED Current price 16 percent
ECD Base price minus discounts plus BED tax
2 percent
AED BED tax 4 percent
VAT Base price minus discounts plus BED tax plus ECD tax plus AED tax
21 percent
SUR VAT tax 13 percent
If the base price for an item is INR 2000.00, the system performs the following calculations to determine the final price:
Adjustment Calculation Price
PRM1 2000.00 × (50 ÷ 100) 1000.00 BED 1000.00 × (16 ÷ 100) = 160.001000.00 + 160.00 1160.00 ECD 1160.00 × (2 ÷ 100) = 23.201160.00 + 23.20 1183.20 AED 160.00 × (4 ÷ 100) = 6.401183.20 + 6.40 1189.60 VAT 1189.60 × (21 ÷ 100) = 249.821189.60 + 249.82 1439.42 SUR 249.82 × (13 ÷ 100) = 32.481439.42 + 32.48 1471.90 ECD 1160.00 × (2 ÷ 100) = 23.201160.00 + 23.20 1183.20 AED 160.00 × (4 ÷ 100) = 6.401183.20 + 6.40 1189.60
6.5.1.3 Service Tax
Service tax is an indirect federal tax on specific services. The service provider is responsible for payment of the tax. Service tax does not depend on the source of supply.
Service tax consists of two tax types: ■ Service
The system calculates service tax as a direct percentage of the cost of the service. ■ Education Cess
The system calculates education cess tax as a direct percentage of the service tax amount.
This example shows a typical tax calculation for service tax:
Tax Name Calculation Based On Rate
SRV Base service price 10 percent
EDCS SRV 5 percent
If the base price for a service is INR 2000.00, the system performs the following calculations to determine the final price:
Adjustment Calculation Price
SRV 2000.00 × (10 ÷ 100) = 20.002000.00 + 20.00 2020.00 EDCS 20.00 × (5 ÷ 100) = 1.002020.00 + 1.00 2021.00
6.5.2 Forms Used to Enter Price Adjustment Details
Form Name Form ID Navigation Usage
Work With Adjustment Detail W4072B Adjustment Set Up (G4231112), Price & Adjustment Detail Revisions Review price adjustments. Price Adjustment Detail Revisions
W4072A On the Work With Price Adjustment Details form, enter an adjustment name and click Add.
On the Preference Hierarchy Selection form, select a record, and click Select.
Enter price adjustment details. The record that you select on the
Preference Hierarchy Selection form determines the fields that display on the Price Adjustment Detail Revisions form. Price Formula
Revisions
W4076A On the Price Adjustment Detail Revisions form, select a record, and then select Formulas from the Row menu.
Define tax on tax calculations.
6.5.3 Entering Price Adjustment Details
Access the Price Adjustment Detail Revisions form.
Figure 6–4 Price Adjustment Detail Revisions form
Factor Value Numeric
Enter a number that represents the tax percentage or amount. The Factor Value Numeric field works in conjunction with the Basis Code field and the Formula Name field for tax on tax adjustments.
BC (basis code)
Enter a user-defined code from UDC table 40/BC to specify how the system uses the factor value to calculate the tax adjustment. The Basis Code field works in conjunction with the Factor Value Numeric field. Values are: