18 Understanding Sales Tax

This chapter contains the following topics:

Section 18.1, "Overview of Sales Tax"
Section 18.2, "Process Flow for Sales Tax"
Section 18.3, "Software Solution for Sales Tax"
Section 18.4, "Setup Requirements for Sales Tax"

18.1 Overview of Sales Tax

Sales tax is a percentage of tax that the Government levies on the sale of goods or services. This percentage can vary depending on the goods and their classification, which is specified in the Central Sales Tax Act. Sales tax applies to a range of goods and services for various types of transactions, such as interstate tradeoff, import or export of goods, and declared goods. The rate of percentage of tax levied varies based on whether the transaction is conducted within the state (intrastate trade) or outside the state (interstate trade). An interstate trade involves the movement of goods from one state to another state.

If a dealer fails to remit the taxes, the Government imposes a penalty and the dealer is liable to pay the penalty along with interest for the delay in the tax payment according to the rule governing the tax type.

The sales tax calculation is determined by the sales tax adjustments that are defined in the Advanced Pricing system. The sales tax adjustment contains information that describes the plan of adjustments to be included in the tax calculation. Each adjustment schedule can contain a multiple number of adjustments, such as sales tax, education cess, and surcharge. After the adjustments are defined, they can be grouped in an adjustment schedule for calculation.

Dealers are required to submit invoices with forms attached to claim sales tax exemptions. An invoice lists the details of the sales tax. Forms such as Form C, Form E, and Form F are used to claim tax exemptions on certain types of goods and transactions. Form C is the most commonly used type of form for claiming sale tax exemption. The form is a declaration of the goods used for manufacturing, resale, and processing that the dealer submits to the Government. A follow-up letter is sent to the dealer with the list of invoices submitted for sales tax exemption without the required concession forms.

18.2 Process Flow for Sales Tax

This process flow shows the steps for the sales tax process:

Figure 18-1 Sales tax process flow

Description of ''Figure 18-1 Sales tax process flow''

18.3 Software Solution for Sales Tax

To meet the sales tax requirements specified by the tax authorities, the JD Edwards EnterpriseOne programs enable you to:

Enter invoice details in forms to claim concession on sales tax.
Generate details of the applicable sales tax.
Print reports that lists invoices with forms pending.
Generate invoices with details of the sales tax.
Issue follow-up letters to customers.

18.4 Setup Requirements for Sales Tax

This table lists the sales tax requirements for India:

Setup Requirements	Comments	Cross-Reference
Assign tax types to tax regimes.	You use the Relation Tax Reg/Tax Type Inf program (P75I005) to specify tax types for tax regimes.	See Assigning Tax Types to Tax Regimes.
Define tax registration details.	You use the Tax Registration Details program (P75I210) to enter the tax registration details for an address book record, such as a business unit, customer, or supplier. You obtain the tax registration details for the address book record from the local tax authorities.	See Setting Up Tax Registration Details.
Set up the system for advanced pricing.	Use the Sales Order Entry program (P4210) to enter sales orders and the Update Price program (R42950) to recalculate prices and costs. You define the tax rates that the system applies for each tax type in the JD Edwards EnterpriseOne Advanced Pricing system.	See Setting Up the Advanced Pricing System for India Taxes.