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Configure VAT Masters in TallyPrime

Configuring VAT masters in TallyPrime is very simple.

TallyPrime facilitates defining VAT details at different levels. This provides the convenience of applying tax rules at the highest level, which is the company level, as well as the flexibility to modify, override or define details at the lower levels

For example, the business is dealing with different types of batteries and if all the items are attracting the same VAT rate, the tax rate can be defined at the company level.

If the business is dealing with batteries and leather goods, then the tax rates are different, then the tax rate can be defined in the stock group level.

The user can define the rules at the company level and override at the lower level. The rules can be inherited as follows:

• Company
• Stock Group
• Stock Item
• Ledger Group
•  Ledger
• Transaction
• Transaction Entry

Note: The rules that are defined at the voucher type or voucher type class level will be used as 'template', thereby it will be used ONLY to fill the values in the transaction by default in create mode.

VAT rates

After migrating to release 5.0, you can start recording invoices. If these are transactions that have statutory implications, then the required masters have to be configured. In most scenarios the business can define the tax rules in few minutes and start recording transactions.

Choose  the scenario most suitable for your business and know how VAT details can be configured at different levels.

Scenario 1: I am dealing with stock items which have the same VAT rate.

For a business with all stock items having the same VAT rate, the tax rates can be defined in the company level. The rates once defined, will be automatically applied to all the stock items.

To define VAT rates at the company level

1. Press F11 (Features) > set Enable Value Added Tax (VAT) to Yes.
   If you do not see this option:

   • Set Show more configurations to Yes.
   • Set Show all configurations to Yes.
2. Enter VAT Details. 
   • Enable Set/alter tax/rate details.
   • Enter the Tax Rate and Tax Type.
3. Press Enter to save.

Scenario 2: Most of the stock items that I deal with, fall under the same VAT rate, but a few stock items attract a different VAT rate.

One of the following modes can be applied.

Mode 1: Define tax rate at the company level, and apply it for the stock items with common VAT rate. Define tax rates at the stock group level or stock item level for the items that different from the common VAT rate.

Mode 2: Define tax rates at the stock group level/stock item level.

Scenario 3: I am dealing with multiple stock items with multiple tax rates. The stock items can be classified into groups, such that each group has a common VAT rate. For example, batteries, leather goods, confectionery, etc.

The tax rate can be defined at the stock group level.

In this case, the tax rate can be defined at the stock group level. In case if any of the stock items have a different VAT rate from the stock group, then the tax rate can be defined at the stock item level. This will override the details specified in the stock group level.

Scenario 4: I am dealing with a wide variety of stock items with different tax rates, where as I have grouped the stock items based on my business need and not based on tax classifications.

To use the custom commodity and tax details

• Enable  VAT commodity and tax details as masters.
  To enable VAT commodity and tax details as masters

Scenario 5: I do not deal with inventory. I maintain only accounts in my company.

In this case, the tax rates can be configured either in the sales/purchase ledger.

To define tax rates at the ledger level

1. Gateway of Tally > Alter > type or select Ledger > and press Enter.
   Alternatively, press Alt+G (Go To) > Alter Master > Ledger > and press Enter.
2. Select the required purchase/ sales ledger.
3. Select Applicable in the field VAT Applicable.
4. Enable Set/Alter VAT details.
5. In the VAT Details screen:
   1. Enter the VAT Rate.
   2. Select the Tax Type.
6. Press Enter.
7. Press Ctrl+A.

Party ledgers in TallyPrime

The party ledger used in the transaction should have the following details defined to generate VAT returns accurately.

TallyPrime identifies if the nature of the transaction (local/ interstate, or export/import) using the state or country name entered in the party’s ledger master. If the party’s location has not been defined, then the VAT amount will not be calculated in the transaction.

To set the party’s location

1. Gateway of Tally > Alter > type or select Ledger > and press Enter.
   Alternatively, press Alt+G (Go To) > Alter Master > Ledger > and press Enter.
2. Select the party ledger.
3. Select the Country.
4. Select the State.
5. Enter the Pincode.
6. Accept the screen. As always, you can press Ctrl+A to save.

Dealer Type: The party’s dealer type is mandatory information to be captured in the reports. Hence, has to be defined in the ledger master.

To set the party’s dealer type

1. Gateway of Tally > Alter > type or select Ledger > and press Enter.
   Alternatively, press Alt+G (Go To) > Alter Master > Ledger > and press Enter.
2. Select the party ledger.
3. Enable the option Set/ Alter VAT Details.
4. In the VAT Details screen:
   1. Select the Type of Dealer.
   2. Enter the TIN/Sales Tax No.
   3. Press Ctrl+A.

MRP Details in VAT Masters in TallyPrime

If MRP is applicable for the stock item and the tax is calculated based on MRP, then MRP has to be configured in the stock item as MRP is enhanced to capture based on the period and state.  

To configure MRP Details

1. In Stock Item Creation screen, press F12 (configure) > Set the option Provide MRP Details  to Yes.
   If you do not see this option:
   • Set Show more configurations to Yes.
   • Set Show all configurations to Yes.
2. Enable Set/Alter VAT details.
3. Enter the Tax Rate.
4. Enable Calculate VAT on MRP in the VAT Details screen.
5. Accept the screen. As always, you can press Ctrl+A to save.