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https://help.tallysolutions.com/docs/te9rel55/Voucher_Entry/Accounting_Vouchers/On_Item_Rate_Calculation_Method.htm

Function of On Item Rate as the Method of Calculation

When you need to apply tax rates on your stock items in a non-compliance environment, you can use the On Item Rate method of calculation with the voucher class feature in Tally.ERP 9 as the method of calculation. This feature fetches the stock items defined with the corresponding tax rates and calculates the rates on different stock items as applicable.

Consider a company National Traders that does not follow the regular compliance norms. However, for different stock items your company needs to apply different tax rates on stock items while recording a sales invoice. Let us assume that the stock items are named Item 1, Item 2, and Item 3, which are taxable at the rates of 5%, 7%, and 10%, respectively.

To record a sales invoice for the stock items with their applicable tax rates, do the following:

1.    Create stock items with the applicable Rate of Duty.

2.    Create a voucher class from the sales voucher type and specify the applicable values for the type of calculation as On Item Rate.

3.    Create a sales invoice.

To create stock items with the applicable Rate of Duty

1.    Go to Gateway of Tally > Inventory Info. > Stock Items > Create/Alter.

2.    Enter the tax rate (for example, 5%) in the Rate of Duty (eg 5) field, as shown below:

3.    Press Ctrl+A to accept.

Similarly, create Item 2 and Item 3 with the Rate of Duty specified as 7 and 10, respectively.

To create a voucher class from the Sales voucher type

1.    Go to Gateway of Tally > Accounts Info. > Voucher Types > Alter > Sales.

2.    Enter the name of the voucher class to be created, in the Name of Class field, as shown below:

3.    Press Enter. The Voucher Type Class screen appears.

o     Select Sales in the Ledger Name field under Default Accounting Allocations for all items in Invoice. If a sales ledger is not present, you can create one by pressing Alt+C in the Ledger Name field.

o     Press Alt+C in the Ledger Name field under Additional Accounting Entries, in order to create a tax ledger, as shown below:

Similarly, you can create separate tax ledgers to cater to different rates of taxes, for example, 7%, 10%, and so on.

o     Select On Item Rate in the Type of Calculation field. Based on the selection of the calculation method and the values specified, when you record the stock item entries in your sales invoice, Tally.ERP 9 automatically relates to the corresponding Rate of Duty for each stock item.

o     Enter the tax rate (for example, 5%) in the Value Basis field.

o     Set the rounding method and rounding limit as required.

The Voucher Type Class screen appears as shown below:

o     Press Ctrl+A to accept. The voucher type creation/alteration screen appears.

Note: You can set the above configuration either from the Voucher Type Class screen or from the Default Accounting Entries screen.

To open the Default Accounting Entries screen, enable the option Set/Alter Default Accounting Entries? in the voucher type creation/alteration screen.

4.    Press Ctrl+A to accept.

To record a sales entry with different tax rates for different stock items

1.    Go to the Gateway of Tally > Accounting Vouchers > F8: Sales. The Change Voucher Type screen appears.

2.    Select the required voucher class. The Accounting Voucher Creation screen appears.

3.    Enter the Party A/c name.

4.    Select the item from the list of stock items.

5.    Enter the Quantity and Rate.

Similarly, you can select other stock items for which you want to apply the tax rates.

Tally.ERP 9 fetches the percentage of tax rate based on the rate provided in the item master, as shown below:

6.    Press Enter to save.

As shown in the image above, after On Item Rate was set as the type of calculation, all the tax rates appear on the basis of the Rate of Duty defined for the stock items.