Tax setup allows your organization to define and manage tax components such as GST, VAT, Sales Tax, Input Tax, Output Tax, and Withholding Taxes. These are used in transactions like Invoices, Bills, and Journal Entries to calculate and report taxes accurately.
Your Salesforce Accounting App provides flexibility to configure:
- Standard Taxes (GST, VAT, Sales Tax, etc.)
- Withholding Taxes (TDS, Retention, etc.)
- Mapping taxes to appropriate General Ledger (GL) accounts
- Assigning taxes to products, vendors, customers, or entities
Types of Taxes:
| Tax Type | Purpose |
|---|---|
| Sales - Output Tax | Collected on sales from customers (e.g., GST on invoice) |
| Purchases - Input Tax | Paid on purchases from vendors (e.g., GST on bills) |
| Withholding Tax | Tax withheld at source while making payments (e.g., TDS) |
Linking Taxes to Transactions:
Once created, taxes can be automatically or manually linked to:
- Products (e.g., default GST for goods)
- Bills and Invoices (tax is applied during creation)
- GL Postings (automated accounting using mapped ledgers)
Best Practices:
- Create separate GL accounts for Input and Output tax to enable easy reporting.
- Group taxes based on percentage or region (e.g., CGST 9%, SGST 9%, IGST 18%).
- If using Withholding Tax, ensure the correct rate is configured based on government rules.
- Test tax calculation by creating sample bills and invoices before going live.
Example Use Case:
| Scenario | Tax Configuration Used |
|---|---|
| Selling a product with 18% GST | Output Tax: GST 18%, linked to invoice |
| Purchasing raw materials with 12% GST | Input Tax: GST 12%, linked to bills |
| Paying vendor with TDS deduction | Withholding Tax: TDS 10% on payment |
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