Applying a Tax on a Tax in ERPNext: Using On Previous Row Total
Sometimes you need to apply a tax on top of another tax. Take an example where NBT is charged on the net total of the items, and then VAT is charged on that running total. Here, NBT at 2% applies to the sum of the item values, and then VAT at 15% applies on top.
Steps
In ERPNext, map this in the Sales Taxes and Charges table of a Sales Order or Invoice:
- Select the type of tax as On Net Total.
- Select or add the tax as NBT and set the rate to 2%.
- Add a new row, select the type of tax as On Previous Row Total, select or add the tax as VAT, and set the rate to 15%.
- Expand the second row and set the Reference Row # to 1.
Once you save the document and view the print preview, the VAT is calculated on the running total after NBT a tax applied on a tax, exactly as intended.
NOTE
Use On Previous Row Total here not “On Previous Row Amount”. “Total” applies the rate to the cumulative total up to the referenced row (net total plus NBT), whereas “Amount” would apply it only to that one row’s charge. The Reference Row # tells ERPNext which row’s total to build on.
TIP
For chained taxes, keep the rows in the order the taxes should compound, and point each Reference Row # at the row whose total it builds on. Checking the print preview after saving is the quickest way to confirm each tax is calculating on the right base.
Related Topics
- Sales Taxes and Charges Template
- Purchase Taxes and Charges Template
- Sales Invoice
- Calculating Tax on a Previous Row’s Amount
SUMMARY
To apply a tax on a tax such as NBT on the net total, then VAT on that running total — set up two rows in the Sales Taxes and Charges table. Row one uses Type “On Net Total” for NBT at 2%. Row two uses Type “On Previous Row Total” for VAT at 15%, with its Reference Row # set to 1. After saving, the print preview shows VAT calculated on the net total plus NBT. Use “On Previous Row Total” (cumulative) rather than “On Previous Row Amount” (single row) for compounding taxes.
