Consider Tax or Charge For in ERPNext: Total, Valuation & Total and Valuation
In the Taxes and Charges table of a purchase or sales transaction, the Consider Tax or Charge For field decides how each tax or charge behaves. It has three values:
- Total
- Valuation
- Total and Valuation
To see the effect of each, take an example. You purchase ten units of an item at a rate of 800, so the purchase amount is 800. The item has 4% VAT applied, and INR 100 was incurred in transportation.
Total
A tax or charge categorised as Total is included in the total of the transaction, but does not affect the valuation of the item purchased.
With 4% VAT on the item, the VAT amounts to INR 32 (on the item’s base rate of 800). VAT is a consumption tax, so it should be added to the value of the Purchase Order/Invoice, it forms part of what’s payable to the supplier but it should not be added to the value of the purchased item. When the Purchase Invoice is submitted, a general ledger posting is made for the tax/charge categorised as Total.
Valuation
A tax or charge categorised as Valuation is added to the value of the purchased item, but not to the total of the transaction.
The transportation charge of INR 100 should be categorised as Valuation. With this, the value of the purchased item rises from 800 to 900. The charge is not added to the transaction total, because it’s your own expense and shouldn’t be reflected as payable to the supplier. (See the perpetual inventory documentation for the general ledger posting done for expenses categorised as Valuation.)
Total and Valuation
A tax or charge categorised as Total and Valuation is added to both the valuation of the item and the total of the transaction.
Suppose transportation is arranged by your supplier, but you have to pay them for it. In that case, the transportation charge should be categorised as Total and Valuation. With this, the INR 100 transportation charge is added to the actual purchase amount of 800 (raising the item’s value), and the INR 100 also appears in the total, since it’s payable to the supplier.
NOTE
The simplest way to choose: if a charge is payable to the supplier, it belongs in the Total; if it adds to the cost of the item, it belongs in the Valuation. A charge that does both like supplier-billed transportation, is Total and Valuation.
TIP
Set this field correctly on each tax and charge from the start, it directly drives both your item valuations and your payables. A transportation cost wrongly marked as Total, for instance, would understate your item cost and misstate what’s owed to the supplier.
Related Topics
- Purchase Taxes and Charges Template
- Sales Taxes and Charges Template
- Purchase Invoice
- Perpetual Inventory
- Item Valuation
SUMMARY
The Consider Tax or Charge For field in the Taxes and Charges table has three values that control how a charge is treated. Total adds the charge to the transaction total but not the item valuation (e.g. VAT payable to the supplier). Valuation adds it to the item’s value but not the total (e.g. your own transportation expense, raising item value from 800 to 900). Total and Valuation adds it to both (e.g. supplier-billed transportation that’s payable and adds to item cost). Choose based on whether the charge is payable to the supplier, adds to item cost, or both.
