There will be one tax code to use in different quarters. But the tax rate will be different in each quarter. That means, we have to use one tax code in different quarters at different rates without creating separate tax codes.
Different situations of changing the rate in the tax codes and their effect on the existing transactions are added below:
Process 1
- Created “Test Tax code” with a rate of 5%.
- Created Purchase order by using “Test Tax code”.
- Updated the tax rate of the “Test Tax code” to 8%.
There is no change in the tax rate of the existing purchase order. It is still 5%. When billing this purchase order, the system will select the new tax rate of 8%.
Process 2
- Updated tax rate of “Test Tax code” to 5%.
- Created purchase order and vendor bill.
- Then again updated tax rate to 8%.
There is no change in the purchase order and vendor bill. It is still using the old rate of 5% in process 2. The reports also show the old rate (same as in the vendor bill).
If we have already used one tax rate in a transaction before changing the rate in the tax code, then the rate in the existing transactions will not be changed. If we need to change it in any existing transactions, then we can do it by doing the below steps:
- Edit record.
- Change tax code in edit mode and then change back to the original tax code. That is, select any other tax code and then select back the original tax code. (Update tax code).
- Save the record.
Update reverse charge code
We cannot update reverse charge tax code rates as it will change the rates in old/existing transactions.