About Setting Up GST

GST is a transaction tax that is paid by the end user, which can be a consumer or a business. You set up GST to specify the GST percentage to calculate for the following scenarios:

Who you sell to.
Who you buy from.
What you sell.
What you buy.

When you set up GST, you have to perform the following general steps:

Set up GST business posting groups.
Enter GST posting setup combinations.
Set up GST product posting groups.
Assign GST posting groups.
Use reverse charge GST for trade between EU countries/regions.
Understand GST rounding for documents.

Note
The principles for setting up both business and product GST posting groups are like the principles for setting up general posting groups. For more information, see Set Up Posting Groups.

Setting up GST Business Posting Groups

You create GST business posting group codes to represent customers and vendors.

GST business posting group codes define how GST is calculated and posted according to the type of customer or vendor that is involved in the transaction. For example, the GST business posting group can describe where the customer or vendor is located.

Use codes that are easy to remember and that describe the business group, such as EU, Non-EU, or Domestic. The code must be unique. You cannot have the same code more than once in a table. You can set up as many codes as you need.

For more information, see How to: Set Up GST Business Posting Groups.

Setting up GST Product Posting Groups

You create GST product posting group codes for items and resources.

GST product posting group codes determine how to calculate and post GST according to the type of item that is being purchased or the type of item or resource that is being sold.

Use codes that are easy to remember and describe the product posting group, such as No-GST for miscellaneous without GST, GST10 for miscellaneous with 10 percent GST, and GST25 for miscellaneous with 25 percent GST.

For more information, see How to: Create a GST Combination Setup and How to: Set Up GST Product Posting Groups.

Entering GST Posting Setup Combinations

You set up the combinations of GST business posting groups and GST product posting groups in the GST Posting Setup window.

For each combination, you can specify the GST percent, GST calculation type, and general ledger account numbers for posting GST that is related to sales and purchases and reverse charge GST. You can also specify whether GST is recalculated when a payment discount is applied or received.

You can enter as many combinations as you need. If you want to group GST posting setup combinations with similar attributes, then you can define a GST Identifier value for each group and then assign the identifier to the group members.

For more information, see How to: Set Up Combinations of GST Business Posting Groups and GST Product Posting Groups, How to: Create a GST Combination Setup, and GST Calculation Type.

Assigning GST Posting Groups

Once you have set up GST posting groups, you assign them to general ledger accounts, customers and vendors, and items and resources.

Instead of manually assigning these groups to accounts, you can set up default GST business posting groups on general business posting groups and default GST product posting groups on general product posting groups. The relevant code is then automatically inserted as the GST business or product posting group when you assign the relevant business or product posting group to a customer, vendor, item, or resource.

For more information, see the following topics:

Using Reverse Charge GST for Trade Between EU Countries/Regions

Companies in the EU must use reverse charge GST when trading with other companies in the EU. The rule applies to purchases from EU countries/regions and sales to EU countries/regions.

Note
This rule applies when trading with companies that are registered as GST liable in another EU country/region. If you do business directly with consumers in other EU countries/regions, then you should contact your tax authority for applicable GST rules.

Purchases from EU Countries/Regions

When you post a purchase from a vendor in another EU country/region, GST must be calculated using the rate that is applicable in your own country/region. On the GST statement, the GST amount is added to the domestic sales GST and to the domestic input tax credit. This means the calculated GST does not affect the payable GST.

You must report the value of purchases, which is the base amount that was used to calculate input tax credit, from EU countries/regions separately on your GST statement.

To correctly calculate GST on purchases from EU countries/regions, you should:

Set up GST Bus. Posting Group and GST Prod. Posting Group combinations with Reverse Charge GST in the GST Calculation Type field. You must also enter the general ledger account to which reverse charge GST is posted in the Reverse Chrg. GST Account field.
Assign the GST business posting groups in the GST Bus. Posting Group field on the vendor card of each EU vendor. You should also enter the vendor's Exemption Certificate number in the Exemption Certificate No. field on the Foreign Trade FastTab.

When you post a purchase from a vendor in another EU country/region, the GST amount is calculated, the input tax credit account is debited, and the reverse charge GST account is credited. A GST entry that contains the GST base amount, which is the purchase price before GST, is created, and the amount is specified as a reverse charge GST amount.

Sales to EU Countries/Regions

GST is not calculated on sales to GST-liable companies in other EU countries/regions. You must report the value of these sales to EU countries/regions separately on your GST statement.

To correctly calculate GST on sales to EU countries/regions, you should:

Set up a line for sales with the same information for purchases. If you have already set up lines in the GST Posting Setup window for purchases from EU countries/regions, then you can also use these lines for sales.
Assign the GST business posting groups in the GST Bus. Posting Group field on the Invoicing FastTab of the customer card of each EU customer. You should also enter the customer's Exemption Certificate number in the Exemption Certificate No. field on the Foreign Trade FastTab.

When you post a sale to a customer in another EU country/region, the GST amount is calculated, and a GST entry is created by using the information about the reverse charge GST and the GST base, which is the amount that is used to calculate the GST amount. No entries are posted to the GST accounts in the general ledger.

Understanding GST Rounding for Documents

Amounts in documents that are not yet posted are rounded and displayed to correspond with the final rounding of amounts that are actually posted. GST is calculated for a complete document, which means that GST that is calculated in the document is based on the sum of all lines with the same GST identifier in the document.