How to Set up Taxes on Shopify India in 5 Steps
Updated : 23-Mar-2023
There’s quite a degree of heartburn in setting up tax rates for India on Shopify because the wordings (shared vocabulary) are not the same as when Shopify was started (in Canada). Since Shopify was not originally set up for India-based taxation, there are a few tweaks one has to get right for a GST-compliant bill to be created properly in Tally ERP9/Tally Prime.
Almost 80% of our sellers didn’t have shipping set up correctly, and nearly 60% of the sellers needed help with adding bulk tax rates/tax overrides for their products.
When we set up the Import2Tally app for Shopify users in India, we quickly realized that sales couldn’t be imported accurately into Tally ERP9/Tally Prime on account of:
Products not having tax rates or incomplete tax rates
Shipping not including the taxes
Products not having SKU codes
Learn “how to set up taxes on Shopify”
If you haven’t already added products to your store, here’s a handy curated video for you.
For taxes, from our intuitive understanding of Shopify’s article,
Country Tax in Shopify -> CGST
Federal tax in Shopify -> Also CGST (apparently!)
If you replace the two phrases (country tax/federal tax) with the word ‘CGST’, the mental mapping of the tax rate immediately becomes clear, as you will see in the steps below.
Step 1 - Add the checks for all products to be taxable, including shipping.
Navigate to the ‘Settings’ section in the Shopify Admin. Tick both the settings for ‘All prices include tax’ and ‘Charge tax on shipping rates’. In India, shipping is also charged with GST, so Indian sellers must tick this option as well in order to generate a GST compliant sale.
If you have tax-exempt products, it’s easy to manage those too. Step 3 will show you how.
Step 2 - Set up bulk tax rates for India.
Next, set up tax rates in bulk for all the taxable products. If all your goods belong to one tax rate, say 12%, you can click on ‘India’ and you will see a list of default tax rates.
The default tax rates are set up as:
Country tax: 9%
All states except Karnataka - 18%, ‘IGST’ and ‘instead of federal tax’
Karnataka - 9%, ‘SGST’ and added to federal tax’
Now, let’s say you sell products in the 12% tax bracket and your home state is Telangana,
Change the Country Tax to 6%.
Change all states except Telangana(your state), and specifically for Karnataka, to: 12%, ‘IGST’ and ‘instead of 6% federal tax’.
Change Telangana to: 6%, ‘SGST’ and ‘added to 6% federal tax’
Step 3: Add/Modify taxable and tax-exempt products.
How to add or modify Shopify tax settings tax on Shopify
Navigate to ‘Products’ in Shopify Admin.
Click on any of the products you want to modify for taxes and scroll to the ‘Pricing’ section.
If it’s a taxable product, tick the ‘Charge Tax on this product’ as shown below. If it’s tax-exempt, untick the option.
Step 4 - Check a test order for taxes!
This is how an order with taxes would look like in Shopify:
On importing the same order in Tally ERP9/Tally Prime, you should be able to see the Shipping/GST details correctly and it should not result in an error.
The Tax Analysis for the Voucher shows that there is no mismatch:
Next steps: Add SKU and HSN code
We always recommend adding SKU and HSN codes to your products in order to keep your Tally GSTR compliant and inventory management efficient. Navigate to the product that you would like to modify and edit the following details:
By now, you must have set your SKUs up flawlessly for GSTR-1 compliance for India. In the next article, we will also tackle how you can add tax overrides for different tax rates.
If you have set up your tax rates correctly, you will not face any more revenue leakage owing to paying GST for which you didn’t charge the buyer. This will cause an immediate lift in your net profit! To save time on importing invoices from any marketplace Khaata has been the easiest solution for many businesses.
You can check out Khaata’s Import2Tally app on the Shopify app store, which accurately and speedily imports your sales from Shopify into Tally ERP9/Tally Prime. Watch how below:
Import all Orders from Shopify to Tally ERP9
Do reach out to us at firstname.lastname@example.org in case you would like a demo on how Khaata helps import your Shopify sales into Tally ERP9/Tally Prime. [Insert Request Demo button here]
Would you like to have a free GST filing session for Shopify/Amazon/Flipkart with us? Do let us know by reaching out to us at email@example.com.