feat: add support for 'not applicable' tax in item tax templates (#50898)

* feat: add support for 'not applicable' tax in item tax templates

* refactor: remove unused imports

* fix: import NOT_APPLICABLE_TAX in get_item_tax_map function

* fix: add item wise tax details for not applicable taxes

* test: added test case for `not_applicable`

* fix: do not create item wise tax details for not applicable tax

* fix: ensure tax rate is set to 0 for not applicable tax rows

* refactor: changes as per review

* test: update selling settings

* test: correct settings

* fix: return both net and current tax amounts for not applicable tax

erpnext/accounts/doctype/item_tax_template/item_tax_template.js

@@ -47,3 +47,12 @@ frappe.ui.form.on("Item Tax Template", {
 		});
 	},
 });
+
+frappe.ui.form.on("Item Tax Template Detail", {
+	not_applicable: function (frm, cdt, cdn) {
+		let row = locals[cdt][cdn];
+		if (row.not_applicable) {
+			frappe.model.set_value(cdt, cdn, "tax_rate", 0);
+		}
+	},
+});

erpnext/accounts/doctype/item_tax_template/item_tax_template.py

@@ -27,8 +27,15 @@ class ItemTaxTemplate(Document):
 	# end: auto-generated types
 
 	def validate(self):
+		self.set_zero_rate_for_not_applicable_tax()
 		self.validate_tax_accounts()
 
+	def set_zero_rate_for_not_applicable_tax(self):
+		"""Ensure tax_rate is 0 for any row marked as not applicable."""
+		for row in self.get("taxes"):
+			if row.not_applicable:
+				row.tax_rate = 0
+
 	def autoname(self):
 		if self.company and self.title:
 			abbr = frappe.get_cached_value("Company", self.company, "abbr")

erpnext/accounts/doctype/item_tax_template_detail/item_tax_template_detail.json

@@ -6,7 +6,8 @@
  "engine": "InnoDB",
  "field_order": [
   "tax_type",
-  "tax_rate"
+  "tax_rate",
+  "not_applicable"
  ],
  "fields": [
   {
@@ -21,20 +22,30 @@
    "fieldname": "tax_rate",
    "fieldtype": "Float",
    "in_list_view": 1,
-   "label": "Tax Rate"
+   "label": "Tax Rate",
+   "read_only_depends_on": "eval:doc.not_applicable"
+  },
+  {
+   "default": "0",
+   "description": "Check if this tax is not applicable to items (distinct from 0% rate)",
+   "fieldname": "not_applicable",
+   "fieldtype": "Check",
+   "in_list_view": 1,
+   "label": "Not Applicable"
   }
  ],
  "istable": 1,
  "links": [],
- "modified": "2024-03-27 13:09:55.735360",
+ "modified": "2025-12-26 17:19:18.791891",
  "modified_by": "Administrator",
  "module": "Accounts",
  "name": "Item Tax Template Detail",
  "owner": "Administrator",
  "permissions": [],
  "quick_entry": 1,
+ "row_format": "Dynamic",
  "sort_field": "creation",
  "sort_order": "DESC",
  "states": [],
  "track_changes": 1
-}
+}

erpnext/accounts/doctype/item_tax_template_detail/item_tax_template_detail.py

@@ -14,6 +14,7 @@ class ItemTaxTemplateDetail(Document):
 	if TYPE_CHECKING:
 		from frappe.types import DF
 
+		not_applicable: DF.Check
 		parent: DF.Data
 		parentfield: DF.Data
 		parenttype: DF.Data

erpnext/controllers/accounts_controller.py

@@ -69,6 +69,7 @@ from erpnext.setup.utils import get_exchange_rate
 from erpnext.stock.doctype.item.item import get_uom_conv_factor
 from erpnext.stock.doctype.packed_item.packed_item import make_packing_list
 from erpnext.stock.get_item_details import (
+	NOT_APPLICABLE_TAX,
 	ItemDetailsCtx,
 	_get_item_tax_template,
 	get_conversion_factor,
@@ -3696,8 +3697,11 @@ def add_taxes_from_tax_template(child_item, parent_doc, db_insert=True):
 
 	if child_item.get("item_tax_rate") and add_taxes_from_item_tax_template:
 		tax_map = json.loads(child_item.get("item_tax_rate"))
-		for tax_type in tax_map:
-			tax_rate = flt(tax_map[tax_type])
+		for tax_type, tax_rate in tax_map.items():
+			if tax_rate == NOT_APPLICABLE_TAX:
+				continue
+
+			tax_rate = flt(tax_rate)
 			taxes = parent_doc.get("taxes") or []
 			# add new row for tax head only if missing
 			found = any(tax.account_head == tax_type for tax in taxes)

erpnext/controllers/buying_controller.py

@@ -18,7 +18,11 @@ from erpnext.buying.utils import update_last_purchase_rate, validate_for_items
 from erpnext.controllers.accounts_controller import get_taxes_and_charges
 from erpnext.controllers.sales_and_purchase_return import get_rate_for_return
 from erpnext.controllers.subcontracting_controller import SubcontractingController
-from erpnext.stock.get_item_details import get_conversion_factor, get_item_defaults
+from erpnext.stock.get_item_details import (
+	NOT_APPLICABLE_TAX,
+	get_conversion_factor,
+	get_item_defaults,
+)
 from erpnext.stock.utils import get_incoming_rate
 
 
@@ -523,6 +527,9 @@ class BuyingController(SubcontractingController):
 				if account not in tax_accounts:
 					continue
 
+				if rate == NOT_APPLICABLE_TAX:
+					continue
+
 				net_rate = item.base_net_amount
 				if item.sales_incoming_rate:
 					net_rate = item.qty * item.sales_incoming_rate

erpnext/controllers/taxes_and_totals.py

@@ -19,7 +19,12 @@ from erpnext.controllers.accounts_controller import (
 	validate_taxes_and_charges,
 )
 from erpnext.deprecation_dumpster import deprecated
-from erpnext.stock.get_item_details import ItemDetailsCtx, _get_item_tax_template, get_item_tax_map
+from erpnext.stock.get_item_details import (
+	NOT_APPLICABLE_TAX,
+	ItemDetailsCtx,
+	_get_item_tax_template,
+	get_item_tax_map,
+)
 from erpnext.utilities.regional import temporary_flag
 
 
@@ -358,6 +363,9 @@ class calculate_taxes_and_totals:
 		if cint(tax.included_in_print_rate):
 			tax_rate = self._get_tax_rate(tax, item_tax_map)
 
+			if tax_rate == NOT_APPLICABLE_TAX:
+				return current_tax_fraction, inclusive_tax_amount_per_qty
+
 			if tax.charge_type == "On Net Total":
 				current_tax_fraction = tax_rate / 100.0
 
@@ -382,9 +390,12 @@ class calculate_taxes_and_totals:
 
 	def _get_tax_rate(self, tax, item_tax_map):
 		if tax.account_head in item_tax_map:
-			return flt(item_tax_map.get(tax.account_head), self.doc.precision("rate", tax))
-		else:
-			return tax.rate
+			rate = item_tax_map[tax.account_head]
+			if rate == NOT_APPLICABLE_TAX:
+				return NOT_APPLICABLE_TAX
+			return flt(rate, self.doc.precision("rate", tax))
+
+		return tax.rate
 
 	def calculate_net_total(self):
 		self.doc.total_qty = (
@@ -594,6 +605,9 @@ class calculate_taxes_and_totals:
 		current_tax_amount = 0.0
 		current_net_amount = 0.0
 
+		if tax_rate == NOT_APPLICABLE_TAX:
+			return current_net_amount, current_tax_amount
+
 		if tax.charge_type == "Actual":
 			current_net_amount = item.net_amount
 			# distribute the tax amount proportionally to each item row

erpnext/controllers/tests/test_item_wise_tax_details.py

@@ -299,3 +299,238 @@ class TestTaxesAndTotals(ERPNextTestSuite):
 		tax = doc.taxes[0]
 		detail = doc.item_wise_tax_details[0]
 		self.assertEqual(detail.amount, tax.base_tax_amount_after_discount_amount)
+
+	@change_settings("Selling Settings", {"allow_multiple_items": 1})
+	def test_not_applicable_tax_in_item_tax_template(self):
+		"""Test that items with 'not applicable' tax don't contribute to net amount of that tax."""
+		template_7pct = frappe.get_doc(
+			{
+				"doctype": "Item Tax Template",
+				"title": "_Test VAT 7% Template",
+				"company": "_Test Company",
+				"taxes": [
+					{
+						"tax_type": "_Test Account VAT - _TC",
+						"tax_rate": 7,
+					},
+					{
+						"tax_type": "_Test Account Service Tax - _TC",
+						"tax_rate": 0,
+						"not_applicable": 1,
+					},
+				],
+			}
+		).insert(ignore_if_duplicate=True)
+
+		template_19pct = frappe.get_doc(
+			{
+				"doctype": "Item Tax Template",
+				"title": "_Test VAT 19% Template",
+				"company": "_Test Company",
+				"taxes": [
+					{
+						"tax_type": "_Test Account VAT - _TC",
+						"tax_rate": 0,
+					},
+					{
+						"tax_type": "_Test Account Service Tax - _TC",
+						"tax_rate": 19,
+					},
+				],
+			}
+		).insert(ignore_if_duplicate=True)
+
+		self.doc.items[0].item_tax_template = template_7pct.name
+
+		self.doc.append(
+			"items",
+			{
+				"item_code": "_Test Item",
+				"qty": 1,
+				"rate": 100,
+				"income_account": "Sales - _TC",
+				"expense_account": "Cost of Goods Sold - _TC",
+				"cost_center": "_Test Cost Center - _TC",
+				"item_tax_template": template_19pct.name,
+			},
+		)
+
+		self.doc.append(
+			"taxes",
+			{
+				"charge_type": "On Net Total",
+				"account_head": "_Test Account VAT - _TC",
+				"cost_center": "_Test Cost Center - _TC",
+				"description": "VAT 7%",
+				"rate": 7,
+			},
+		)
+
+		self.doc.append(
+			"taxes",
+			{
+				"charge_type": "On Net Total",
+				"account_head": "_Test Account Service Tax - _TC",
+				"cost_center": "_Test Cost Center - _TC",
+				"description": "VAT 19%",
+				"rate": 19,
+			},
+		)
+
+		self.doc.save()
+
+		# VAT 7%: Both items contribute (Item 2 has 0% rate, not "not applicable")
+		self.assertEqual(self.doc.taxes[0].net_amount, 200.0)
+		# Service Tax 19%: Only Item 2 contributes (Item 1 has not_applicable)
+		self.assertEqual(self.doc.taxes[1].net_amount, 100.0)
+
+		expected_values = [
+			{
+				"item_row": self.doc.items[0].name,
+				"tax_row": self.doc.taxes[0].name,
+				"rate": 7.0,
+				"amount": 7.0,
+				"taxable_amount": 100.0,
+			},
+			{
+				"item_row": self.doc.items[1].name,
+				"tax_row": self.doc.taxes[0].name,
+				"rate": 0.0,
+				"amount": 0.0,
+				"taxable_amount": 100.0,
+			},
+			{
+				"item_row": self.doc.items[1].name,
+				"tax_row": self.doc.taxes[1].name,
+				"rate": 19.0,
+				"amount": 19.0,
+				"taxable_amount": 100.0,
+			},
+		]
+
+		actual_values = [
+			{
+				"item_row": row.item_row,
+				"tax_row": row.tax_row,
+				"rate": row.rate,
+				"amount": row.amount,
+				"taxable_amount": row.taxable_amount,
+			}
+			for row in self.doc.item_wise_tax_details
+		]
+
+		self.assertEqual(actual_values, expected_values)
+
+	def test_not_applicable_tax_in_item_tax_template_with_different_items(self):
+		"""Test that items with 'not applicable' tax don't contribute to net amount of that tax."""
+		template_7pct = frappe.get_doc(
+			{
+				"doctype": "Item Tax Template",
+				"title": "_Test VAT 7% Template",
+				"company": "_Test Company",
+				"taxes": [
+					{
+						"tax_type": "_Test Account VAT - _TC",
+						"tax_rate": 7,
+					},
+					{
+						"tax_type": "_Test Account Service Tax - _TC",
+						"tax_rate": 0,
+						"not_applicable": 1,
+					},
+				],
+			}
+		).insert(ignore_if_duplicate=True)
+
+		template_19pct = frappe.get_doc(
+			{
+				"doctype": "Item Tax Template",
+				"title": "_Test VAT 19% Template",
+				"company": "_Test Company",
+				"taxes": [
+					{
+						"tax_type": "_Test Account VAT - _TC",
+						"tax_rate": 0,
+						"not_applicable": 1,
+					},
+					{
+						"tax_type": "_Test Account Service Tax - _TC",
+						"tax_rate": 19,
+					},
+				],
+			}
+		).insert(ignore_if_duplicate=True)
+
+		self.doc.items[0].item_tax_template = template_7pct.name
+
+		self.doc.append(
+			"items",
+			{
+				"item_code": "_Test Item 2",
+				"qty": 1,
+				"rate": 100,
+				"income_account": "Sales - _TC",
+				"expense_account": "Cost of Goods Sold - _TC",
+				"cost_center": "_Test Cost Center - _TC",
+				"item_tax_template": template_19pct.name,
+			},
+		)
+
+		self.doc.append(
+			"taxes",
+			{
+				"charge_type": "On Net Total",
+				"account_head": "_Test Account VAT - _TC",
+				"cost_center": "_Test Cost Center - _TC",
+				"description": "VAT 7%",
+				"rate": 0,
+			},
+		)
+
+		self.doc.append(
+			"taxes",
+			{
+				"charge_type": "On Net Total",
+				"account_head": "_Test Account Service Tax - _TC",
+				"cost_center": "_Test Cost Center - _TC",
+				"description": "VAT 19%",
+				"rate": 0,
+			},
+		)
+
+		self.doc.save()
+
+		# VAT 7%: Only Item 1 contributes (Item 2 has not_applicable)
+		self.assertEqual(self.doc.taxes[0].net_amount, 100.0)
+		# Service Tax 19%: Only Item 2 contributes (Item 1 has not_applicable)
+		self.assertEqual(self.doc.taxes[1].net_amount, 100.0)
+
+		expected_values = [
+			{
+				"item_row": self.doc.items[0].name,
+				"tax_row": self.doc.taxes[0].name,
+				"rate": 7.0,
+				"amount": 7.0,
+				"taxable_amount": 100.0,
+			},
+			{
+				"item_row": self.doc.items[1].name,
+				"tax_row": self.doc.taxes[1].name,
+				"rate": 19.0,
+				"amount": 19.0,
+				"taxable_amount": 100.0,
+			},
+		]
+
+		actual_values = [
+			{
+				"item_row": row.item_row,
+				"tax_row": row.tax_row,
+				"rate": row.rate,
+				"amount": row.amount,
+				"taxable_amount": row.taxable_amount,
+			}
+			for row in self.doc.item_wise_tax_details
+		]
+
+		self.assertEqual(actual_values, expected_values)

erpnext/public/js/controllers/taxes_and_totals.js

@@ -1,6 +1,8 @@
 // Copyright (c) 2015, Frappe Technologies Pvt. Ltd. and Contributors
 // License: GNU General Public License v3. See license.txt
 
+const NOT_APPLICABLE_TAX = "N/A";
+
 erpnext.taxes_and_totals = class TaxesAndTotals extends erpnext.payments {
 	setup() {
 		this.fetch_round_off_accounts();
@@ -299,6 +301,10 @@ erpnext.taxes_and_totals = class TaxesAndTotals extends erpnext.payments {
 		if (cint(tax.included_in_print_rate)) {
 			var tax_rate = this._get_tax_rate(tax, item_tax_map);
 
+			if (tax_rate === NOT_APPLICABLE_TAX) {
+				return [current_tax_fraction, inclusive_tax_amount_per_qty];
+			}
+
 			if (tax.charge_type == "On Net Total") {
 				current_tax_fraction = tax_rate / 100.0;
 			} else if (tax.charge_type == "On Previous Row Amount") {
@@ -322,9 +328,14 @@ erpnext.taxes_and_totals = class TaxesAndTotals extends erpnext.payments {
 	}
 
 	_get_tax_rate(tax, item_tax_map) {
-		return Object.keys(item_tax_map).indexOf(tax.account_head) != -1
-			? flt(item_tax_map[tax.account_head], precision("rate", tax))
-			: tax.rate;
+		if (tax.account_head in item_tax_map) {
+			let rate = item_tax_map[tax.account_head];
+			if (rate === NOT_APPLICABLE_TAX) {
+				return NOT_APPLICABLE_TAX;
+			}
+			return flt(rate, precision("rate", tax));
+		}
+		return tax.rate;
 	}
 
 	calculate_net_total() {
@@ -368,6 +379,10 @@ erpnext.taxes_and_totals = class TaxesAndTotals extends erpnext.payments {
 			}
 
 			$.each(item_tax_map, function (tax, rate) {
+				if (rate === NOT_APPLICABLE_TAX) {
+					return;
+				}
+
 				let found = (me.frm.doc.taxes || []).find((d) => d.account_head === tax);
 				if (!found) {
 					let child = frappe.model.add_child(me.frm.doc, "taxes");
@@ -524,6 +539,10 @@ erpnext.taxes_and_totals = class TaxesAndTotals extends erpnext.payments {
 		var current_tax_amount = 0.0;
 		var current_net_amount = 0.0;
 
+		if (tax_rate === NOT_APPLICABLE_TAX) {
+			return [current_net_amount, current_tax_amount];
+		}
+
 		// To set row_id by default as previous row.
 		if (["On Previous Row Amount", "On Previous Row Total"].includes(tax.charge_type)) {
 			if (tax.idx === 1) {

erpnext/stock/get_item_details.py

@@ -40,6 +40,8 @@ purchase_doctypes = [
 	"Purchase Invoice",
 ]
 
+NOT_APPLICABLE_TAX = "N/A"
+
 
 def _preprocess_ctx(ctx):
 	if not ctx.price_list:
@@ -843,7 +845,10 @@ def get_item_tax_map(*, doc: str | dict | Document, tax_template: str | None = N
 		template = frappe.get_cached_doc("Item Tax Template", tax_template)
 		for d in template.taxes:
 			if frappe.get_cached_value("Account", d.tax_type, "company") == doc.get("company"):
-				item_tax_map[d.tax_type] = d.tax_rate
+				if d.get("not_applicable"):
+					item_tax_map[d.tax_type] = NOT_APPLICABLE_TAX
+				else:
+					item_tax_map[d.tax_type] = d.tax_rate
 
 	return json.dumps(item_tax_map) if as_json else item_tax_map
 

erpnext/utilities/transaction_base.py

@@ -9,7 +9,7 @@ from frappe.utils import cint, flt, get_time, now_datetime
 
 from erpnext.accounts.doctype.accounting_dimension.accounting_dimension import get_dimensions
 from erpnext.controllers.status_updater import StatusUpdater
-from erpnext.stock.get_item_details import get_item_details
+from erpnext.stock.get_item_details import NOT_APPLICABLE_TAX, get_item_details
 from erpnext.stock.utils import get_incoming_rate
 
 
@@ -367,6 +367,9 @@ class TransactionBase(StatusUpdater):
 		):
 			item_tax_template = frappe.json.loads(item_details.item_tax_rate)
 			for tax_head, _rate in item_tax_template.items():
+				if _rate == NOT_APPLICABLE_TAX:
+					continue
+
 				found = [x for x in self.taxes if x.account_head == tax_head]
 				if not found:
 					self.append("taxes", {"charge_type": "On Net Total", "account_head": tax_head, "rate": 0})