Query
I am getting message "Incorrect tax type selected in tax ledger" in the GSTR reports. How do I resolve it ?


Preface

The aforesaid message may appear in :
GSTR-1 (Sales / Outward Supply) and/or;

GSTR-2 (Purchase / Inward Supply) and/or;

GSTR-3 (Returns Summary).


Let's take an example to understand the situation when this problem occurs

Example : Sales with StockItems


Sales Voucher data in Tally (extract)

Party StockItem Sales Ledger Remarks
Name
 State-Name Item-Name Is GST Applicable Tax-Rate
 Ledger Name Is GST
Applicable		 Nature-of Transaction
 Tax-rate
Party B

 Assam
(i.e Interstate Sales)		 ITEM A Applicable 18 Sales @ 18% (Interstate) Applicable Sales Taxable 18 Incorrect tax-type given in Nature of transaction


Report : GSTR1

Message : Incorrect tax-type selected in tax ledger


Solution 1 (Recommended)
- Use the option "Gateway of Tally >> Accounts Info >> Ledgers >> Alter"
- Next, select the ledger "Sales @ 18% (Interstate)" and set the following options :

  1. Is GST Applicable : Yes
  2. Set GST details : Yes 
    - Next, press Alt+L
    - Next, remove the DATE (using spacebar)
    - Next, press Ctrl+A (to accept and close the window)
  3. Type of Supply : Goods (or Services)
  4. Press Ctrl+A to accept and save the ledger.


Solution 2 

- Use the option "Gateway of Tally >> Accounts Info >> Ledgers >> Alter"
- Next, select the ledger "Sales @ 18% (Interstate)" and set the following options :

  1. Is GST Applicable : Yes
  2. Set GST details : Yes 
    - Nature of transaction : Interstate Sales Taxable
    - Integrated Tax : 18
    - Next, press Ctrl+A (to accept and close the window)
  3. Type of Supply : Goods (or Services)
  4. Press Ctrl+A to accept and save the ledger.


CONCLUSION

a. If you are using Accounting-with-Inventory (i.e. Stockitems in Sales/Purchase entries), then it is advised that you specify the HSN code and Tax-rates at the StockItem level only (and not the Sales ledger-level).

b. Specifying the GST Tax rates at one place (i.e. Stockitem level) simplifies the whole process.

c. We suggest Solution 1 as given above.


PS:
The aforesaid message / problem may occur in "Sales with StockItems" or "Purchase with StockItems". The steps to resolve are the same for both Sales and Purchase entries.