The computation for VAT/GST when Tax Rounding Level = Item Line Level is as follows:
VAT/GST amount = Gross amount - Net amount = Round(quantity*rate*(1+taxrate)) - Round(quantity*rate)
Given:
Quantity = 24
Rate/Price = 5.11726
Tax Rate = 21%
Example Scenarios:
#1 Tax Rounding Precision = 100 and Below
Computation:
Tax = Round(24*5.11726*(1.21)) - Round(24*5.11726)
= Round(148.6052304) - Round(122.81424)
= 100 - 100
= 0
#2 Tax Rounding Precision = 10 and Below
Computation:
Tax = Round(24*5.11726*(1.21)) - Round(24*5.11726)
= Round(148.6052304) - Round(122.81424)
= 150 - 120
= 30
#3 Tax Rounding Precision = 1 and Below
Computation:
Tax = Round(24*5.11726*(1.21)) - Round(24*5.11726)
= Round(148.6052304) - Round(122.81424)
= 149 - 123
= 26
#4 Tax Rounding Precision = 0.1 and Below
Computation:
Tax = Round(24*5.11726*(1.21)) - Round(24*5.11726)
= Round(148.6052304) - Round(122.81424)
= 148.60 - 122.80
= 25.80
#5 Tax Rounding Precision = 0.01 and Below
Computation:
Tax = Round(24*5.11726*(1.21)) - Round(24*5.11726)
= Round(148.6052304) - Round(122.81424)
= 148.61 - 122.81
= 25.80
In this example scenario, the tax amount expected by straight forward computation differs with the system computation. On a straight forward basis tax should be 25.79. Please refer below for the straight forward computation:
Tax = Round(24*5.11726*.21)
= Round(25.7909904)
= 25.79
This is the reason why users are given the option to use Tax Rounding Level to be set to Transaction level.