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OK, then what if i wanted to log purchases into system, what is your take on this, what would be the impact? would it be vice versa? i.e. i have to adjust the cost using discount? What would be impact on Tax Input & output in that scenario? Will i have to tell FA to calculate tax related stuff on "Value before discount"?

This is quite simple i was also able to achieve this, but what if i change the price from 100 to let us suppose 85PKR or 70PKR?????? the system will pick the new price 85 as a base for taxation and add 17% into it which is about 85 + 14.45 = 99.45

Where as i want it to pick up 85 + 17 = 102

I mean the value of tax i fix. Is this thing still going to work????

Now you are close enough to my point, but our international audience is not aware of this, so i have to bring this in another way.

It is complicated but I'll come with another simple to understand example.
Let's assume one product called "Super Candy" is sold to consumers at PKR 119
Breaking of this is (100 as MRP + 17 ST + 2 ET)

First situation
The Manufacturer sell this to it's registered customer (In this step to a Retailer) at following rate
90+17+2=109
90 Goes into COGS account for that product
17 goes to Sales Tax Account for that product (this can be passed on / Claimable)
2 goes to "Extra Tax" account for that product (this can also be passed on further to next customer  / Claimable)

Second situation
The Manufacturer sell this to it's Un-registered customer (In this step to a Retailer) at following rate
90+17+3+2=112
90 Goes into COGS account for that product
17 goes to Sales Tax Account for that product (this can be passed on  / Claimable)
3 goes to "Additional Sales Tax" for that product (THIS CAN-NOT BE PASSED ON FURTHER / non-claimable)
2 goes to "Extra Tax" account for that product (this can also be passed on further to next customer / Claimable)

FYI Passed on or claimable means that this amount of tax can be claimed while filing monthly sales tax returns and the customer may get a rebate / refund / adjustments subject to other things, it is can be adjusted in your tax return. Pass-on means the same in terms of "SALES" i.e. you can ask your customer "By law govt. has collected tax on this from me through my supplier and i am passing on this load to you as per law". Additional tax cannot be passed-on if some registered retailer is charged with this, this would be his EXPENSE he would have to bear this.

THIS was all from "Sales" point of view.

From procurement side it is the same as sales, you log the difference in cost and sale price into profit and difference of ST, ET is also logged and difference is paid accordingly to govt. only additional tax is recorded as expense.

The only impact in this case would be upon "Un-Registered" retailer or distributor, i.e. when he makes a purchase he would be charged additional 3% tax, but he CANNOT pass-on this to his customer, for example the consumer will pay only 17% of MRP + 2% Extra Tax. This thing was introduced to encourage registration (in other words documentation and traceability) and discourage un-regulated trade. 

Yes according to law toffees etc. are always charged a tax called "Extra Tax" which is @2%

We have to log all these separately and would have to display/produce this record separately.

I hope this will develop common understanding. and i wish nothing is left.

Shehroz

I have already seen that post, it is related to Income Tax regime, plus in his case he was a "Service Provider" it is completely different thing.

In my case i am talking about real physical products which falls in "Goods regime"

First of all thanks for your reply!

This will partially resolve the issue!

But problem comes when the tax is calculated based upon Maximum Retail Price, whether it is in the first stage of product life cycle, that means, if the product have three price tiers, let us suppose for company's authorized dealer gets a product which is to be sold at PKR 117 (In this the retailer will get 100PKR and 17PKR is the value of tax) the manufacturer will sell this as per law or policy at 90 PKR + 17 PKR tax = 107 PKR to it's dealer, at the end when the transaction occurs at the dealer' end, outcome would be PKR 10 as profit in Gross profit account and 0 PKR in respective tax account head.

I think if it is possible adding a custom field in product' characteristic table might resolve this (i really don't know if this thing is practical).

Plus customizing the invoice template would be essential (actually it is a legal formality to produce invoices compliant to sales tax law), but this is the other part of story.