diff --git a/erpnext/public/js/controllers/transaction.js b/erpnext/public/js/controllers/transaction.js
index 6539530..44bf21d 100644
--- a/erpnext/public/js/controllers/transaction.js
+++ b/erpnext/public/js/controllers/transaction.js
@@ -6,12 +6,31 @@
 		this._super();
 		frappe.ui.form.on(this.frm.doctype + " Item", "rate", function(frm, cdt, cdn) {
 			var item = frappe.get_doc(cdt, cdn);
+			var has_margin_field = frappe.meta.has_field(cdt, 'margin_type');
+
 			frappe.model.round_floats_in(item, ["rate", "price_list_rate"]);
 
 			if(item.price_list_rate) {
-				item.discount_percentage = flt((1 - item.rate / item.price_list_rate) * 100.0, precision("discount_percentage", item));
+				if(item.rate > item.price_list_rate && has_margin_field) {
+					// if rate is greater than price_list_rate, set margin
+					// or set discount
+					item.discount_percentage = 0;
+					item.margin_type = 'Percentage';
+					item.margin_rate_or_amount = flt(Math.abs(1 - item.rate / item.price_list_rate) * 100.0, 
+						precision("discount_percentage", item));
+					item.rate_with_margin = item.rate; 
+				} else {
+					item.discount_percentage = flt((1 - item.rate / item.price_list_rate) * 100.0, 
+						precision("discount_percentage", item));
+					item.margin_type = '';
+					item.margin_rate_or_amount = 0;
+					item.rate_with_margin = 0;
+				}
 			} else {
 				item.discount_percentage = 0.0;
+				item.margin_type = '';
+				item.margin_rate_or_amount = 0;
+				item.rate_with_margin = 0;
 			}
 
 			cur_frm.cscript.set_gross_profit(item);
diff --git a/erpnext/selling/sales_common.js b/erpnext/selling/sales_common.js
index da9c771..7154343 100644
--- a/erpnext/selling/sales_common.js
+++ b/erpnext/selling/sales_common.js
@@ -337,14 +337,6 @@
 		})
 	},
 
-	rate: function(doc, cdt, cdn){
-		// if user changes the rate then set margin Rate or amount to 0
-		item = locals[cdt][cdn];
-		item.margin_type = "";
-		item.margin_rate_or_amount = 0.0;
-		cur_frm.refresh_fields();
-	},
-
 	margin_rate_or_amount: function(doc, cdt, cdn) {
 		// calculated the revised total margin and rate on margin rate changes
 		item = locals[cdt][cdn];