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Service Taxes (India)

&

SAP Configuration

By

Muhammad I Shokat

Haas Automation Inc

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TABLE OF CONTENTS

Scenario: (Purchasing /Input) ..........................................................................................3 Example: .....................................................................................................................3

Important:................................................................................................................3 SAP Configuration Changes for TAXINN Procedure ......................................................4

1. Create new condition types (JSRT, JEC3 and JES3).............................................4 JSRT (A/P Service Tax)...................................................................................4 JEC3 (A/P ECS for ST) ~ 2% ..........................................................................5 JES3 (A/P SECess for ST) ~ 1% ......................................................................6

2. Create two new Account Keys and Use VS7 as existing one: ...............................7 VS7 (IN: A/P Service Tax) ..............................................................................7 VS8 (IN: A/P ECS for ST) ...............................................................................7 VSE (IN: A/P SECess ST) ...............................................................................8

3. Maintain Tax Procedure (TAXINN) to accommodate these changes. ...................8 4. Assign G/L Accounts to Tax Code (ST and S1). ..................................................9 VS7 11406400 ............................................................................................9 VS8 11406500 .............................................................................................9 VSE 11406600...........................................................................................10

5. Maintain Tax rates in FV11 ...............................................................................10 <FV11> JSRT (12%) .................................................................................10 <FV11> JEC3 (2%) ...................................................................................11 <FV11> JES3 (1%)....................................................................................11

Posting Service Invoice .................................................................................................12 Assigning New Tax Code “S1” to be able to see in FB60 tax code drop down screen. ...13

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Service Taxes India

Scenario: (Purchasing /Input) When we create service tax invoices, system should be able to calculate 12.36% tax. 12% for service tax, 2% for Education Cess and 1% on SecCess. Service tax = 12% Ed Cess@2% = 12%*2% = (12*1.02 = 12.24%) Sec Cess @1% = 12%*1% = (12*1.01 = 12.12%) Total Tax amount--------------------------- 12.36%

ChAc G/L accoun CoCd Long Text

HAAS 11406400 4000 Service tax-input credit - Basic Service Tax 12% HAAS 11406500 4000 Service tax-input credit - Education Cess 2% on Service tax HAAS 11406600 4000 Service tax-input credit - Secondary & Higher Educ 1% on Service tax

Example: A Vendor service Invoice for 3370.80 INR needs to be entered calculating 12.36% on this invoice and a 2% TDS. Total taxes should be (3000*12.36%) = 370.80

Debit Credit Vendor – 3303.38

Wages G/L Account – 3,000 Service tax @12% (3000*12%) = 360

Ed Cess @2% (360*2%) = 7.20 S&HE Cess @1% (360*1%) = 3.60

Vendor TDS = 67.42 Total Taxes = 370.80

Important: Here tax base amount for Edu Cess should be 12% of the orgibal invoice base which is (12%*3000) = 360, in this case. Education Cess = 360*2% = 7.20 Sec and Higher Sec Cess = 360*1% = 3.60

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SAP Configuration Changes for TAXINN Procedure We have to do following to accommodate these changes in the system.

1. Create new condition types (JSRT, JEC3 and JES3). <OBYZ> Define Condition Types JSRT (Make sure you mention “JTAX” in access seq.) and enter text as (A/P Service Tax)

JSRT (A/P Service Tax)

This should be “1” as level 1

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JEC3 (A/P ECS for ST) ~ 2%

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JES3 (A/P SECess for ST) ~ 1%

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2. Create two new Account Keys and Use VS7 as existing one: <OBCN> VS7, VS8, VSE

VS7 (IN: A/P Service Tax)

VS8 (IN: A/P ECS for ST)

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VSE (IN: A/P SECess ST)

3. Maintain Tax Procedure (TAXINN) to accommodate these changes. <OBYZ>Define Procedures Important: In order to accommodate .24% and .12% of service tax value (360 as calculated above), Use step (605) as “From” and “To” for steps 607 and 609 as shown below and highlighted in red. Also assign new account keys (VS7, VS8 and VSE).

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4. Assign G/L Accounts to Tax Code (ST and S1). Even though we ONLY require tax code “ST”, but due to TAXINN, and maintaining rates in FV11, we need to link S1 with ST, so we will have two tax codes. <OB40> assign ST and S1 tax codes in transactions “VS7”, “VS8”, and “VSE”.

VS7 11406400

VS8 11406500

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VSE 11406600

5. Maintain Tax rates in FV11 We need to maintain two tax codes, and use “ST” as central for all three conditions. Because if we don’t create “S1”, we will not be able to maintain 12%, 2% and 1% for code “ST’ because if we do that, system gives an error for 2% that you have already maintained 12% for code ST.

<FV11> JSRT (12%)

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<FV11> JEC3 (2%)

<FV11> JES3 (1%)

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Posting Service Invoice FB60: When ever we will create an Invoice, we will use tax code “S1” on FB60 screen, because in FV11 we have linked S1ST, and postings will show ONLY ST tax code.

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Assigning New Tax Code “S1” to be able to see in FB60 tax code drop down screen. <OBZT> Add tax code “S1” for purchasing. DO NOT assign “ST” as it will automatically show through FV11 assignment.