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Service tax legal changes for Abatements

Case 1:- Abatements with Service tax credit

Create a PO with service tax for a vendor with a rate 9% (for example, considering a 75% and 25% split,the service tax will be 12%).

Purchase order

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Accounting in MIRO transaction (Invoice verification)

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The service tax credit is postedto an interim account, which is then transferred to the final credit account once the amount is remitted to the Government. The service tax credit is now available for set-off against service tax payable.  Transfer of service tax credit from the interim to final account is handled through FI transactions. This helps you track the payment.


Case 2:- Abatements without service tax credit(Expense out)


Create a PO with service tax for a vendor with a rate 9% (that is, service tax credit – service tax abatement; 12% – 3%).

Purchase order

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Accounting in MIRO transaction (Invoice verification)

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Note

  1. Interim account values are transferred to the final G/L account via FI transaction and the service tax clearing amount is knocked off against the Service tax challan payment to the government.
  1. In case of abatements without credit scenarios, the whole amount is expensed out to the expense G/L account.

                                                                                 Customization for abatements

  1. 1. Condition types: – Create condition types using the OBYZ transaction.
  2. To do this, chooseSAP Customizing Implementation Guideà Financial Accounting (New)à Financial Accounting Global Settings (New)à Tax on Sales/Purchasesà Check Calculation Procedure.

Here, there are three conditions to handle service tax, ECS and SEcess on Service tax credits. For example, JSER, JEC3, and JSE3.

a) Create fivepositive conditions for abatements

For example,

JSA1 – Abatement condition for Service Tax

JAE1- ECS for abatement

JAS1- SECess for abatement

JAE2- Offset entry for ECS for abatement

JAS2-Offset entry for SECess for abatement

**JAE2 and JAS2are created as positive conditions since these are calculated on base service condition, whereas JSA2 is a negative condition. Hence the calculation happens correctly. Considering the above mentioned PO screenshot,

JAE2 = (-30) * 2% = 0.60

JAS2 = (-30) * 1% = 0.30

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b) Create a negative condition for service tax abatement. This acts as a base for abatement ECS and SECess conditions mentioned above.

For example, JSA2 (Use the access sequence JTAX).

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  1. 2. Tax code: –Create the input tax code S1 using the FTXP transaction for your tax procedure.
  1. 3. Condition record: – Create condition records for required condition types using transaction FV11(For Tax classification category). In this example, the service tax is considered as 12%, with a splitof 75% & 25%. So you need to create condition records for the defined condition types to fulfill the percentage of abatement split; that is 9% and 3% service tax respectively.

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Note: –

     1. If it is a TAXINJ (Formula based tax procedure), then maintain the condition rates using FTXP transaction.

     2. You need to click on the ‘Deactivate line’ button when you not required the Cond. Type. Otherwise the Cond. Type will appear in the PO      with zero values which is the behavior of a tax procedure.

     3. You need to maintain the GL accounts using OB40 transaction. As it is not possible to maintain more than 8 GL accounts for Transaction keys      in FTXP transaction.

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4. Tax Posting key: – Create posting keys PS1, PS2, PS3, PS4, PS5, and PS6 using the transaction OBCN. To do this, chooseSPRO à Financial Accounting      à Financial Accounting Global Settings à Tax on Sales/Purchases à Basic Settings à Check and Change Settings for Tax Processing.

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Note

If there are multiple service tax registration numbers, you need to have separate account postings to different GL accounts based on the service tax registration number. This can be done provided a separate tax code is maintained for each service tax registration number.

In such a case, activate multiple accounts posting per tax code using transaction 0B40. To do this, choose SPRO à Financial Accounting à Financial Accounting Global Settings à Tax on Sales/Purchases à Posting à Define Tax Accounts.

For the new account key, enter the chart of accounts being used. Choose the PF status Rules and select the Tax Codecheckbox.

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Now maintain different accounts based on the tax code. Since the tax code is specific for a plant, you can achieve the posting to a plant-specific account.

A separate account for every tax code can be maintained as follows:

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Note

Follow the above-mentioned procedure for all processing keys.

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Assign the posting key to theabatements tax condition in the tax procedure using transaction OBYZ.

  1. 5. G/L account: – Create a G/L account using transaction FS00.

Alternate Solution


Case 1:- Abatements with Service tax credit


  1. SAP Customizing Implementation Guide->Financial Accounting->Financial Accounting Global Settings->Withholding Tax->Extended Withholding Tax->Calculation->Withholding Tax Type->Define Withholding Tax Type for Invoice Posting.

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2.  SAP Customizing Implementation Guide->Financial Accounting->Financial Accounting Global Settings->Withholding Tax->Extended Withholding       Tax->Calculation->Withholding Tax Codes->Define Withholding Tax Codes

     Create corresponding ET and ST tax codes while maintaining the ECS rate (2%) and SECS rate (1%).

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3.  SAP Customizing Implementation Guide->Financial Accounting->Financial Accounting Global Settings->Withholding Tax->Extended Withholding      Tax->Postings->Accounts for Withholding Tax->Define Accounts for Withholding Tax to be Paid Over.

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4.  SAP Customizing Implementation Guide->Financial Accounting->Financial Accounting Global Settings->Withholding Tax->Extended Withholding      Tax->Postings->Accounts for Withholding Tax-> Define Accounts for Withholding Tax Offsetting Entry.

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5.  Assign this withholding tax type to your vendor and choose the Liable checkbox.

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6. Create a G/L account using transaction FS00.

7. Create a PO with service tax rate of 9% for a vendor (considering 75% and 25% split example; service tax is 12%).

Purchase order

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8.  Accountings in MIRO

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As per the legal change for abatements, the recipient of the service is required to pay aportion of the service tax (for example, 25%) to the Government.

There are two ways to manage this reverse charge tracking and payment of service payables of service recipient. Choose the way which best fits your business requirement.

1.  Directly post the amount to the final payable account and manage the same according to the G/L account payable balance; that is, make the payment to the      Government depending upon the pending payables for each period on the payment date.

2.  The service tax credit is postedto an interim account, which is then transferred to the final credit account when the amount is remitted to the Government. The      service tax credit is now available for set-off against service tax payable.Transfer of Service tax credit from the interim account to the final account is handled      through FI transactions. This helps you to track the payment.

Recommendation

Refer to SAPNote 1242881 for customizations and details which was released for GTA.

For example, consider a service bill of Rs.109 (Service amount + 9% Service Tax). The recipient of the services, shall pay 3% of service tax, where the total service tax to be paid to government is 12 % (9%+3%).

During Invoice Verification, the following entries are effected:

DrGR/IR clearing 100

  DrService tax receivable A/c     3

CrVendor        109

CrService tax payable A/c         3

DrService tax receivable A/c     9

The vendor is paid Rs.109/-(100+9) and the service tax Rs.3/-is remitted to the government by the receiver of the services later.

Case 2:- Abatements without service tax credit (Expense out)


In this you need use the posting indicator 1 instead of 3 while defining the tax code. For example create a PO with service tax for a vendor with a rate 9% (that is, service tax credit – service tax abatement; 12% – 3%).

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