Tax Calculation on Freight – Different Scenarios
I have seen many threads with different requirements of PO tax calculation with / without freight, freight to be relevant for VAT only, not for excise etc for INDIA. In this blog, I am just sharing some of the standard options for the different business scenarios.
1. Freight condition type with acrual flag inserted in MM pricing procedure with acrual key.
2. Tax procedure configured and tax codes with valid condition records.
Case 1: PO Tax should not be calculated over freight (Normal Case)
If the freight condition type is with acrual key and no subtotal maintained against the condition type in MM pricing, then the condition wont be added to the net value / tax base and it wont affect the tax calculation.
MM pricing procedure:
Test Case: PO with freight
PO price: 100 INR per 1 EA
Freight: 10% = 10 INR
Note: Freight value wont be added to tax base and the freight has no effect on tax.
Case 2: The freight value should be added to tax base, so that all taxes (VAT, ED etc) will be calculated over the net + freight:
In this case, maintain subtotal “4” against the freight condition in PO pricing procedure and maintain the base calculation procedure as 362 against the BASB condition in tax procedure:
MM Pricing Procedure:
Note: Freight value WILL be added to tax base.
Case 3: Freight Relevant for VAT only, NOT for excise:
ED : 12.36 (12.36 % on net value :100 * 12.36%)
VAT 5% on net value + Freight + ED ( that is freight has to calculate over 100+10+12.36 = 122.36 and the value will be 122.36 * 5% = 6.12 )
In order to achieve the requirement, maintain the subtotal “6” against the freight condition in MM pricing procedure and maintain the base calculation 363 against BASB and the VAT condition type in tax procedure.
MM Pricing Procedure:
Test Case: PO
Result: The ED is calculated over net and VAT is calculated over NET + ED + Freight
Thanks for your time.
Very helpful document. Thanks AKPT for sharing this.
You are welcome!
Thanks for sharing. i was having the doubt on case 3. Now it is clearly understood.
Helpful doc. 🙂
A very clear document regarding the same... Nice and thanks for sharing.
Just a query, can't we use 362 bas. typ. even for case 3? I think it fetches both KZWI4 and KZWI6 from KOMP.
Thanks for the feedback.
But in case 3, the base type 362 WONT work, since it will alter the BASB. 362 will work with KZWI4. You may test the scenario.
Thanks a lot for sharing this document to us.The way you described is very nice.
Keep it up 🙂 .
Its really very helpful document.
Thanks for the sharing.
Nice information. Thanks for the document.
Very good information.
We have to introduce Green Goa Cess in MM as one of the condition type . Applied the above settings for BASB and JVRD., but it is not working for me. The JVRD is zero if the base type 363 is selected , it only get calculated if the same is changed to 370. But the JVRD calculated in this case i.e with 370 , takes only the Base and ED/Manual ED .
The Green Goa Cess , should get loaded on material and will not be separately posted in a particular GL,
Can I get any hints , so the same can be made applicable.
Did you assign the correct subtotal against the MM condition type in the MM pricing procedure. Please check and revert back.
If you want to add the tax directly to material cost, maintain the account key NVV (or a copy of NVV in OBCN) against the tax condition type in the tax procedure.
The subtotal against the MM condition is given as 6. The cost is getting loaded on the material , but only while calculating VAT (JVRD) condition the amount is excluding the created condition type.
If you use subtotal 6, then you have to assign base calculation 363 against BASB and the JVRD.
first of all thanks for sharing this very useful document. ( I have never seen any literature like this,educating about 'subtotal or routine')
I wanted to know, from where we can get educated more about the various thing used in Pricing procedure..like subtotal & routine.
Where to use which subtotal & respective routine to get the desired results? I like to learn the various effects but i didn't find any documents even form SAP to understand these things.
Please guide if i can get the better learning material in depth in case.
Thanks for the feedback.
Your question is valid. Even I couldnt find any standard document explaining the full usage of standard subtotals and routines 😥 .
I explained the above options based on my experience only. Additionally, refer the note: 1559145 - Frequently asked questions for Procurement in India: CIN - Purchase Order - Q Number 3, which gives a hint about the above option.
Very useful documents & every MM consultant working for indian projects must read.
My customer has business has case 2 & case 3, how it can be addressed ? what base type we should have for BASB & JVRD
I have tested with BASB as 362 & JVRD as 363.
ED considers condition with subtotal 4 but not consider with subtotal 6 and JVRD considers condition wiht subtotal 6 but not consider with subtotal 4
how to achieve a case where condition value (freight, discount etc) to consider for both ED & VAT
Thanks for the feedback.
If you want the freight to be considered for both VAT and ED, you can copy the freight value to BASB condition as explained in case 2. Please maintain the config as per the case 2 option and test the scenario and revert back.
case 2 & case 3 works separately. We have vendor invoice for below both scenarios ?
PB00 : 100
FRA1 : 10 subtotal : 4
ED : 12.36% on PB00 + FRA1
VAT : 5% on net PB00 + FRA1 + ED
PB00 : 100
DIS1 : -10 subtotal : 6
ED : 12.36% on PB00
VAT : 5% on net PB00 + DIS1 + ED
BASB (362) & JVRD (363) : Scenaria 2 is working but scenaria 1 is not working (ED is calcualted on PB00 + FRA1 but vat 5% on net PB00 + ED and not considering FRA1)
please advice on combination of base type & subtotal to be maintained to address both the scenarios ?
Informative. Thank you
Thank you for this document. It is very helpful. Actually our requirement is of case 3 and I did exactly as you suggested. The CST tax calculation is correct but during MIRO, the tax is getting calculated on unplanned delivery cost which is entered in the header. When routine 362 is used for BASB condition, there is no tax on unplanned delivery costs.
Could you please advice how to achieve case 3 requirement with routine 362 against BASB condition. We don't want tax to be calculated on unplanned delivery costs during MIRO.
Please check the note 1402621 - Taxes are getting calculated on Unplanned del.costs - MIRO
Thank you for the reply. I have checked the above note. Earlier there was no tax calculation on unplanned delivery costs because the routine used was 362 even if above note was not implemented. To fulfil our case 3 requirement I have changed the routine to 363.
I believe the sudden tax calculation on unplanned delivery costs is due to change in routine. Please advice if we can use routine 362 to achieve case 3 requirement and the steps for the same.
You may go with the new base formula 371 as explained in the note: 1835308 - Routine 371 to support planned+unplanned delivery cost- MIRO
Very Very Informative document. Thanks for sharing
Thank you for this document. It is very helpful & i tried all the mentioned steps by you.
Actually one of the client have the same requirement but its not working, might be somewhere i am missing logic need your valuable inputs.
CIF Value (100)+ ZDTY(50) + ZSH1(50) = 200
Currently i am get BASB =100 requirement is 200.
Guide me how to achieve the requirement.
The document is very descriptive and addresses important scenarios.
Our current setup is - the taxes are calculated for - PO line items + unplanned delivery cost (UPD) on MIRO transaction and then UPD (excluding the taxes) is distributed to the PO line items on MIRO. This is working fine.
We have a scenario where product purchased on a PO is ‘NON taxable’ and UPD is ‘taxable’, in this scenario capturing the tax for UPD in the tax field in MIRO is not possible. We want to have the ability to assign and calculate tax on UPD at a rate different than PO line items and continue to distribute UPD (excluding the taxes) to the PO line items on MIRO. Can we automate/configure this new scenario while keeping our current setup?
Please help. Thank you.
Steps to reconstruct the new scenario
Invoice is for purchase order items that are not taxable, invoice has on it charges for unplanned freight. Freight charges are taxable.
PO line item - $100
Freight - $50
tax on freight - 10% = $5
Total of the invoice - $155
Thanks for this material. I want to know how I can use 362 formula in a different Tax Schema, in a different from India. Thanks in advance.
I am trying the same In this case, maintain subtotal “4” against the freight condition in PO pricing procedure and maintain the base calculation procedure as 362 against the BASB condition in tax procedure
but is not working.
can you please provide the detail configuration.
Thanks for the block, Actually we are working on the VAT i'e Case-2, we are struggling to add Frieght to VAT Base amount. this block help me lot.