Addressing VAT and Service Tax on Composite rates in SAP

Introduction:

Annual maintenance contracts (AMC’s) are composite contracts bundled to have services and sales components. But in certain scenarios, segregating the contract into two, a) service portion and b) sales portion is difficult. There are provisions in the Service Tax (Determination of Value) Rules, 2006, under rule 2A for addressing value determination of Services & Sales portion in case of composite contracts

One typical example is: 12.5% MVAT applicable on 60% of Base value and 12.36% Service Tax applicable on 40% of Base Value for a composite contract.

This document explains how this scenario can be addressed in SAP.

Step1:

Create a custom tax condition for VAT: JVRZ, with details as shown

Step2:

Assign the VAT Tax condition to Tax calculation procedure

Existing Tax condition for Service can be used if it is applying on Tax Base

Step3:

Create Tax code

Explaining formula based tax calculation here, same logic is applicable for condition based tax procedure also

Here applicable tax is 12.5% MVAT on 60% of Base value and 12.36% Service Tax applicable on 40% of Base Value

So Service Tax percentage= 40% *12.36% = 4.944%, VAT = 60% * 12.5% = 7.5%

Input values against corresponding conditions

Input Tax G/L

Create PO with created Tax code and cliclk the Tax calculation

Tax Calculation:

PO pricing as desired and appropriate G/L postings during SES/GR and MIRO is achieved .

Looking forward for your comments….

Thanks & Regards

Nireesh.P.H