Swachh Bharat cess configuration for Indian clients

Dear friends,

Swachh Bharat cess is a “tax on services” in addition to service tax in india.

It has been introduced with effect from 15.11.2015 in India
The rate of Swachh Bharat Cess is 0.5% of value of taxable service on which Service Tax is payable.

Please note that Swachh Bharat Cess will have to be separately shown in all of Service Invoices raised on or after 15.11.2015.

Let me explain the step by step configurations required to have Swachh Bharat cess in SAP.

Swachh Bharat cess in Accounts Payable:

In T code OBCN (SPRO–>FA–>FA Global settings–>Tax on sales/purchases–>Basic settings–>Check and change settings for Tax processing), create new processing key. This will enable us to assign separate GL account for Swachh Bharat cess(SBC).

Then in T code OBQ1 (SPRO–>FA–>FA Global settings–>Tax on sales/purchases–>Basic settings–>Check calculation procedure) create new condition type for SBC.

Then assign the condition type and processing key in pricing procedure vide SPRO–>FA–>FA Global settings–>Tax on sales/purchases–>Basic settings–>Check and change settings for Tax processing.

Then Create separate GL account for SBC vide T code FS01.

Then in T code OB40 (SPRO–>FA–>FA Global settings–>Tax on sales/purchases–>Posting–>Define Tax accounts) assign GL account for the relevant tax code in the transaction (Read processing key) created for SBC in T code OBCN.

Then in T code FV11 create condition records for SBC for the service tax applicable tax codes.

The abovementioned process meant for Swachh Bharat cess payable to vendor and Service tax credit is available.

If Service tax credit is not available then we can include the SBC with the Service tax rate.

That is Service tax rate 14% and SBC 0.5% so total taxes is 14.5% and the entire amount will be booked into the natural expenses head.

With respect to Reverse charge cases, in our company we are following Withholding tax type route for Reverse charge mechanism.

We have decided to include the SBC rate in the Service tax rate and then before processing returns pass manual JV to show separately the Service tax and SBC amount.

Example If the Service tax base amount is 1000 Crores, then Serv tax is 140 C and SBC is 5C so in reverse charge, Service tax payable head will be credited by 145C . At the time of filing of return We will pass rectification entry like,

ST payable DR 145 C

ST payable CR 140 C

SBC           CR    5 C.

Swachh Bharat cess in Accounts Receivable

In accounts receivable side, we have used condition type route for service taxes and not followed Tax code route.

Create New condition type in T code V/06 (SPRO–>Sales and Distribution–>Basic functions–>Pricing–>Define condition types).

Then create new account key for SBC vide SPRO–>Sales and Distribution–>Basic functions–>Account assignment/Costing–>Revenue account determination–>Define and assign account keys.

Then in Pricing procedure assign the SBC condition type in T code V/08 (SPRO–>Sales and Distribution–>Basic functions–>Pricing–>Assign Pricing procedures)

Then in VK11 create condition records for SBC.

Then in VKOA maintain GL account assignment for the account key (SPRO–>Sales and Distribution–>Basic functions–>Account assignment/Costing–>Revenue account determination–>Assign GL accounts).

Sample accounting document is as follows.

Hope it helps.

Kindly revert back for any clarification.

Your views and criticisms are also welcome.

Thanks and Regards,

G.Sethuraman