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atul_gokhale3
Product and Topic Expert
Product and Topic Expert
This blog post will help readers to understand how Tax calculation works for the Services Purchased using SAP Transportation Management for T&L for SAP S/4HANA.

I would like to be specific to the current On-Premise 1909 release. The reason is that in SAP S/4HANA when it comes to Operational Procurement Service Purchasing, two possibilities exists. One is the Lean Services and another is External Services (MM-SRV).

SAP Transportation Management for T&L for SAP S/4HANA is integrated with the External Services (MM-SRV). This has already changed in the Cloud version where Lean Services functionality is integrated.

You can read further in the Application Help for SAP S/4HANA OP

https://help.sap.com/viewer/af9ef57f504840d2b81be8667206d485/1909.001/en-US/eac16d662d6b4c72b3e302ef...

You can read further in the Application Help for SAP S/4HANA Cloud edition for Lean Services

https://help.sap.com/viewer/0e602d466b99490187fcbb30d1dc897c/2002.500/en-US/8992c3b0c6a640e8a360cdd5...

Note:  I have demonstrated the functionality in this blog post using system screen images with relevant data for ease of understanding for the readers. It should be noted that these screens and the data is from SAP’s internal test systems and has no relation to any external source.

Use Case

Primary use case is for the customers in Transportation & Logistics Industry (T&L) who are actively “purchasing” services from external business partners.

Conventional manufacturers (producer of goods or Shippers as we call them) also have more or less same use case.

Lets focus on an Inland Transportation process as it applies to both industries (T&L and Conventional Manufacturers).

Assumption: Lets assume that customer has implemented SAP S/4HANA 1909 and uses SAP Transportation Management for T&L for SAP S/4HANA. Transportation process and financial postings both are on same SAP S/4HANA instance.

Freight Order (Truck) transporting cargo incurs cost of transport and additional services which is billed by the Service Provider (Trucking company) to the requester (LSP or Shipper who issues the Freight Order). If you look at the Invoice you will notice that Tax may be applicable. Also it is likely that different tax percentages could be applicable for different services (charges) on the invoice.

It is quite likely that Tax may not be calculated correctly by the Service Provider and the LSP/Shipper  will end up paying incorrect amount. I have seen many customers raising this concern and would like to have some control measures in place. One of such control measures is to also determine the applicable tax on the Purchase Order so that it could be matched during the Invoice Verification Process and any disputes could be then clarified with the Service Provider.

Lets assume below fictitious scenario to understand how the functionality works. I really don't want to be too focused on the VAT percentages as the discussion is more to understand how system is able to assign the correct Tax codes based on the given logic.

Note: The focus should be on the 2 green coloured columns, reason is that the use case is more from the "Purchaser" perspective and how is he determining the Tax treatment on behalf of his Service Provider. 



We approach this functionality in following way:

  • Transactional View of the Process





    1. Freight Order and the Charges

    2. Technical Purchase Order, Service Entry Sheet and Tax Codes on the Service Entry Sheet per Service





  • Set-up (This will be in my follow-up blog, so keep looking!!!)





    1. Enabling Tax determination for Services

    2. Tax condition table and related setup

    3. Available BAPIs




Transactional View of the Process

  • Freight Order and the Charges: Lets try to identify the different parameters that affect Tax code determination out of the Freight Order


As you see in the picture below, the Cargo is transported from Germany to Switzerland. So the country codes of the Source and Destination Locations could influence the Tax code determination.



As you see in the picture below, three different types of services are purchased by the LSP/Shipper from the Trucking Company. Theoretically each of the service could have a different VAT treatment and so are also the influencing factors.



  • Technical Purchase Order & Service Entry Sheet: Once the Freight Settlement Document is created and posted, what we create is a Technical Purchase order and Service Entry Sheet, which is also accepted automatically to post the GR/IR accruals.


Below you see the Freight Settlement Document



Once the document is posted, you see below the Technical Purchase Order and Service Entry Sheet



Purchase Order: The technical Purchase Order created with the SAP Transportation Management uses the MM-SRV External Services. As you see that all the Freight Order charges are grouped under one Purchase Order Item. From a Tax calculation perspective this granularity is not enough for most of the use cases as each charge (which is the service procured) could potentially have different tax treatment.











Service Entry Sheet: In the service entry sheet we have the correct granularity for determining the tax codes.



So if we go back to the fictitious scenarios we considered in the beginning of this blog post then we have achieved the below. Focus should be on the green coloured column as it represents the VAT Tax code determination from the Service Receiver's perspective (which means the one who raises the Freight Order/Purchase Order&Service Entry Sheet)



Lets quickly run through another scenario and see the results.

Freight Order: In below example the Freight Order has source location in Germany and Destination location also in Germany.



Below you see the different services procured and the charges calculated



Freight settlement document is created and posted which results into a technical Purchase Order and Service Entry Sheet as shown below.



The service entry sheet has the correct granularity of the services (charges) and the Tax code determined.



So if we go back to the fictitious scenarios we considered in the beginning of this blog post then we have achieved the below. Focus should be on the green coloured column as it represents the VAT Tax code determination from the Service Receiver's perspective (which means the one who raises the Freight Order/Purchase Order&Service Entry Sheet)



Set-Up

In my upcoming blog I will explain how the setup needs to be done to achieve the above and the flexibility offered by the solution in SAP S/4HANA

Happy reading and feedback appreciated !!!
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