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Service Tax consulting note for the TAXINN Customers:

Requirement:

The requirement for the Service tax credit in India is that the

Service tax credit can be availed only after making the Vendorpayment to the extent of Payment made to Vendor. Similarly the

Service tax should be paid only when you receive the Paymentfrom the Customer.

Proposed Service tax Solution:

In the existing solution released in note 779512 will accumulate

the Service tax credit in the Interim account and the Service taxpayable will account in the interim account. Please refer the SAP

note 921634 and do the Customizing Changes and code correctionmentioned in the SAP note. You will have to create the GLaccounts with the controls mentioned in the SAP note 921634. The

Service tax credit can be availed when you run the ReportJ_1I_RFUMSV50 (RFUMSV50 for ECC Customers) for the Payment

made Invoices.

The following additional Customizing is required for the Sales

transactions.

We assume that the Condition types JSE4 AR Service tax andJES4 AR ECS on Service tax has been created in SD Pricing

condition and assigned to the SD Procedure with the account keyVS9AR Service tax and VS0 AR ECS on Service tax created and

assigned in the SD Pricing procedure for the condition types JSE4and JES4 respectively.

1. Customizing Changes:

1.1 Condition type:

Create two new condition type JSE4 AR Service tax & JES4AR

ECS on Service tax. Copy the Condition type JIN1 & JIN2 as JSE4

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&. Use transaction code OBQ1 for creating the new condition type.Kindly use the access sequence MWST and not JTAX.

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1.2 Account Key:

Define two new account keys VS9 & VS0 same as the SD account

key created. If you are using different account in SD Pricingprocedure then you will have to create the same account key here.

Customizing Path: SPROFinancial AccountingTax on

Sales/PurchasesBasic SettingsCheck and Change Settings for

Tax Processing

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1.3 Tax Procedure Change:

Include the two conditions JSE4 and JES4 in the TAXINNProcedure.

Customizing Path: SPROFinancial AccountingTax on

Sales/PurchasesBasic Settings Check Calculation Procedure

Define Procedures

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2. GL Account Creation:

Kindly create 4 GL accounts with the following properties. Two GLaccounts should be created for the Interim account of Service Taxand ECS on Service Tax and Two GL account for the Final GLaccount.

2.1 Interim GL Account Properties:

Only Balance in Local Currency should not be activated. The TaxCategory should be >. The open item management and Line itemdisplay indicator should be active.

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2.2 Final GL Account Properties:

Only Balance in Local Currency should not be activated. The TaxCategory should be >. The open item management should not be

active.

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3. Tax Code Creation:

You have to create two tax codes for the Service tax setting. Onetax code for posting into the Interim account when you carry outthe Sales transactions. This tax code will not be having any ratesmaintained in FTXP.

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The final tax code should have the rates maintained.

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Assign the Final tax code to the interim tax codes as Target taxcode through FTXPProperties.

4. GL account Assignment:

Assign the Interim GL account for the Interim tax codes and FinalGL accounts to the Final tax codes.

Customizing Path: SPROFinancial AccountingTax on

Sales/Purchases Posting Define Tax Accounts

Activate the tax code indicator for the Account key.

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Assign the Posting Key:

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The Service tax Interim Tax code is M3 which will post the value

into the interim GL account 24820010. The Service tax Final taxcode is M4 which has been assigned with the Service tax Final GLaccount 24820012. When we receive the Payment from theCustomer the Service tax payable will be moved from InterimAccount (24820010) to Final Account (24820012).

The Same setting should be carried for the ECS on Service tax

account key also.

Activate the tax code indicator for the Account key.

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Assign the Posting Key:

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The ECS on Service tax Interim Tax code is M3 which will post the

value into the interim GL account 24820011. The ECS on Servicetax Final tax code is M4 which has been assigned with the Servicetax Final GL account 24820013. When we receive the Paymentfrom the Customer the Service tax payable will be moved fromInterim Account (24820011) to Final Account (24820013).

5. SD Condition Record:

Create the condition record for the Service tax and ECS on Servicetax with 12% and 2% with the Interim Tax Code M3 assigned. If

you have already gone live with the Service tax then you may

ensure that the Interim tax code is assigned.

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The condition record shown here is only for the reference and it isnot expected to have the same access table. You can have yourown access table to determine the Service tax and ECS on Service

tax rates but ensure that the Interim tax code is assigned.

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6. Process flow for Normal Sales Cycle:

The Sales process is like this, you will have Sales orderBilling orSales OrderDeliveryBilling.

When you generate the billing document the Service and ECS on

Service tax payable will be posted into Interim GL account.

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Carry out the In-coming Payment receipt through the transactionF-28.

Once you create the In-coming Payment then you can run thereport J_1I_RFUMSV50 (RFUMSV50 for ECC Customers) fortransferring the Payable from Interim to Final Account.