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 Vendor payment to the extent of Payment made to Vendor. Similarly the Service tax should be paid only when you receive the Payment from 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 tax payable will account in the interim account. Please refer the SAP note 921634 and do the Customizing Changes and code correction mentioned in the SAP note. You will have to create the GL accounts with the controls mentioned in the SAP note 921634. The Service tax credit can be availed when you run the Report J_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 and JES4 AR ECS on Service tax has been created in SD Pricing condition and assigned to the SD Procedure with the account key VS9 AR Service tax and VS0 AR ECS on Service tax created and assigned in the SD Pricing procedure for the condition types JSE4 and JES4 respectively.

1. Customizing Changes: 1.1 Condition type: Create two new condition type JSE4 AR Service tax & JES4 AR ECS on Service tax. Copy the Condition type JIN1 & JIN2 as JSE4

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

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 Pricing procedure then you will have to create the same account key here. Customizing Path: SPRO Financial Accounting Tax on Sales/Purchases Basic Settings Check and Change Settings for Tax Processing

1.3 Tax Procedure Change: Include the two conditions JSE4 and JES4 in the TAXINN Procedure. Customizing Path: SPRO Financial Accounting Tax on Sales/Purchases Basic Settings Check Calculation Procedure Define Procedures

2. GL Account Creation: Kindly create 4 GL accounts with the following properties. Two GL accounts should be created for the Interim account of Service Tax and ECS on Service Tax and Two GL account for the Final GL account.

2.1 Interim GL Account Properties: Only Balance in Local Currency should not be activated. The Tax Category should be >. The open item management and Line item display indicator should be active.

2.2 Final GL Account Properties: Only Balance in Local Currency should not be activated. The Tax Category should be >. The open item management should not be active.

3. Tax Code Creation: You have to create two tax codes for the Service tax setting. One tax code for posting into the Interim account when you carry out the Sales transactions. This tax code will not be having any rates maintained in FTXP.

The final tax code should have the rates maintained.

Assign the Final tax code to the interim tax codes as Target tax code through FTXP Properties.

4. GL account Assignment: Assign the Interim GL account for the Interim tax codes and Final GL accounts to the Final tax codes. Customizing Path: SPRO Financial Accounting Tax Sales/Purchases Posting Define Tax Accounts Activate the tax code indicator for the Account key. on

Assign the Posting Key:

The Service tax Interim Tax code is M3 which will post the value into the interim GL account 24820010. The Service tax Final tax code is M4 which has been assigned with the Service tax Final GL account 24820012. When we receive the Payment from the Customer the Service tax payable will be moved from Interim Account (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.

Assign the Posting Key:

The ECS on Service tax Interim Tax code is M3 which will post the value into the interim GL account 24820011. The ECS on Service tax Final tax code is M4 which has been assigned with the Service tax Final GL account 24820013. When we receive the Payment from the Customer the Service tax payable will be moved from Interim Account (24820011) to Final Account (24820013). 5. SD Condition Record: Create the condition record for the Service tax and ECS on Service tax 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.

The condition record shown here is only for the reference and it is not expected to have the same access table. You can have your own access table to determine the Service tax and ECS on Service tax rates but ensure that the Interim tax code is assigned.

6. Process flow for Normal Sales Cycle: The Sales process is like this, you will have Sales order Sales Order Delivery Billing. Billing or

When you generate the billing document the Service and ECS on Service tax payable will be posted into Interim GL account.

Carry out the In-coming Payment receipt through the transaction F-28. Once you create the In-coming Payment then you can run the report J_1I_RFUMSV50 (RFUMSV50 for ECC Customers) for transferring the Payable from Interim to Final Account.