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50% as per reverse mechanisam in service tax

former_member211706
Participant
0 Kudos

Dear Expert,

Here the requirement is we have to customizing a tax code with reversal mechanization, here i am giving small solution for creating the tax code.

Vat 70% of 5% = 3.5% of 1000 =35 which is stated below

service tax 70% of  12.36 = 43.26 (50% as per reverse mechanisam) where i will show the 50% of amount

the amount of service tax 43.26 is calculated  only 50% of 70%.

so where i will show the rest 50% which mentioned in reversal mechanism.

could you please suggest me.

  1. No

Service Description

Qty

Rate

Amount

1

Rubberizing of Pickling Roll

1

1000

1000

2

Mat Content ( 70%) & Service Content( 30%)

3

Vat@5% on 70% of Rs 1000

35

4

Service Tax@12.36% on 70% of Rs 1000 X 1/2(50% as per reverse mechanisam) {ST on &70% instead of 30%, since the above service is under the category of repair & maintenance & Movable type}

            43.26

5

Gross Bill Value

  1. 1078.26

6

TDS deduction @ 2% on Rs. 1078.26

  1. 21.5652

7

WCT deduction @ 4% on Rs. 1078.26

  1. 43.1304

8

Payable to Vendor

  1. 1013.5644

Regards

Pulak

Accepted Solutions (1)

Accepted Solutions (1)

suma_mani
Active Contributor
0 Kudos

Hi Pulak,

You can achieve the same below mentioned suggestions.

1. Create tax code for VAT @ 3.5% and Create withholding tax codes for service tax ( Reverse mechanism) @ 6+ 2+1%  Or else

2. You can create single tax code for VAT + Service tax.

Mentioned SAP note can drive to achieve the same.

Note 1736781 - Service tax Legal changes for Abatements and Negative list

Regards

Mani Kumar

former_member211706
Participant
0 Kudos

Dear Sridevi & Mani,

Thanks lot providing this solution.i have one question regarding this issue.

This is question Regarding the reversal mechanism of the 50% of tax.

I want without any reflect rest of tax 50%,this gl would be reflect in fbl3n without change in the below posting screen shot.is it possible otherwise could you please any other solution. if i do 100% tax in tax code create in FTXP then provide the solution

In FTXP can i take 50% or 100% in service tax which one is correct please advice.

the below screen shot the tax code has been created 50% of service tax in FTXP.

Is this correct  42+1.26=43.26(50% 86.52)and total tax is86.52, plz advice here i show 50% or 100% of tax, if 50% then 50% how is show in GL with out in reflect in in posting.if i show 100% then how i deduct the 50% of tax.

Please see the calculation attached screen shot.

Gross amount 1078.26

Paid amount 1013.56

if any doubt   plz see the first posting details (Original post)

Regards

Pulak

former_member211706
Participant
0 Kudos

Dear experts,

Please help me to provide the solution.

I am waiting for reply its urgent.

Regards

Pulak

sridevi_p
Active Contributor
0 Kudos

Can you please check the link - http://scn.sap.com/docs/DOC-42970?

I have explained it with an example.

subhadeep_das
Contributor
0 Kudos

Hello Pulak,

in case of reverse charge mechanism, the service provider's share of tax will be handled through FTXP while the reverse charge component will be handled through withholding tax process since that will then create your liability. Therefore as you charge 50% from your vendor you will also be creating a libility of the rest 50% which will have to be paid by you.

best regds

Subha

former_member211706
Participant
0 Kudos

Hi Sridevi,

Thank you very much for your sharing knowledge regarding service tax reversal mechanism.

Now its customizing in my client as per your note and working fine

Have a nice day.

Regards

Pulak

Answers (1)

Answers (1)

sridevi_p
Active Contributor
0 Kudos

Hi,

Service tax reverse charge mechanism can be achieved through Withholding tax route. 

SAP has provided 2 solution approaches for the reverse charge mechanism on Service tax.  The standard SAP Note 1736781 - Service tax Legal changes for Abatements and Negative list handles 2 cases –

Case 1: Abatements with Service tax credit

Case 2: Abatements without service tax credit.

Hope this helps

Regards,

Sridevi