Purchase & Service Scenario

[Former Member]

Hi

We are purchasing a material, say Rubber from a Vendor. He supplies the Material to us and does some Servicing on it in our premises.

The details of the Purchase Order is as below:

Qty 1

Price 52910

Base Amount 52910.00

Base Amount for VAT (On Base Amt) 75% 39682.50

VAT 13.50% 5357.14

Base Amount for Service Tax (On Base Amt) 25% 13227.50

Service Tax 10.00% 1322.75

Service Tax 2% 26.46

Service Tax 1% 13.23

Total Service Tax 1362.43

Total Invoice Amt 59629.57

Here the Vendor is charging VAT on 75% of the Base Amount & Service Tax on 25% of the Base Amount. In our case, the VAT is recoverable, and do not maintain any record of the Service Tax. We simply add the Service Tax Amount to the Cost of the Material.

The above scenario is not mapped in our SAP System. And for work around we are creating a Standard PO and change the Material Price to 7,936.50 just to get the correct VAT Value 5,357.14. This we have discussed with Accounts also and they are OK with it. We deduct the TDS, and for this we are doing the changes in the MIRO only.

Can we go ahead with the above work-around? Or what is best way to resolve this Issue for the time being as we are doing back-log entries..

Alternatively I can create two Purchase Orders, one Standard Purchase Order for Material & other Service Purchase Orderu2026. Sounds stupid for me as we get single Invoice from the Vendor..

Also request you to please give the SAP Standard Solution for the same.

Regards,

[former_member218071 · Accepted solution]

Hi,

Create composite tax code for the scenario.

To Maintain VAT 13.5 % on 75% of Value - Use Vat setoff condition with 10.125% (75 * 13.5%) - Tax amount will not be inventoried.

And then maintain Service tax 10 % based on VAT setoff condition and which will be inventoried on Material

And when u use this tax code in PO taxes will be calculated correctly.

But in MIRO need to check how TDS deduction will happen.

Hope this will help you.

Regards,

Rakesh

Edited by: Rakesh Shelar on Sep 14, 2010 12:34 PM

[Former Member · Accepted solution]

Thanks for help.

Will explore the same and revert to you.

Thanks a lot again for the help.

Regards,

[Former Member]

HI

If you are using TAXINN procedure, single service tax code will take care of both VAT & Service tax.

But the service tax code will be useful for route Service PO (Acc.Ass K, Service D) with out item code & Service entry sheet.

Using t.code FTXP create a new service tax code assigning as follows.

Acc.key JP5 with a value of 75% of VAT %ge ( ie if VAT%ge is 4%, then 75% of 4 is 3)

Acc.key VS4,VS5,VS6 with 25% of Service tax 5ge (ie is Service tax %ge is 10, then 25% of 10 is 2.5)

Two tax codes should be created one for Deferred & another one for final. Final tax code will be linked in the deferred tax code in tab. Necessary G/L assignment to be done by your FI team.

During bill passing seperate entries will ge to VAT input credit & Service tax credit.

With regards,

Jeeva.

[Former Member]

Hi,

make service PO with one line item and make tax code such that 75 % vat and 25 % service tax .

I think its possible.

[Former Member]

You can create one PO with 2 line items.

1st line item will be for the basic material price i.e., 75% of the amount in your case. Here you have to assign Tax code for VAT in line item details.

2nd line item will be only for the service charge i.e., 25% of the amount. Assign tax code for service tax in line item details.

Rest will happen automatically.

Regards

Rajesh Dangle

[Former Member]

Thanks for the reply.

One clarification - Are we putiting same Material Codes for the both the two line items? If yes, our Inventory will go up.

Request you to please give the details of the Line Items to be created in the PO.

Regards,

[Former Member]

1st line time will contain your material code and with tax code for VAT , inventorisation will happen.

2nd line item will be created with item cat as "D" and there won't be any material code. No inventorisation.

Hope your queries are resolved.

Regards

Rajesh Dangle

[Former Member]

Hi Rajesh,

In our case we want the Service Tax Amount to be added on to the Material Code.

If I follow your above process, will the Service Tax Amount go to Material Cost.

Please help.

Regards,