Service Tax and VAT in a single invoice

[VishaalUlphe]

Hello,

We have a scenario wherein the vendor invoice has two components, Material and Services. VAT is deducted on both the components ( Material and Services) whereas the Service Tax is deducted only on Service component only. The scenerio is given below--

Invoice Value = 1000

Material -- 800

Services -- 200

VAT -- 100 ( @ 10% on total value)

Service Tax -- 10 ( @5% on service component only)

Payable to Vendor -- 890 ( 1000-100- 10)

The client takes VAT credit on purchases as well. Whereas Service Tax is payable to govt authorities)

Besides, There is a exemption of 20,000 in service tax...so if the total vendor invoice in a period exceeds 20000...then only service tax is deducted.

Please need your help to map the above scenerios in SAP along with necessary configuration.

Thanks

Bijoy

[sanilbhandari]

Hi kamalsachdevasoltius

It would help if you add details also like

a) which country is this scenario is applicable

b) write down the accounting entries, highlighting if the service tax is deductible or non deductible.

It would help others to be able to guide you better

Thanks & Regards

Sanil Bhandari

[VishaalUlphe]

Dear Sanil,

Client is having Manufacturing operations in Kenya,Congo,Angola and South Africa.

Below given the example of Vendor Invoice raised of 121,000.00 and then deduction of Service tax.

Example: Amount Labor Contract 50,000 Spare parts 60,000 Total Invoice Value 110,000 IVA 10% 11,000 Total invoice Value with IVA 121,000 Less : Service Tax @ 6.5% on 50,000 3,250 Net payable to supplier 154,250

Warm Regards

Bijoy

[sanilbhandari]

Hi kamalsachdevasoltius

I had requested for an accounting entry example that you would expect, but you did not share. I would assume you expect the below entries:

Expense A/c for labour Dr 50000

Expense A/c for Spare Parts Dr 60000

Input VAT A/c Dr 11000

Service Tax Expense Payable A/c Dr 3250

To Service Tax Payable Cr 3250

To Vendor A/c Cr 154250

I would suggest to create a with holding tax for the service tax. In the with holding tax configuration, you should use the posting indicator as 2 or 3 depending on whether you want to calculate service tax on Expense Amount+VAT or only on expense amount as shown below:

You also mentioned that the service tax should be charged only on the contract amount, so while booking the invoice you have to manually change the base amount for with holding tax calculation to 50000 in the with holding tax tab for MIRO or FB60.

You have also mentioned that service tax should be calculated only if the invoice amount is over 20000 in a year. You do that as well if you use formulae in with holding tax configuration and use accumulation feature in the with holding tax type configuration. These are all standard feature available. The below blogs should help you:

https://wiki.scn.sap.com/wiki/display/ERPFI/Withholding+tax+calculation+with+FORMULA

The below wiki explains the concept of accumulation in with holding tax type configuration

https://wiki.scn.sap.com/wiki/display/ERPFI/Withholding+Tax+Accumulation

I assume you know how to set up with holding tax configuration. There is already a lot of information available on setting up the same, if you search in google.

With this the set up of VAT will be like any other condition based tax determination and should not be an issue. Let me know if you have any specific issued for which you need assistance.

Thanks & Regards

Sanil Bhandari

PS - Kindly provide as much details as you can in your question and not assume that others will understand what you are trying to communicate. All of us are taking some time out of our day jobs and trying to help each other. However, if you do not provide enough details in the question, it is a waste of time for others trying to help you to figure out what could be a potential issue !