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Transcript of Country India Version Library
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COUNTRY INDIA VERSION
Taxes (FI-AP/AR)
Purpose
The Taxes component covers the most important laws and business practices specific to India. Thefollowing documentation describes these aspects of the component. For generic information about Taxes ,
see Taxes (FI-AP/AR).
Features
Country-Specific Functions
Country Version India uses the standard functions for calculating and collecting withholding taxes.However, both Classic Withholding Tax and Extended Withholding Tax come with additional functions fortax remittance, journal vouchers, creating withholding tax certificates, and preparing annual returns.
If you want to handle excise duties, you must post the excisable transactions using the Materials Management (MM) and Sales and Distribution (SD) components. The system calculates the excise dutyin these components and creates the appropriate line items in Financial Accounting (FI). However, if you
only want to handle withholding taxes, you can use FI on its own.
Country Template
The country template for India comes with settings for calculating and posting withholding taxes, andaccount determination settings for posting excise duty.
excise duty
VAT
Service tax
WHT
Tax Collected at Souce
Excise Duty
UseThe SAP system automatically calculates excise duties in Materials Management (MM) and in Sales and Distribution (SD), and posts them in Financial Accounting (FI).
The system covers all types of excise duty, all of which need to be calculated and reported separately:
Basic excise duty (BED)
Special excise duty (SED)
Additional excise duty (AED)
National calamity contingency duty (NCCD)
Cess
Education cess
Countervailing duty
Additional duty of customs
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FeaturesThe system of excise duties is complex, and differs from the generic functions for taxes on sales andpurchases in a number of ways:
The rate of duty on a single material can vary according to which chapter ID it is listed under.
You cannot offset all excise duty on inputs against outputs.
Depots cannot offset any input duties at all. Manufacturing plants can only offset input duties if theycan show that the input materials are used to produce output materials.
You have to record all excise duty (inputs and outputs) in excise registers.
Your company may only be entitled to offset a portion of the duty on inputs against duty onoutputs.
Companies that qualify as small-scale industries can levy excise duty on outputs at reducedrates, so if you purchase materials from these companies, you must calculate a different rate ofexcise duty.
Excise Determination
MM comes with two ways of determining excise duties (and sales taxes) on input materials: formula-based excise determination and condition-based excise determination. The system calculates excise
duties using a tax procedure.SD also supports formula-based and condition-based excise determination, but in SD, the systemcalculates the taxes using a pricing procedure, not the tax procedure (see Pricing).
Reporting
You have to remit the excise duty that you have collected to the central excise authorities. The lawrequires you to remit excise duty twice monthly: for the first half of any given month (1 –15 inclusive) andfrom 16 to month-end. In each case, you are allowed five days to remit the excise duty. Country VersionIndia offers a report to help you do just that (see Remittance of Excise Duty Fortnightly).
A small number of transactions have to be remitted on the same day (see Other Outward Movements).
In addition, the system allows you to prepare printouts of the various excise registers for the taxauthorities.
basic excise duty (FI)
Financial Accounting (FI)
The main type of excise duty in India.
It is levied on a wide range of products, for example, foodstuffs, metals, jewelry, leather goods, andmachinery.
special excise duty (FI)
Financial Accounting (FI)
A form of excise duty in India on a limited number of goods, mostly luxury goods, including pan masala,sparkling waters, furs, and yachts.
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additional excise duty (FI)
Financial Accounting (FI)
A form of excise duty, in India, levied on a select range of products, for the most part, textiles.
national calamity contingency duty (FI)
Financial Accounting (FI)
In India, a form of excise duty levied over and above additional excise duty.
It applies to a range of products, such as tobacco or high-speed diesel and oil.
cess (FI)
Financial Accounting (FI)
In India, a tax on the manufacture of certain products, mostly foodstuffs.
Payroll India (PY-IN)
An additional tax calculated based on a person#s income tax payable and levied for particular purpose inIndia, usually is certain percentage of the total tax payable. For example education cess.
education cess (FI)
Financial Accounting (FI)
A surcharge of 2% applicable in India, on the total excise duty for the product.
countervailing duty (FI)
Financial Accounting (FI)
A form of excise duty imposed on imports that are subsidized by the country in which they weremanufactured.
Countervailing duty (also known as CVD) is intended to make the imports more expensive, therebyredressing any competitive advantage they might have over goods produced locally.
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additional duty of customs (FI)
Financial Accounting (FI)
Imports duty in India, over and above the countervailing duty, basic customs duty and price of theproduct.
This duty is applicable on all products and is charged at 4% on the aggregate price plus duties.
Education Cess is not calculated on ADC.
Partial CENVAT Credit
Use
In some industries, businesses are only allowed to set off a portion of their input excise duty againstoutput duty. In this case, the remainder of the duty is added to the material value.
Activities
Customizing
If any of your excise registrations are only entitled to claim partial CENVAT credit, set the indicator in
Customizing for Logistics – General, by choosing Taxes on Goods Movements India Basic
Settings Maintain Excise Registrations .
Configure separate tax codes that split the excise and post some as tax and add the rest to the material
price.
Day-to-Day Activities
The portion of the excise duty that is added to the material value is displayed in the excise invoice, alongwith the CENVAT credit. This amount is added to the inventory value when you post the goods receipt.
Monthly Remittance of Excise Duty and Service Tax
You use this report to calculate how much excise duty you must remit to the authorities. Legislation requires you to
remit excise duty monthly - for all the goods issued and services provided in the given month. In each case, you areallowed five days to remit the excise duty and service tax.
Once the report has determined how much you have to pay, it allows you to specify where the money should be paid
from - whether it should be deducted from the CENVAT credits that you have accumulated, from the service tax
credit accounts, from the personal ledger account (PLA) or from the service tax clearing accounts.
If the service tax is to be paid from the service tax credit and CENVAT credit, and the credit available is not
sufficient to pay off the service tax, then the amount is pushed to the service tax clearing accounts.
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NOTE
You use the service tax clearing accounts for service payments and personal ledger accounts for CENVAT payments
respectively.
Prerequisites
You have:
Customized the system so that when you create an excise invoice for a sale, the system automatically debits
the excise to a CENVAT clearing account
Made the settings in Customizing for Logistics - General, by choosing Taxes on Goods Movements
India Business Transactions Utilization
Maintained the various service tax G/L account details in Customizing for Logistics – General, under
Taxes on Goods Movements India Service Tax Account Assignment .
Features
To access the report, on the SAP Easy Access screen, choose Indirect Taxes Sales/Outbound Movements
Monthly Utilization .
On the selection screen of this report, you can no longer maintain the General Ledger (G/L) accounts. To maintain
the G/L accounts, do so in Customizing for Logistics – General, under Tax on Goods Movements India
Service Tax Assign Service Tax Accounts .
Selection
On the selection screen, enter data as required:
Organizational data (in the General data group box) Posting date for the CENVAT payment, if it is different from the run date
The period to be covered by the report (for example, 1-15 January)
NOTE
If, for any reason, you want to select an excise invoice individually, you can do so. Any entry in the Period
field will be disregarded.
NOTE
To display a list of all the excise invoices whose excise duty you have not yet remitted, choose Display pend. invoices.
To display a list of only the excise invoices for a given period, enter the period in the Period fields, select
Select pending inv. for period, and choose Display pend. invoices. You can also print the list of pending
invoices.
To display the last date when tax was remitted, choose Display last util. date (Display last utilization date).
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Payment options
You can pay the CENVAT and Service Tax payable amount from CENVAT credit or service tax credit
accounts.
Output
For each sort of excise duty, the system shows you:
How much you have to remit ( Amounts payable group box)
How much credit you have at your disposal on the appropriate CENVAT account and Service Tax
account(Available balances)
For a list of excise invoices that are considered for the CENVAT payment, choose Display excise invoices. You can
print the list and use it as an annexure.
You can save the entries only when you have utilized all the duties. The system then:
Creates an accounting document that debits the accounts from which the excise duty or the service tax is tobe paid.
Account Debit Credit
CENVAT account 250.00
Excise duty account 50.00
Service Tax 200.00
Generates entries in the Part II table for service tax payable. The system assigns a new register type T and
also updates the Excise Part II details (J_1IPART2) and the Excise invoice line item details (J_1IEXCDTL)
tables with the service tax serial number. Similarly, the system also generates entries in the Part II table for
service tax exemption payable and assigns new register type X . The system generates entries in the Part II table for service tax utilization with register type S.
Value Added Tax (VAT)
Use
In India, VAT has been levied in certain states from April 1, 2005.
VAT is levied instead of the Local Sales Tax (LST). VAT also
replaces other taxes such as, turnover tax, surcharge, additional
surcharge.
Prerequisites
You can configure the following tax procedures:
For Condition-Based Excise Determination , configure the tax procedure TAXINN. For moreinformation about TAXINN, see Configuration of Tax Calculation Procedure TAXINN.
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For Formula-Based Excise Determination , configure the tax procedure TAXINJ. For moreinformation about TAXINJ, see Configuration of Tax Calculation Procedure TAXINJ.
Features
The essence of VAT is that you can set off the input tax against
the tax paid earlier. VAT is based on the value addition to thegoods, and your VAT liability is calculated by deducting input tax
credit from tax collected on sales during the payment period (say,
a month).
You have purchased input worth INR 1,00,000 and your sales are worth INR 2,00,000 in amonth, and input tax rate and output tax rate are 4% and 10% respectively, then input taxcredit/set-off and calculation of VAT will be as follows:
1. Input purchased within the month = INR1,00,000
2. Output sold in the month = INR 2,00,000
3. Input tax paid = INR 4,000
4. Output tax payable = INR 20,000
5. VAT payable during the month after set-off/input
tax credit = INR (20,000 – 4,000) = INR 16,000The excise invoice that you capture contains one of the following:
1. VAT Number – If your buyer belongs to a state where VAT is levied, VAT Number has to be printedon the excise invoice.
2. Bill of Sale Number - If your buyer belongs to a state where VAT is not levied, Bill of Sales Numberhas to be printed on the excise invoice.
During billing, the system generates the VAT number if the VAT
Registration number is maintained in customer master in the Tax
Code 2 field. Else, the system generates a Bill of Sale number.
These numbers have to printed serially and separately for Bill of
Sale, VAT invoice, credit and debit notes. You can do this using
the Official Document Numbering.
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Service Tax
This is a tax that is levied on taxable services as defined by law. Service providersare responsible for the service tax payment.
Prerequisites
In addition to the standard Implementation Guide (IMG) settings for taxes on
sales/purchases, and deferred taxes, you must also have maintained the tax
registration numbers of your vendors, customers, and your own plants.
NOTE
If there are multiple tax registration numbers, you should have separate account
postings to different General Ledger Accounts based on service registration
number. You can do this if you have maintained a separate tax code for each
service registration number. For every service registration number, you should
define separate General Ledger Accounts for service tax and education cess onservice tax.
Features
Service tax has the following features:
It is charged at a certain percentage on the amount the service provider
received for the services rendered.
The Education Cess and the Secondary and Higher Education Cess are
applicable at a certain percentage on the service tax.
For the service provider (for example, vendor, landlord), this is a deferred
tax. The tax payment becomes liable on receipts from the service receiver
(for example, customer, tenant). In case of partial payment, the proportional
amount of the taxes (Service Tax, Education Cess, and the Secondary and
Higher Education Cess) must be paid to the tax authorities. The output taxes
that became liable have to be transferred from the deferred tax account to the
normal output tax account with the Deferred Tax Transfer (RFUMSV50)
program as described in SAP Note 921634.
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For the service receiver, the tax credit can be utilized for payment of tax due
when the vendor is paid for the whole invoice amount. In case of partial
payment, the assessee is not eligible to take credit on the proportional
amount of the input taxes. Consequently, the taxes must be transferred from
the deferred tax account to the normal tax account when the payment for thewhole invoice is made.
The interim general ledger account contains the total service tax that you
have to receive or pay as required. The final general ledger account contains
only the actual amount that you have received or paid. This means that the
corresponding tax codes have to possess a target tax code. The tax codes
defined for Service Taxes should not have a tax rate defined in the tax code
itself. We recommend that you define the tax rate in the condition records of
the tax procedure (TAXINN) to cope with the frequent changes in tax rates
easily.
The interim general ledger account contains the total service tax until the fullpayment of the invoice or receipt from customer.
Credit utilization or tax payment amounts are determined from the final
general ledger account.
Cross-utilization of input credit between Services and Goods is permitted, so
you can use the Service Tax credit to set off Basic Excise Duty that is
payable by you. This tax is payable to and administered by the Central Excise
Commissionerates working under the Central Board of Excise and Customs
(CBES) of the Department of Revenue in the Ministry of Finance.
Corporate assessees need to pay the tax on the value of taxable service
received in a month, by a specified period in the following month. Period for
payment of tax by individual assessees are also defined.
All the financial documents for which service tax must be paid should
contain information about the business place that identifies the tax office thatis responsible for collecting the service tax.
In the Flexible Real Estate Management (RE-FX) component, the leased-out rental
objects are subject to service tax that you need to pay to the responsible federal taxoffice. You identify the federal tax offices with the business place.
Example
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The price of the service is INR 10,000.
Service tax that is applicable is INR 1,000 (10%).
Education Cess is INR 20 and Secondary and Higher Education Cess is INR 10.
Total amount the customer needs to pay is INR 11,030. The system updates the
interim general ledger account with this amount.
For service provider:
Assume that the customer makes a partial payment, out of which INR 500 is
against service tax. You have to manually update the final general ledger account
with this amount.
You can offset only INR 500 against the payables in that month.
For service receiver:
Assume that you pay the vendor (providing the service) the value of INR 11,030.
In such a case, the credit of INR 1030 can be utilized to pay output tax.
Asset Accounting (FI-AA)
Purpose
The Asset Accounting (FI-AA) component covers the most important laws and business practices specificto India. The following documentation describes these aspects of the component. For generic information
about FI-AA, see Asset Accounting (FI-AA).
Features
Country-Specific Functions
Country Version India comes with a report for calculating depreciation on asset blocks (asset groups) asrequired by law for calculating a company's taxable income.
Country Template
The country template for India comes with the following settings:
Chart of depreciation
Depreciation keys as per the income tax laws
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For more information, see the following documentation.
Year-End Income Tax Depreciation Report
Use
You use this report to calculate the depreciation on your assets and any capital gains or losses accordingto the Income Tax Act.
To access the report, from the SAP Easy Access screen, choose Accounting Financial Accounting
Fixed Assets Information System Reports on Asset Accounting Taxes Country Specifics
India Year-End IT Depreciation Report .
Prerequisites
You can use the Customizing settings delivered by SAP in order to configure Asset Accounting (FI-AA)with respect to the income tax depreciation area and so that the report works correctly. For more
information about what settings to make, see the Release Note structure under FI Release Notes from Country Version India Add-On Customizing Settings for Income Tax Act .
Features
Selection
Enter the asset numbers of your group assets and other selection data as required.
Output
The system:
Calculates the depreciation on each asset block
Calculates any capital gains or losses
If you deselect Test Run, the system also:
Posts the depreciation to the income tax depreciation area
Stores the capital gains amounts from the report in a table for your future reference.
Calculation of Depreciation
Use
The program calculates the depreciation on each asset block according to the Income Tax Act.
Features
Depreciation of Asset Blocks
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The Income Tax Act requires you to depreciate all assets in blocks (in the SAP System, called assetgroups). In other words, you do not calculate the depreciation on each individual asset. Instead, an assetgroup has its own net book value.
The asset block’s net book value increases when you add assets to it and falls when you sell or retireassets. You also calculate depreciation on the block’s net book value. The depreciation rate depends on
the asset block and is prescribed by the government. Since an asset block may exist for a very long time,as you add new assets to it, it has an unrestricted useful life.
For example, assume your company has four trucks. At the beginning of fiscal 20X1, the trucks have atotal net book value, for income tax purposes, of INR 300,000. At the end of the year, with no acquisitionsand no retirements, the net book value has not changed. The total depreciation on all of the trucks is 10%of INR 300,000, or INR 30,000.
The total net book value of the block at the beginning of 20X2 is therefore INR 270,000.
New Assets Held for Less Than 180 Days
If you purchase an asset less than 180 days before the end of the fiscal year, you are only entitled todepreciate it at half of the normal rate of depreciation. To continue the example, on 1 June 20X2 you sella truck for IN 30,000. On 31 March the following year, instead of posting INR 3,000 depreciation, you canonly post half of that, INR 1,500.
The system handles this requirement by taking half the acquisition cost and calculating depreciation onthat.
Asset Retirements
When you retire an asset, you are not entitled to calculate any depreciation on it in that fiscal year at all.
Calculation of Capital Gains or Losses on Sales ofAssets
Use
The system automatically calculates any gains of losses on sales of assets according to the Income TaxAct. Any gains or losses have to be taxed.
Features
If you sell an individual asset from a block, the value of the asset block goes down by the sale price. For
example, assume that you have an asset block of trucks. On 1 April 20X2, the trucks’ total net book valueis INR 270,000. On 1 February 20X3 you sell one of the trucks for INR 50,000. At the end of the year, thenet book value before depreciation is therefore INR 220,000.
Capital Gains
If the sale of an asset causes the value of the asset block to fall below zero, the amount below zeroconstitutes a capital gain under the terms of the Income Tax Act. For example, on 1 April 20X3 the trucks’
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total net book value is INR 198,000. On 1 December you sell a truck for INR 210,000. On 31 March 20X4the system determines the asset block’s net book value as:
INR 198,000 – INR 210,000 = – INR 12,000
This makes a capital gain of INR 12,000, which the system stores in a table for your future reference.
The following year, the net book value of the asset block is set to zero.
Capital Losses
If you sell all the assets in a block, but the block still has a net book value, the system posts this value asa capital loss. For example, if you have a block with only one asset valued at INR 12,000, and you sell itfor INR 10,000, the net book value of the block is still INR 2,000, even though there are no assets in it.
The system stores the capital loss amount in a table for your future reference.