TAX on Sales and Purchases

VAT Input - Input tax paid on purchases to the vendor

VAT Output - Output Tax on Sales collected from the customer

Tax Procedure - Tax Calculation and posting settings are controlled at tax procedure level. Tax
procedure is assigned to the country. Indicates taxation settings are controlled at country level. The
company codes belongs to the country will follow the same taxation settings.

Tax procedure is managed with tax condition types and account Keys.

Condition types - The condition types used to determine use of condition type like discounts, taxes,
prices etc.,

Account Key/Process Key - The calculated condition value will store against G/L Account
assigned to the account key.

The taxes can be managed on:

Deductable -

Nondeductible -The calculated tax will be distributed to inventory/expense or revenue line item instead
of generating new tax line item.

Vendor Invoice - 10000 with 10% Input Tax (Nondeductable)

Tax = 1000

Inventory Raw Material A/c Dr 11000

To Vendor A/c 11000

Deductible - The calculated Tax on inventory/expense or revenue item posted with new tax
line item and the tax amount is payable/receivable from/to the tax authorities.

Vendor Invoice - 10000 with 10% Input Tax (deductible)

Tax = 1000

Inventory Raw Material A/c Dr 10000

Input tax A/c Dr 1000

To Vendor A/c 11000

Configuration settings of Tax on Sales or Purchases

Step 1 - Create G/L Accounts FS00

G/L a/c type text

100800 Tax Accounts BS CGST Input A/c
100801 Tax Accounts BS CGST Output A/c
100810 Tax Accounts BS VAT payable a/c
100802 SGST input A/c
100803 IGST Input A/c
100804 SGST Output A/c
100805 IGST Output A/c

Step - Define Tax Condition types

SAP delivered standard condition types, which can be used against tax procedure or can create new
condition types as per business requirement.

Path - SPRO  Financial Accounting (New)  Financial Accounting Global Settings (New) 
Tax on Sales/Purchases  Basic Settings  Check Calculation Procedure

t-Code - OBYZ

Double click on “Define Condition Types”

Standard condition types -

1. BASB - Base Amount (Invoice Amount)

2. MWAS - Output Tax
3. MWVS - Input Tax

Create new Tax Condition types

Select condition type MWAS and choose copy as button

Change Condition type - CGST

 Condition
Type Description
JA01 Central Sales Tax
JA02 State GST
JA03 Integrated GST
JA04 CGST Input
JA05 SGST Input
Integrated GST
JA06 Input

Step - Define Process Keys/Account keys or Check and Change Settings for Tax Processing

Same Path

T-Code - OBCN
Standard Account Keys are

MWS Output tax

VST Input tax

New Entries

Account
Key Desc Tax Type Posting Indicator
CGST 1 - Output 2- Separate line
JA1 Ouput tax item
SGST 1 - Output 2- Separate line
JA2 Output tax item
IGST 1 - Output 2- Separate line
JA3 Output tax item
 2- Separate line
JA4 CGST Input 2 - Input Tax item
2- Separate line
JA5 SGST Input 2 - Input Tax item
2- Separate line
JA6 IGST Input 2 - Input Tax item

Step - Define Tax Pricing Procedure/ Check Calculation Procedure

T-Code - OBYZ

Double click on define procedures

SAP deliver with TAX Procedure TAXINN for country India. If TAXINN is not exists ask BASIS consultant to
copy from client 000

Note: for testing purpose we are creating new tax procedure

New Entries

Save

Select the procedure TAXINN and double click on Control Data Folder

New Entries
Step - Assign Country to Calculation Procedure

Same Path

T-Code - OBBG

Save

Step - Define Tax Codes for Sales and Purchases

Path - SPRO Financial Accounting (New)  Tax on Sales/Purchases  Calculation  Define

Tax Codes for Sales and Purchases

T-Code - FTXP

This transaction is used to maintain tax codes with percentage.

Country - IN

Enter

Enter
Save

Tax code A0 was created

Tax Code - A1
Save
Save

Enter
Save
Save

Note: Tax Code doesn’t automatically store in a transport request. Consultants must create manual TR
for Tax Codes to move tax codes from development to Quality and to PRD.

Procedure to create TR for tax codes

FTXP Main Screen

Tax Code Menu  Transport  Export

Enter

- Select create button to create new or separate TR for tax codes

- Enter the TR description

Enter

- Choose the tax codes which you want to create TR

- Or Select All button to select all Tax codes in the TR
- Tax Code Menu  Save

Message- Tax Code included in the TR

Step - Define Tax Accounts

Path - SPRO  Financial Accounting (New)  Financial Accounting Global Settings (New) 
Tax on Sales/Purchases  Posting  Define Tax Accounts

T-Code - OB40

This configuration is used to assign tax G/L accounts against account keys/process keys.

- Double click on Account Key JA1

- COA - Z100
- Save Posting Rules
- Choose posting Key button

- Assign G/L 100801

Assign Tax Codes for Non-Taxable Transactions

Same Path

T-Code – OBCL

Save

Testing of Input Tax

Step - Update Tax type to Expense / revenue G/L Account

FS00
Save

Ignore the warning message and press enter

Posting without tax allowed: If this indicator is set, system will allow postings to this G/L line item
without tax code. Generates warning message that tax code is missing.

If this indicator is not set and missing of Tax code, triggers error message and doesn’t allow to save the
document.
Save

Step - Post Vendor Invoice

T-Code - FB60
Simulate

If Calculate tax is set, system considers the tax % is already included in expense/inventory line item.

Back Arrow

Goto Tax Tab

De-select Calculate Tax

And choose net proposal button

If Net Proposal is set, tax is calculated above the inventory/expense line item and vendor amount is
equals to Expense/inventory amount + Tax Amount

In the above example

Vendor Invoice = 100000 + 14000 = 1,14,000/-

Simulate

Save

Document 1900007 was posted in company code Z100

Step - Create Tax Code FTXP

Save

Step - Post Vendor Invoice

Simulate

Document 1900008 was posted in company code Z100

Step - Post Customer Invoice

FB70
Simulate

Save

Document 1800002 was posted in company code Z100

Step - Advance Tax Report on tax on sales and purchases

This report is used to:

1. To Track taxes calculated (Input and Output Taxes)

2. End of the month to transfer input and output taxes to the tax payable a/c.
3. The payable account will show the balance amount to be remitted to the tax authorities
(Advance Tax Returns)
 Path - Accounting  Financial Accounting  General Ledger  Reporting  Tax Reports 
General  Advance Return for Tax on Sales/Purchases  Advance Return for Tax on
Sales/Purchases

T-Code - S_ALR_87012357

Choose Further Selection Button

Expand Output List

Save as Variant

Execute

Back Arrow

Expand Tax payable Posting

Save Variant

Error: Acct determination for Tax payable posting (advance tax return) not defined

T-Code - OB89 or FBKP

Choose Automatic Postings

Double click on Taxes

Double click on transaction UMS - Tax payable posting (advance tax return)

COA - Z100
Save

System generates BTIS by transferring all tax line items to tax payable account

Step - Process BTIS

T-Code - SM35

- Select The session Z100_ATR

- Process session in foreground

Keep on press enter till you get the message BTIS completed.

- Choose Log Button

- Double click on session Z100_ATR

Document 100002 was posted in company code Z100

Step - FAGLB03

Note: On due date 7.7.2019, the tax payable amount will be paid to the tax authorities.

Tax Jurisdiction = State + county Code + City Code