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Goods & Service Tax: Interoduction
Goods & Service Tax: Interoduction
Goods & Service Tax: Interoduction
INTERODUCTION
Generally the tax calculation procedure is differs from country to country. According to the
government policy and the revenue resources, it levies the tax on goods. For the purpose of tax
each country develops its own structure of taxation independently.
While implementing the project, we must understand the tax structure of the country and has to
apply the same to our project as per the business requirement.
SAP is standard software; hence it has not all developed for any country’s requirement specially.
It has globally developed. It will be configured or design separately for that company which
company will use it for their business requirement.
GST (Goods & Service Tax) is applicable in India from July 1, 2017 onward. There are two types of
taxes, one is input tax and other one is output tax. Input tax means the taxes on purchase of
goods or services and Output tax means the taxes on sales of goods or services.
With the help of the condition types and processing keys, the SAP creates tax procedure for the
country. For processing the Input tax and Output tax, we have to use the tax calculation
procedure to apply the relevant taxes. Condition types “MWVS” is for Input tax and “MWAS” is for
Output tax which is standard in SAP. We can create new condition types by using “Copy As” of
standard condition type “MWVS” for Input and “Copy As” of standard condition type “MWAS” for
Output.
1. Deductible
2. Non-Deductible
1. Deductible: The tax for which, we can take tax credit or benefit / Mod vat / Cen vat that is deductible.
2. Non-deductible: The tax for which, we cannot take tax credit that is non-deductible.
Component of GST
S. No. Input GST Output GST
1 SGST-Input SGST-Output
2 CGST-Input CGST-Output
3 IGST-Input IGST–Output
4 UTGST-Input UTGST-Output
5 RCM-CGST-Input
6 RCM-SGST-Input
7 RCM-IGST-Input
NOTE:
1. SGSG → State Goods & Service Tax
2. CGSG → Central Goods & Service Tax
3. IGSG → Integrated Goods & Service Tax
4. UTGST→ Union Territory Goods & Service Tax
5. RCM→ Reverse Charge Mechanism
SGSG = 2.5% This is intrastate tax, if we sale or purchase of goods or services with
= 5%
CGST = 2.5% same state of customers or vendors then it will be applicable. It
means the sellers and the purchasers both are in same state then it
will be applicable.
1. Deductible Tax = It carry the rate of GST, it means we will take input credit.
Entry – Goods Receipt
S. No. Particulars Dr. Cr.
1 Raw Material Inventory A/c 1,00,000.00
2 GR/IR Clearing A/c 1,00,000.00
Total = 1,00,000.00 1,00,000.00
Entry – Invoice Receipt
S. No. Particulars Dr. Cr.
1 GR/IR Clearing A/c 1,00,000.00
2 Input GST A/c 18,000.00
3 Vendor A/c 1,18,000.00
Total = 1,18,000.00 1,18,000.00
2. Non-Deductible Tax: It not carry the rate of GST, it means we will not take input credit.
3. Non-deductible tax in RCM case: If we purchase of goods or services from non-registered vendor
then RCM (Reverse Charge Mechanism) will be applicable.
In case of sales order, we select output tax code. No accounting entry for sales order (SO).
Billing TC “VF02”
Purpose: In this step, we create the tax account key. Those tax conditions which will display or which will
post in separate GL account. Account keys are used to determine the GL account.
Path: SPRO → IMG→ Financial Accounting (New)→ Financial Accounting Global Settings (New)→ Tax
on Sales & Purchase→ Basic Settings→ Check & Change Setting for Tax Processing
3 Digits tax
processing key Tax type: 1 for Output
tax & 2 for Input tax
Input CGST
- Process: IIC
- Description: Input CGST
- Tax Type: 2
- Posting Indic.: 2
↓
Enter – Save
↓
Prompt for customizing request
↓
– Create Request – to click
↓
Short Description: IIET- GST Configuration
↓
Enter – Enter
↓
√ - Data was saved
↓
- Next Entry - to click
↓
Process: IIS
Description: Input SGST
Tax Type: 2
Posting Indic.: 2
↓
Enter – Save
↓
√ - Data was saved
↓
- Next Entry - to click
↓
Process: III
Description: Input IGST
Tax Type: 2
Posting Indic.: 2
↓
Enter – Save
↓
√ - Data was saved
As per business requirement, similarly we define tax processing key for the state of “Union Territory”
↓
- Next Entry - to click
↓
Process: IIU
Description: Input UTGST
Tax Type: 2
Posting Indic.: 2
↓
Enter – Save
↓
√ - Data was saved
↓
- Next Entry - to click
↓
For “Output” tax
Tax type- 1
Posting Indicator - 2
- Process: IOC
- Description: Output CGST
- Tax Type: 1
- Posting Indic.: 2
- Enter - Save
- √ - Data was saved
Note: Tax processing keys are useful to process the collected tax amount to be posted in General Ledger
accounts. The definition of this processing keys, the system either credit the amount to separate GL
accounts or credit back to the respective GL accounts only.
CHECK CALCULATION PROCEDURE – TC “OBYZS”
Purpose: In this step, we define condition types and tax calculation procedure. Condition types represent
the tax element and tax calculation procedure is a tax calculation formula where we define the base
amount of each tax element.
Path: SPRO → IMG→ Financial Accounting (New)→ Financial Accounting Global Settings (New)→ Tax
on Sales & Purchase→ Basic Settings→ Check Calculation Procedure.
Condition types represent the tax elements. Condition types “MWVS” is standard for Input tax and
“MWAS” is standard for Output tax, which predefined in the SAP system. We will copy from “MWVS” for
making new Input condition type and copy from “MWAS” for making new Output condition type.
S. No. Condition type for Input tax Condition type for Output tax
1 IICG Input CGST IOCG Output CGST
2 IISG Input SGST IOSG Output SGST
3 IIIG Input IGST IOIG Output IGST
↓
Define Condition Types
Double Click
Condition type for “Input” tax
↓
Position – to click
↓
Condition type – MWVS
↓
Enter
↓
MWVS – to select
↓
- Copy As - to click
↓
We will change 4 digit “IICG”
code for condition type as per
company’s identification
Input CGST
↓
Enter-Save
↓
↓
Select –customizing request “IIET – GST Configuration”
↓
Enter
↓
√ - Data was saved
↓
Now select – IICG - Input CGST
↓
- Copy As - to click
↓
Input SGST
↓
Enter - Save
↓
√ - Data was saved
↓
Now select – IISG - Input SGST
↓
↓
- Copy As - to click
↓
Input IGST
↓
Enter - Save
↓
√ - Data was saved
Now, we will define “Condition type” for Output tax
↓
Position – to click
↓
Condition type – MWAS
↓
Enter
↓
MWAS – to select
Condition type for “Output” tax
- Copy As - to click
↓
Output CGST
↓
- Enter – Save
- Select –customizing request “IIET – GST Configuration”
- Enter
- √ - Data was saved
- Now select – IOCG - Input CGST
- Now select – IOCG - Input CGST
- Copy As - to click
↓
Output SGST
- Enter-Save
- √ - Data was saved
- Select – IOSG - Output SGST
- Copy As - to click
↓
Output IGST
- Enter-Save
- √ - Data was saved
B. Define Procedure:
The tax calculation procedure is a tax calculation formula, which we define the bas amount of each tax
element and assign the account key with tax element.
TAXINN is a standard tax procedure, which is pre-defined in SAP system. We will copy with reference of
tax procedure TAXINN, after copy of this procedure we will change procedure and description and save it.
Steps Cond. type Description From To Acc. Key
100 BASB Base Amount-Input ------ ------ --------
150 IICG Input CGST 100 100 IIC
160 IISG Input SGST 100 100 IIS
170 IIIG Input IGST 100 100 III
180 IIUG Input UTGST 100 100 IIU
500 BASI Base Amount-Output ----- ----- ----------
550 IOCG Output CGST 500 500 IOC
560 IOSG Output SGST 500 500 IOS
570 IOIG Output IGST 500 500 IOI
580 IOUG Output UTGST 500 500 IOU
TC-OBYZ
↓
Define Procedure
Double Click
Tax Calculation Procedure ↓
BY COPY OF “TAXINN” Position – to click
↓
Procedure – TAXINN
↓
Enter
↓
Select – TAXINN
↓
- Copy As - to click
↓
Procedure – TAXIN
Description – Tax Procedure –India – IIET
↓
Enter
↓
Copy all – to click
↓
Enter
↓
Copies no. of entry 1
↓
Save
↓
√ - Data was saved
↓
Now we will select – TAXIN- Tax Procedure-India-IIET
↓
- Control - Double click
↓
↓
New Entry
↓
Note: We can use any unused numbers between 1- 999 for step for calculation of tax. Condition type
“BASB” use for base amount of Input tax and “BASI” use for base amount of Output tax.
ASSIGN COUNTRY TO CALCULATION PROCEDURE – TC “OBBG”
Purpose: In this step, we assign tax calculation procedure with country “India” or for whichever country
we defined tax calculation procedure. Assign country to tax calculation procedure for calculating the tax
as per tax law of that country, which tax calculation formula we designed in tax procedure.
Path: SPRO → IMG→ Financial Accounting (New)→ Financial Accounting Global Settings (New)→ Tax
on Sales & Purchase→ Basic Settings→ Assign country to calculation procedure.
Purpose: In this step, we define the tax codes for sales and purchases. Tax code carry the % rate of tax,
it is two character alpha numeric codes.
Path: SPRO → IMG→ Financial Accounting (New)→ Financial Accounting Global Settings (New)→ Tax
on Sales & Purchase→ Calculation→ Define Tax Codes for Sales and Purchases.
↓
Enter
↓
Tax code – V1
↓
Enter
↓
V1 – Input IGST@5%
Tax type: V – Input tax
↓
Enter
↓
Tax type Acc. Key Tax Rate in % Level From Level Cond. Type
Input IGST III 5,000 170 100 IIIG
↓
Enter
↓
Save
↓
√ - Tax code V1 was created
Tax code – V2
↓
Enter
↓
V2 – Input (CGST@2.5%+SGST@2.5%)
Tax type: V – Input tax
↓
Enter
↓
Tax type Acc. Key Tax Rate in % Level From Level Cond. Type
Input CGST IIC 2.500 150 100 IICG
Input SGST IIS 2.500 160 100 IISG
↓
↓
Enter
↓
Save
↓
√ - Tax code V2 was created
Similarly we will create following tax code for Input tax.
Tax code – V3
↓
Enter
↓
V3 – Input@12%
Tax type: V – Input tax
↓
Enter
↓
Tax type Acc. Key Tax Rate in % Level From Level Cond. Type
Input IGST III 12,000 170 100 IIIG
↓
Enter
↓
Save
↓
√ - Tax code V3 was created
Tax code – V4
↓
Enter
↓
V4 – Input (CGST@6%+SGST@6%)
Tax type: V – Input tax
↓
Enter
↓
Tax type Acc. Key Tax Rate in % Level From Level Cond. Type
Input CGST IIC 6.000 150 100 IICG
Input SGST IIS 6.000 160 100 IISG
↓
Enter
↓
Save
↓
√ - Tax code V4 was created
Tax code – V5
↓
Enter
↓
V5 – Input@18%
Tax type: V – Input tax
↓
Enter
↓
Tax type Acc. Key Tax Rate in % Level From Level Cond. Type
Input IGST III 18,000 170 100 IIIG
↓
Enter
↓
Save
↓
√ - Tax code V5 was created
Tax code – V6
↓
Enter
↓
V6 – Input (CGST@9%+SGST@9%)
Tax type: V – Input tax
↓
Enter
↓
Tax type Acc. Key Tax Rate in % Level From Level Cond. Type
Input CGST IIC 9.000 150 100 IICG
Input SGST IIS 9.000 160 100 IISG
↓
Enter
↓
Save
↓
√ - Tax code V6 was created
Tax code – V7
↓
Enter
↓
V7 – Input@28%
Tax type: V – Input tax
↓
Enter
↓
Tax type Acc. Key Tax Rate in % Level From Level Cond. Type
Input IGST III 28,000 170 100 IIIG
↓
Enter
↓
Save
↓
√ - Tax code V7 was created
Tax code – V8
↓
Enter
↓
V8 – Input (CGST@14%+SGST@14%)
Tax type: V – Input tax
↓
Enter
↓
Tax type Acc. Key Tax Rate in % Level From Level Cond. Type
Input CGST IIC 14.000 150 100 IICG
Input SGST IIS 14.000 160 100 IISG
↓
Enter
↓
Save
↓
√ - Tax code V8 was created
↓
Now we will create Output Tax Codes
Tax code – A1
↓
Enter
↓
A1 – Output IGST@5%
Tax type: A – Output tax
↓
Enter
↓
Tax type Acc. Key Tax Rate in % Level From Level Cond. Type
Output IGST IOI 5,000 570 500 IOIG
↓
↓
Enter
↓
Save
↓
√ - Tax code A1 was created
Tax code – A2
↓
Enter
↓
A2 – Output (CGST@2.5%+SGST@2.5%)
Tax type: A – Output tax
↓
Enter
↓
Tax type Acc. Key Tax Rate in % Level From Level Cond. Type
Output CGST IOC 2.500 550 500 IOCG
Output SGST IOS 2.500 560 500 IOSG
↓
Enter
↓
Save
↓
√ - Tax code A2 was created
Tax code – A3
↓
Enter
↓
A3 – Output@12%
Tax type: A – Output tax
↓
Enter
↓
Tax type Acc. Key Tax Rate in % Level From Level Cond. Type
Output IGST IOI 12,000 570 500 IOIG
↓
Enter
↓
Save
↓
√ - Tax code A3 was created
Tax code – A4
↓
Enter
↓
A4 – Output (CGST@6%+SGST@6%)
Tax type: A – Output tax
↓
Enter
↓
Tax type Acc. Key Tax Rate in % Level From Level Cond. Type
Output CGST IOC 6.000 550 500 IOCG
Output SGST IOS 6.000 560 500 IOSG
↓
Enter
↓
Save
↓
√ - Tax code A4 was created
Tax code – A5
↓
Enter
↓
A5 – Output@18%
Tax type: A – Output tax
↓
Enter
↓
Tax type Acc. Key Tax Rate in % Level From Level Cond. Type
Output IGST IOI 18,000 570 500 IOIG
↓
Enter
↓
Save
↓
√ - Tax code A5 was created
Tax code – A6
↓
Enter
↓
A6 – Output (CGST@9%+SGST@9%)
Tax type: A – Output tax
↓
Enter
↓
Tax type Acc. Key Tax Rate in % Level From Level Cond. Type
Output CGST IOC 9.000 550 500 IOCG
Output SGST IOS 9.000 560 500 IOSG
- Enter
- Save
- √ - Tax code A6 was created
- Tax code – A7
- Enter
- A7 – Output@28%
- Tax type: A – Output tax
- Enter
Tax type Acc. Key Tax Rate in % Level From Level Cond. Type
Output IGST IOI 28,000 570 500 IOIG
- Enter
- Save
- √ - Tax code A7 was created
- Tax code – A8
- Enter
- A8 – Output (CGST@14%+SGST@14%)
- Tax type: A – Output tax
- Enter
Tax type Acc. Key Tax Rate in % Level From Level Cond. Type
Output CGST IOC 14.000 550 500 IOCG
Output SGST IOS 14.000 560 500 IOSG
↓
Enter
↓
Save
↓
√ - Tax code A8 was created
CREATE GL A/C FOR INPUT TAX & OUTPUT TAX – TC “FSOO”
Purpose: In this step, we will create GL Accounts for Input tax and output tax.
TC-FS00
↓
Enter
↓
– Create New – to click
↓
GL Account – 400001
Company Code - IIET
↓
Enter
↓
Type/Descriptions
Account Group – Taxation (This is not standard; you can select as per your configuration which account
group you have define for Tax GL).
– Balance sheet account
Short Text – Input CGST A/c
GL Acc. long text – Input CGST Account
↓
↓
Control Data – to click
Control Data
Account currency – INR (It is company code currency, company code currency is known as local
currency. Any company code currency/local currency will be selected by default).
– Only balance in local currency - (It will be selected in those GLs for which we want to see the balance
in local currency)
Tax category – (-) Input tax (It will be selected for Input tax GL account i.e. CGST, SGST & IGST)
Tax category – (+) Output tax (It will be selected for Output tax GL account i.e. CGST, SGST & IGST)
– Posting without tax allowed – (It will be tick for without tax posting)
– Open item management – (It will be selected in those GLs which needs to be clear/nullify/paid in
future.
– Line item display – (It will be selected in those GLs which we want to see the separate transaction
(line items) in GL line items report.
Sort key – 001 (This sort key is posting date, it is use to sort the line items. You can use any sort key as
per your requirement).
↓
Create/bank/interest – to click
Create/bank/interest
Field Status Group – G014 -Taxation (This is not standard; you can select as per your configuration which
field status group you have define for Tax GL).
↓
↓
Enter – Save
↓
√ - Data saved
DEFINE TAX ACCCOUNT – TC “OB40”
Purpose: In this step, we will assign tax code with GL accounts in which GL we want to post the tax
amount separately.
Path: SPRO → IMG→ Financial Accounting (New)→ Financial Accounting Global Settings (New)→ Tax
on Sales & Purchase→ Posting→ Define Tax Account
↓
Input CGST – IIC
Double click
↓
Chart of Account - IIET
↓
Enter
↓
Tax Code -
↓
↓
Posting Key – to click
↓
Message – Do you want to save the data first? “YES, NO, CANCEL”
↓
↓
YES
↓
Posting key – to click
↓
Debit – 40
Credit – 50
↓
Accounts – to click
↓
Message – Do you want to save the data first? “YES, NO, CANCEL”
↓
YES
↓
Select customizing request – IIET GST Configuration
↓
Enter
↓
TC Account
V2 400001
V4 400001
V6 400001
V8 400001
↓
Enter
↓
Save
↓
Select customizing request – IIET GST Configuration
↓
Enter – √ - Data saved
Similarly we will assign one-by-one tax processing key with GL Account for Input tax
TC “OB40”
↓
↓
Output CGST – IOC
Double click
↓
Chart of Account - IIET
↓
Enter
↓
Tax Code -
↓
↓
Posting key – to click
↓
Message – Do you want to save the data first? “YES, NO, CANCEL”
↓
YES
↓
Posting key – to click
↓
Debit – 40
Credit – 50
↓
Accounts – to click
↓
Message – Do you want to save the data first? “YES, NO, CANCEL”
↓
YES
↓
Select customizing request – IIET GST Configuration
↓
Enter
↓
TC Account
A2 410001
A4 410001
A6 410001
A8 410001
↓
Enter - Save
↓
Select customizing request – IIET GST Configuration
↓
Enter - √ - Data saved
Output SGST – IOS
Double click
↓
Chart of Account - IIET
↓
Enter
↓
Tax Code -
↓
Posting key – to click
↓
Message – Do you want to save the data first? “YES, NO, CANCEL”
↓
YES
↓
Posting key – to click
↓
Debit – 40
Credit – 50
↓
Accounts – to click
↓
Message – Do you want to save the data first? “YES, NO, CANCEL”
↓
YES
↓
Select customizing request – IIET GST Configuration
↓
Enter
↓
TC Account
A2 410002
A4 410002
A6 410002
A8 410002
↓
Enter - Save
↓
Select customizing request – IIET GST Configuration
↓
Enter - √ - Data saved
Output IGST – IOI
Double click
↓
Chart of Account - IIET
↓
Enter
↓
Tax Code -
↓
Posting key – to click
↓
Message – Do you want to save the data first? “YES, NO, CANCEL”
↓
YES
↓
Posting key – to click
↓
Debit – 40
Credit – 50
↓
Accounts – to click
↓
Message – Do you want to save the data first? “YES, NO, CANCEL”
↓
YES
↓
Select customizing request – IIET GST Configuration
↓
Enter
↓
TC Account
A1 410003
A3 410003
A5 410003
A7 410003
↓
Enter - Save
↓
Select customizing request – IIET GST Configuration
↓
Enter - √ - Data saved
ASSIGN TAX CODE TO COMPANY CODES
Purpose: If the tax rate will not be reflected that screen after creating the tax codes by TC “FTXP” In this
case we will assign tax codes directly to the company by below path.
Path: SPRO→ IMG→ Logistics General→ Tax on Goods Movement→ India→ Basic Settings→
Determination of Excise Duty→ Condition Bases Excise Determination→ Assign Tax Code to Company
↓
Assign Tax Code to Company Codes
↓
Execute
↓
New Entry
↓
Company Code Tax Codes Company Code Tax Codes
IIETT A1 IIETT V1
IIETT A2 IIETT V2
IIETT A3 IIETT V3
IIETT A4 IIETT V4
IIETT A5 IIETT V5
IIETT A6 IIETT V6
IIETT A7 IIETT V7
IIETT A8 IIETT V8
↓
Enter
↓
Save
↓
Select customizing request – IIET – GST Configuration
↓
Enter
↓
√ - Data was saved
OR
↓
Enter
↓
Country – IN
↓
Company Code: IIET
Tax Code: A1
↓
↓
Enter – Save
↓
Enter
↓
√ - Data was saved