1. Service Taxes (India)
&
SAP Configuration
By
Muhammad I Shokat
Haas Automation Inc
Page 1 of 13

2. TABLE OF CONTENTS
Scenario: (Purchasing /Input) ..........................................................................................3
Example: .....................................................................................................................3
Important:................................................................................................................3
SAP Configuration Changes for TAXINN Procedure ......................................................4
1. Create new condition types (JSRT, JEC3 and JES3).............................................4
 JSRT (A/P Service Tax)...................................................................................4
 JEC3 (A/P ECS for ST) ~ 2% ..........................................................................5
 JES3 (A/P SECess for ST) ~ 1% ......................................................................6
2. Create two new Account Keys and Use VS7 as existing one: ...............................7
 VS7 (IN: A/P Service Tax) ..............................................................................7
 VS8 (IN: A/P ECS for ST) ...............................................................................7
 VSE (IN: A/P SECess ST) ...............................................................................8
3. Maintain Tax Procedure (TAXINN) to accommodate these changes. ...................8
4. Assign G/L Accounts to Tax Code (ST and S1). ..................................................9
 VS7  11406400 ............................................................................................9
 VS8 11406500 .............................................................................................9
 VSE 11406600........................................................................................... 10
5. Maintain Tax rates in FV11 ...............................................................................10
 <FV11> JSRT (12%) .................................................................................10
 <FV11> JEC3 (2%) ...................................................................................11
 <FV11> JES3 (1%)....................................................................................11
Posting Service Invoice .................................................................................................12
Assigning New Tax Code “S1” to be able to see in FB60 tax code drop down screen. ...13
Page 2 of 13

3. Service Taxes India
Scenario: (Purchasing /Input)
When we create service tax invoices, system should be able to calculate 12.36% tax. 12%
for service tax, 2% for Education Cess and 1% on SecCess.
Service tax = 12%
Ed Cess@2% = 12%*2% = (12*1.02 = 12.24%)
Sec Cess @1% = 12%*1% = (12*1.01 = 12.12%)
Total Tax amount--------------------------- 12.36%
G/L
ChAc accoun CoCd Long Text
HAAS 11406400 4000 Service tax-input credit - Basic Service Tax 12%
HAAS 11406500 4000 Service tax-input credit - Education Cess 2% on Service tax
HAAS 11406600 4000 Service tax-input credit - Secondary & Higher Educ 1% on Service tax
Example:
A Vendor service Invoice for 3370.80 INR needs to be entered calculating 12.36% on
this invoice and a 2% TDS. Total taxes should be (3000*12.36%) = 370.80
Debit Credit
Vendor – 3303.38
Wages G/L Account – 3,000
Service tax @12% (3000*12%) = 360
Ed Cess @2% (360*2%) = 7.20
S&HE Cess @1% (360*1%) = 3.60
Vendor TDS = 67.42
Total Taxes = 370.80
Important:
Here tax base amount for Edu Cess should be 12% of the orgibal invoice base which is
(12%*3000) = 360, in this case.
 Education Cess = 360*2% = 7.20
 Sec and Higher Sec Cess = 360*1% = 3.60
Page 3 of 13

4. SAP Configuration Changes for TAXINN Procedure
We have to do following to accommodate these changes in the system.
1. Create new condition types (JSRT, JEC3 and JES3).
<OBYZ> Define Condition Types
JSRT (Make sure you mention “JTAX” in access seq.) and enter text as (A/P Service
Tax)
 JSRT (A/P Service Tax)
This should be “1” as level 1
Page 4 of 13

5.  JEC3 (A/P ECS for ST) ~ 2%
Page 5 of 13

6.  JES3 (A/P SECess for ST) ~ 1%
Page 6 of 13

7. 2. Create two new Account Keys and Use VS7 as existing one:
<OBCN> VS7, VS8, VSE
 VS7 (IN: A/P Service Tax)
 VS8 (IN: A/P ECS for ST)
Page 7 of 13

8.  VSE (IN: A/P SECess ST)
3. Maintain Tax Procedure (TAXINN) to accommodate these changes.
<OBYZ>Define Procedures
Important: In order to accommodate .24% and .12% of service tax value (360 as
calculated above), Use step (605) as “From” and “To” for steps 607 and 609 as shown
below and highlighted in red. Also assign new account keys (VS7, VS8 and VSE).
Page 8 of 13

9. 4. Assign G/L Accounts to Tax Code (ST and S1).
Even though we ONLY require tax code “ST”, but due to TAXINN, and maintaining
rates in FV11, we need to link S1 with ST, so we will have two tax codes.
<OB40> assign ST and S1 tax codes in transactions “VS7”, “VS8”, and “VSE”.
 VS7  11406400
 VS8 11406500
Page 9 of 13

10.  VSE 11406600
5. Maintain Tax rates in FV11
We need to maintain two tax codes, and use “ST” as central for all three conditions.
Because if we don’t create “S1”, we will not be able to maintain 12%, 2% and 1% for
code “ST’ because if we do that, system gives an error for 2% that you have already
maintained 12% for code ST.
 <FV11> JSRT (12%)
Page 10 of 13

11.  <FV11> JEC3 (2%)
 <FV11> JES3 (1%)
Page 11 of 13

12. Posting Service Invoice
FB60:
When ever we will create an Invoice, we will use tax code “S1” on FB60 screen, because
in FV11 we have linked S1ST, and postings will show ONLY ST tax code.
Page 12 of 13

13. Assigning New Tax Code “S1” to be able to see in FB60
tax code drop down screen.
<OBZT> Add tax code “S1” for purchasing. DO NOT assign “ST” as it will
automatically show through FV11 assignment.
Page 13 of 13