SD Functional Overview in SAP for Retail

SAP SD Tax Procedure

A tax is a financial charge or other levy imposed on an individual or a legal entity by a state or a functional equivalent of a state.

There are many types of taxes, in Business Scenarios. The very relevant one are Input Taxes & Output Taxes

•  Input Taxes are during Purchasing Transactions
•    Output Taxes are during Sales Transactions

Every Country has its own set of Taxes levied when Sales takes place. The tax calculations are likely to be complex in nature and can have very adverse effect on the bottom line. Hence it is important to have clear understanding of relevant taxes What is sold, Where is it sold, How is it sold & When is it sold  can influence relevant taxes

• In US the taxes are at Jurisdiction Level
  In UK  the taxes are considered as VAT
  In India there are  Local Sales Tax and Central Sales Tax  & VAT

 Usages of tax

• Output Taxes are a type of a Sales Tax when Sales Activity takes place. 
• Output Taxes are of two Types:- Domestic Taxes  & Export Taxes
• When sales activity takes place, output taxes are levied to the customer. 
• The output Tax revenue is collected and then paid to the respective government authority as the case may be. 
• This functionality of output Taxes helps us in calculating the taxes for various types of scenarios, accounting of tax and payments to the government authority. 
• Customers are charged output Taxes depending whether the customer is a domestic customer or an export customer. 
• In most of the countries, the output Taxes for Exports are ZERO. 
• VAT is a type of an output Tax which is uniform in the entire country. 

Tax procedure

▪       Every country has its own set of output Taxes

▪       The challenges faced are to calculate the Taxes in these various scenarios

•          Like in the US, the taxes are at Jurisdiction  Level

•          In UK, the taxes are simple which is termed as VAT.

•          In India, there are states with  VAT and there are states with other local & central taxes i.e.  LST / CST

▪        The system should calculate the taxes properly and are to be paid to the government authorities, so this is a STATUTORY ACTIVITY.

▪        Proper maintenance of Master Data pertaining to Taxes

▪        Proper accounting of Taxes , GL accounts, Tax Codes.

▪        Statutory Reporting on Taxes

Output Taxes in Country

• Each country has its own set of rules for calculation of Output Taxes
• In this courseware, we shall cover the mapping of  Output Taxes in three countries:-

•          USA

•          UK

•          India

Tax in USA

• In U.S.A., the taxes are related to the Jurisdiction code which is a combination of pin code & region.
• The Jurisdiction code is stored in the customer master.
• The Jurisdictions (State, County, Town or lower) are several levels
• The Taxes are:-

•          Domestic Taxes

•          Export Taxes

Tax in UK

• In U.K., the output taxes are called as VAT(Value Added Taxes)
• The taxes are subdivided into Domestic and Exports.

                 For U.K., the tax condition type is MWST in SAP.

• Domestic – Within U.K. e.g. sale is from UK to UK 17.5 % VAT
• Exports – It is further subdivided into:-

•          Exports to European Countries

▪       i.e. from Great Britain to France which is 0%

•          Exports to Non-European Countries

▪       i.e. from Great Britian to U.S. which is 0%

Tax in India

• In India, in SAP, there are 2 types of output Taxes:-

•           Domestic Taxes

•           Export Taxes (Zero Taxes)

•  Under Domestic Taxes, the state may be relevant for

   VAT or not    relevant for VAT.

•  If the state is relevant for VAT, then it will be either

•           VAT e.g. Maharashtra

•           CST under VAT.  e.g. Maharashtra to Karnataka

•  If the state is not relevant for VAT,then it will be

  either

•           LST(Local Sales Tax) e.g. sales from within the same state i.e. within Tamilnadu

 CST(Central Sales Tax) e.g. sale from one state to another i.e. Tamilnadu to Karnataka

SAP SD Tax configuration -Output Taxes

The configuration/master data settings relating to taxes are as follows:-

Configurations for Output Taxes in SAP

• Check Calculation Procedure

•          Create a Tax Procedure

• Assign Country to Calculation Procedure

•          Assign Tax Procedure to the Country

• Taxable indicator for Customer & Material

•          Create Taxable indicators for Customers &  Materials like Full Tax, Zero Tax, Concessional Tax

• Define Tax Determination Rules

•          Create Rules for determining the Taxes

• Tax Codes

•          Create Tax codes for various types of Tax % or Amounts

• SD Pricing Procedure

•          Create Sales Pricing procedure which contains the Tax Condition Types

• Account keys for Taxes and G/L account codes

•          Assign Account Keys to the Tax Condition Types

•          Assign GL Accounts to Account Keys

Master Data for Output Taxes in SAP

The Master Data pertaining to taxes are as follows:-

• Customer and Material Master should have a taxable indicator

•          Customer indicator is “Taxable” or “Exempt”.

Configurations steps as below 

1.Check Calculation Procedure

IMG>>Financial Accountin>> Financial Accounting Global Settings>>Tax on Sales/Purchases>>Basic Settings>> Check Calculation Procedure

TAXIN is the tax procedure in India

2.Assign Country to Calculation Procedure

IMG à Financial Accountingà Financial Accounting Global SettingsàTax on Sales/Purchasesà Basic Settingsà Check Calculation Procedure

Assign tax procedure as below

3.Taxable indicator for Customer & Material

IMG à Sales and Distributionà Basic Functionsà TaxesàDefine Tax Relevancy Of Master Records

Here we define taxable indicator for customer & material

Define tax relevancy indicator for Customer such as 0 value can be configured for Tax Exempt and 1 value for Liable for Tax

Same as material ,Define tax relevancy indicator for Material

4 Define Tax Determination Rules

IMGà Sales and Distributionà Basic Functionsà Taxesà Define Tax Determination Rules 

Tcode:OVK1

Define tax determination rule 

5.Tax Codes

IMGà Financial Accountingà Financial Accounting Global Settingsà Tax on Sales/Purchasesà Calculationà Define Tax Codes for Sales and Purchases 

Tcode:FTXP

Define tax code for Sales & Purchased 

6.SD Pricing Procedure

IMGà Sales and Distributionà Basic Functionsà Pricingà Pricing Controlà Define And Assign Pricing Procedures 

Tcode:V/08

Define & Assign priceing procedure

The MWS account key for the MWST condition type indicates that the tax will hit a particular G/L account code 

7.Account keys for Taxes and G/L account codes

In FTXP transaction code on entering the country and tax code,keep the cursor on output tax MWS and click on Tax accounts tab,enter the chart of accounts as shown in the below snapshot:-

8.Master Data Maintenance 

Customer and Material Master should have a taxable indicator

VAT registration number for European customers.

   

Jurisdiction code for U.S. customers.

Tax condition records

Maintain Condition records  

Tcode -VK11

U.S.A.:- 

In case of U.S., the taxes are derived from the tax code. 

e.g. In a sales order ,if we consider the condition types at item level, we will observe JR1 condition type having tax rate as 4%.

Tips for Configuration 

If Tax is not getting determined, then we can check the following points :-

• The country and region should be maintained for the Customer 
• Customer Master for taxable indicator
• Material Master for taxable indicator
• Check if tax procedure has been defined
• Check if tax procedure has been assigned to the country
• Check if the account key exists in pricing procedure for the respective tax condition type
• Check if the G/L account exists for Tax account key

Following are some of the tables that can be referred to:-

• Customer Master – KNA1,KNVV 
• Material Master – MVKE 
• Pricing Conditions – KONV 
• Tax Codes - T007S , T007V for percentage of tax code.

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