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Tax Procedure in India

Hi All,

There is a requirement to changes in taxes for Indian states Kerala & Gujarat. Post India Budget 2008-2009, the state governments have proposed a few changes to the taxes . There has been a requirement from the State Governments of Kerala and Gujarat, for imposing Social Security Cess on VAT( kerala) & Additional tax( Gujarat) on Base amount applicable from 1st April 2008 and . The details of the same are as below:

As per clause 6 the Kerala Finance Bill, 2008, a Social Security Cess has been imposed on

at the rate of 1% on VAT Payable.

In the State of Gujarat, Here are the changes as per the Bill. As per the Bill the total tax including additional tax, in case of goods attracting 4% will be 4% VAT + 1% Additional Tax and therefore total tax will be 5%. In case of goods attracting 12.5% the rate would be 12.5% VAT + 2.5% Additional Tax and therefore total tax would be 15%.

To meet this requirement at FI side following is been carried out:

1. Two new conditions will be added to the Tax procedure( TAXINJ):

a. ZSSC u2013 Itu2019s a new condition proposed for Kerala tax changes which represents the Social Security Cess calculating on VAT in Kerala. This will be applied on VAT (JIP5). This new condition needs be added in the Pricing procedure from PUR.

This ZSSC tax condition which will be created in FI will post to G/L account -1337027.

b. ZADT u2013 Its new condition proposed for Gujarat Additional tax. This will be applied on the value on which VAT (JIP5) is calculated. This new condition needs be added in the Pricing procedure from PUR.

This ZADT tax condition which will be created in FI will post to G/L account -1337032.

3. Tax codes needs to be created for respective states. Respective changes needs to be done in pricing procedure by PUR.

My question is what need to be done at Purchasing level for Input tax. All I understand is we need to do the testing once tax code is changed. There is no Change at Pricing Procedure level at Purchasing. Please advice what all should be covered in testing ? Do I need to cover all purchasing documents and PO processes like consignment, Subcontracting, Contract,SA etc,

Thanks.

Shalini

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