Taxation in SD

[Former Member]

hi,

Wat is taxation in SD ,and where we can find in Sales order(i.e,how its determined in Sales Order).

Can anyone help me to know the step by step procedure for tax determing in SD.

points are assured!!.

Ganesh

[Former Member]

Hi Ganesh,

Please find below v.important notes on Taxes in SD

TAX CONFIGURATION:

Configuration of taxes is an interface between SD and FI. The folloiwng is the detailed overview of tax determination in SD point of view -

The SAP system automatically determines and calculates taxes based on -

Country of the delivering plant + Country of the Ship-to-Party + Tax indicator of the Customer Master Record + Tax indicator of the Material Master Record.

It’s important to note that the condition types for taxes are country specific. Therefore one must assign the relevant tax condition types to the country key. The system will only regard those condition types as relevant for taxes that have taxes as the “condition class” in its control data.

When determining taxes, one should always maintain the data relevant to taxes in consultation with FI module.

Menu path: IMG – Sales & Distribution - Basic functions – taxes – define tax determination rules (OVK1). Here you assign the tax ‘condition type’ or ‘tax category’ to the relevant country key. In addition to this one needs to specify if more than one tax is required and in which order the system is to access the condition records.

For example, in case of countries like Canada, three types of taxes are imposed (GST, PST, PST-Que & Mar (Base+) on standard sales transaction; and therefore three condition types have to be maintained in the system. And when allocating the country key to the relevant condition type, an access sequence has to be mentioned for the country Canada to realize in which order the system is to access the condition records for that specific country.

For determining taxes one must ensure –

relevant tax categories are assigned to the country keys

condition types are maintained in the relevant pricing procedures

Associated tax records are created and maintained.

As some countries may have county or regionalized taxes such as Great Britain and even tax based at city level like in the case of US, it is possible to state specific regions, counties or cities within a country code. This is maintained at - Menu path: IMG – Sales & Distribution - Basic functions – taxes – define regional codes.

The next step is to assign the delivering plant to the relevant country, region and/or city code for tax purposes. This can be done at IMG – Sales & Distribution - Basic functions – taxes – assign delivering plants for tax determination.

The last and final step in this tax determination process is creation of tax indicators in the customer and material master records. Menu path: IMG – Sales & Distribution - Basic functions – taxes – define tax relevancy of master records (OVK3).

Here you specify if a customer or a material is liable for taxes or not. One can then assign a relevant indicators such as 1- liable for tax, 2- concession tax, 3- tax exempt in case of customers and 1- no tax, 2- half tax, 3- full tax in case of materials. New indicators can be created if necessary.

These indicators are maintained in billing document view of CMR and sales org. 1 view of MMR.

Please Reward If Really Helpful,

Thanks and Regards,

Sateesh.Kandula

[Former Member]

Hi Ganesh

Taxation Explain with an example

I'm assuming that, the country is India and based on its requirement:

Sales tax is a state government revenue. There are two types of sales taxes, Local sales tax & central sales tax. Local sales tax is intra state whereas CST is inter state.

Example of LST : Point of sale i.e. delivering plant & ship to party are within the same state. The rates are defined by the respective state governments.

Example of CST : The Delivering plant & Ship to party geographic locations are 2 different states. At the point of sales from one state, the ST goes to that state govt. & consignment is despatched to the Ship to party. Once that consignment is received at the ship to party state, sales tax will be levied once the sales is registered there. For this case, the LST that is applicable by the Ship to party further will not be applicable in all probability to be captured in SAP.

Stock transfer : This does not attract any sales tax. The consignment is transferred from one D plant to another D plant irrespective of inter/intra state sales. The invoice that is accompanied with the consignment thus shall not have any final value. It's a zero value invoice, but the basic prices needed to be mentioned.

The selling organisations normally needs to register with the sales tax authority of the respective state to have a warehouse or D plant to avoid the double taxation for their dealers/distributors.

Now, the pricing procedure that is there in 4.7 is Factory sale with formula-JFACT, in which the CST condition type is JIN1 & the LST is probably JIN2. There may be surcharge cond types as well which will calculate the amount on either JIN1 or JIN2.

For config :

1.SPRO > S&D > Basic fn. > Pricing > Pricing control > Define & assign Pric. procedure > Maintain Pric proc.

2. The tax rates are normally driven from the Tax classification of Customer & Material access. To do this config, S&D >Basic fn. > Taxes. You need to include the condition type for country IN in 'Define tax determin rule'.

3. Same path : But go to Tax relevancy of master records where you configure the condition type & options of rates that will flow to these masters. One needs to understand here properly as u need to have unique combinations for picking the sales tax rates. I will try to demonstrate the smallest example. Let's say, the LST rates are 2%,4% & 0%. I will have two options for material master here. 1 for taxable & 2 for not taxable.

For customer master, I will have 1-LST 2%, 2-LST4% & 3-LST0%. When I create master records for LST thru VK11 for JIN2, I will chose the access where the combinations of customer & material tax classifications are available. If this access does not exist create it under an access sequence. But normally this is standard. The condition records will look like,

Cust-Tax classi. Material tax claasi. Rate Tax code

1 1 2% A1

2 1 4% A1

3 1 0% A1

Remember, rates are flown from the tax codes. Tax codes can be created thru T code FTXP. This is normally a FI job.

Reward if useful to u

[Former Member]

Hi

Refer below

Define Tax Determination Rules

You specify the valid tax types in transaction OVK1. More than one tax type can be defined for a country by defining the sequence.

The SAP System determines the taxes automatically within pricing.

In the standard SAP R/3 System, the elements of tax calculation are predefined (for example, tax condition type "MWST" for taxes on sales and purchases).

Assign the plant for Tax Determination in OX10, using the country key, the SAP System recognizes which tax type is valid for a plant and thus which taxes are relevant when creating an SD document.

Define the Customer Taxes in OVK3, you will maintain the tax code in Customer Master.

Define the Material Taxes in OVK4, which will then be maintain in Material Master.

For example :-

MWST GST 0 Tax Exempt

MWST GST 1 Liable for Taxes

Now, you define the Tax Determination in VK12.

VK12 - Domestic Taxes/Export Taxes

Condition Type MWST

Customer Taxes Material Taxes Rate Taxes

0 0 0 %

0 1 0 %

1 0 0 %

1 1 9 %

In this example, if both the Customer Master and Material Master Tax code is 1, Tax will be included when you create the Sales Order.

Tax Code in Customer Master / Sales Order

How can we maintain the Tax Code (Tax code - which we maintain in MWST Condtion Records) in Customer Master or in Sales Order?

There are few points which I would like to remind you:

1) MWST is a tax condition which is applied to customer to whom we are selling. The rate of tax is depend on various parameteres, whether is fully liable for tax or expemted (in case of Defence Customer)

2) There are few parameteres which we apply tax condition. Whether customer is tax liable? Whether material is tax exempted?

For example, if you are selling a goods which are free for tax to any customer, put the Tax Indicator (at MMR as '0'). If your

material is tax liable pur the Tax Indicator (at MMR as 1). If your customer is not liable for tax at all (like the case of Indian

Defence organisations) put the Tax Indicator (at CMR as 0) or 1 in case fully tax liable.

3) Now, at VK11 you need to mainatain your pricning conditions with all the combinations like:

1 0

1 1

0 1

0 0

4) While maintaining your Material Master Records or Cusotmer Master Records, you must identify, which are tax liable and which are tax exempeted.

5) In anycase, as a SAP standard Best Practises, while processing a sales order, you must retrieve a Tax condition record from SAP database only and not entered Manually. Accordingly, at V/06, the MWST condition Defintions, the field for 'Manual Entries', it would be marked as - D (Not possible to process Manually).

Due to this setting, normally, you cannot maintain Condition tax code during sales order processing. And in Cusotmer Master, you can only maintain Tax Indicator and not Tax Code.

6) In case your client insists for Manual entry of Tax code during Sales Order processing, you can change the field at point 5) above to C-Manual entry is priority instead of D.

OBBG - Assign Country to calculation procedure.

OBCO - Specify structure for Tax Jurisdiction code. For country like U.S.A.

LG -> character length of first level of hierarchy within your tax jurisdiction code structure.

LG -> Second level of hierarchy as above.

LG -> Third level of hierarchy as above.

LG -> Fourth level of hierarchy as above.

TX -> Tick if you want the system to determine taxes on a line by line basis instead of determining them on a cumulative basis

per tax jurisdiction code.

OBCP - Define Tax Jurisdiction code

Dil -> Tick if you do not want tax amounts included in the based amount used for calculating cash discounts.

Txl -> Tick if you want the cash discount amount deducted from the base amount that is used to calculate taxes.

FTXP - Define Taxes on Sales/Purchases Code.

OBCL - Allow Tax codes for non-taxable transactions.