Skip to Content
SAP Business ByDesign

Abatement for Service Tax and VAT

Hello,

This document is for country version and applicable for country like India.

This document is about Proportionate tax on work contract. It explains how abatement works for Service tax and VAT on the tax net amount.

In SAP ByDesign, System behavior is such that the Service tax and VAT is directly calculated on the tax net amount.

For Example:

Tax Net Base Amount

15000

Service Tax Rate is 14% on 15000

2100

VAT Tax Rate is 5% on 15000

750

But ideally in some cases abatement will be applicable say Service tax must be calculated on 70% of Tax net amount and VAT should be calculated on 60% of the tax net amount.

Then we need to make use of the existing abatement rates provided separately for VAT and Service Tax where both the abatement and tax rates will be combined and maintained in the abatement rates.

Tax Net Base Amount

15000

Abatement 70% on Net Amount for Service Tax.

10500

Service Tax 14% on 70% Abatement Amount

1470

Abatement Rate is (70*14% = 9.8) 9.8% of 15000

1470

Abatement 60% on Net Amount for VAT.

9000

VAT Tax 5% on 70% Abatement Amount

450

Abatement Rate is (60*5% = 3) 3% of 15000

450

To achieve this scenario, need to follow the below steps:-

Maintain the abatement value rate in the Business configuration. SAP has already delivered 5 abatement tax rate types, for which it is flexible to change the rate percentage as needed.

  1. 1.     Go to Business Configuration Work center.
  2. 2.     Click on work center view ‘Implementation Projects’.
  3. 3.     Select the current implementation and click on the button ‘Open activity list’.
  4. 4.     Go to the tab ‘Fine-tune’.
  5. 5.     Select the activity ‘Tax on Goods and Services’ and click open.
  6. 6.     Click on Define tax rate schedules.
  7. 7.     Under the country India, we can find that already five abatement tax rate types has maintained. Here rate in percentage is flexible for change just by clicking above that and rewriting the percentage and save.

If we take this as instance, we can directly maintain 9.8 for country India, under Abatement provide the value as 9.8.

Then in the purchase order system directly calculates the tax amount using the abatement rate.


Regards,

Rajitha

Former Member

No comments