SAP Financial Accounting (FI) Taxes (FI-AP/AR) Value Added Tax (VAT)

Use

In India, VAT has been levied in certain states from April 1, 2005. VAT is levied instead of the Local Sales Tax (LST). VAT also replaces other taxes such as, turnover tax, surcharge, additional surcharge.

Prerequisites

You can configure the following tax procedures:

· For Condition-Based Excise Determination, configure the tax procedure TAXINN. For more information about TAXINN, see Configuration of Tax Calculation Procedure TAXINN.

· For Formula-Based Excise Determination, configure the tax procedure TAXINJ. For more information about TAXINJ, see Configuration of Tax Calculation Procedure TAXINJ.

Features

The essence of VAT is that you can set off the input tax against the tax paid earlier. VAT is based on the value addition to the goods, and your VAT liability is calculated by deducting input tax credit from tax collected on sales during the payment period (say, a month).

You have purchased input worth INR 1,00,000 and your sales are worth INR 2,00,000 in a month, and input tax rate and output tax rate are 4% and 10% respectively, then input tax credit/set-off and calculation of VAT will be as follows:

● Input purchased within the month = INR 1,00,000

● Output sold in the month = INR 2,00,000

● Input tax paid = INR 4,000

● Output tax payable = INR 20,000

● VAT payable during the month after set-off/input tax credit = INR (20,000 – 4,000) = INR 16,000

The excise invoice that you capture contains one of the following:

● VAT Number – If your buyer belongs to a state where VAT is levied, VAT Number has to be printed on the excise invoice.

● Bill of Sale Number - If your buyer belongs to a state where VAT is not levied, Bill of Sales Number has to be printed on the excise invoice.

During billing, the system generates the VAT number if the VAT Registration number is maintained in customer master in the Tax Code 2 field. Else, the system generates a Bill of Sale number.

These numbers have to printed serially and separately for Bill of Sale, VAT invoice, credit and debit notes. You can do this using the Official Document Numbering.