SAP FICO Training Material
Tax configuration in sap: Tax procedure & Tax code
Every country has a list of different taxes which may be applicable on a business
transaction in the country. Different business transaction might invite different types of taxes
with different tax rates.
Tax base amount can be inclusive or exclusive of cash discount. Once tax base amount
and tax rate is known for a transaction, tax amount can be calculated.
Calculated tax amount along with business transaction details need to be recorded.
TAX PROCEDURE
In sap, country specific tax procedure is created and assigned to country. Tax procedure is
a list of tax condition types. Each condition type represents a type of tax applicable in the
country. TAXINN / TAXINJ is a tax calculation procedure for local version India and it
supports condition-based excise determination. You need to configure this tax calculation
procedure.
Hence tax procedure represents the list of different types of taxes which are valid in the
country.
TAX CODE, TAX JURISDICTION CODE
In sap, tax code is created to store the value of tax percentage.
A business transaction might invite different type of taxes with different tax rates. Hence in
sap, tax condition types are assigned to tax percentage. This combination of tax condition
types and corresponding tax percentage is stored in tax code.
A tax code in sap is a two-digit alphanumeric code which stores different tax conditions
(defined in tax procedure) and corresponding tax percentage.
Page 1 of 11
SAP FICO Training Material
Normally tax code is created at national level but in few countries like USA, different areas
have different tax authority and each tax authority decides its own tax percentage. Hence
applicable tax percentage depends upon which tax authority the business transaction
belongs to.
In sap, each tax authority is created as tax jurisdiction code.
Hence in USA, tax percentages are assigned to tax condition types for the combination of
tax code and tax jurisdiction code.
When a business transaction happens, tax code is supplied and system derives tax
jurisdiction code information. Corresponding tax percentage maintained against tax
condition type is applied for tax amount calculation. Tax amount is posted to GL account
assigned to condition type.
With huge number of tax jurisdiction code (tax authority) and each are regulating its own
tax percentage, it becomes very challenging for companies to keep track to up to date tax
percentage. Instead of committing resources on keeping track of tax percentage,
companies take help from other companies who maintain up to date tax percentage for
each tax jurisdiction code.
Companies like vertex, taxware, sabrix maintain tax percentage on their server. When
transaction is entered in sap, software determines the jurisdiction code and fetches tax
percentage from vertex/ taxware/ sabrix server.
Hence companies free themselves from the load of maintaining tax percentages by using
the services provided by other companies. Hence tax percentage is fetched from
external sources like vertex, sabrix and taxware.
Page 2 of 11
SAP FICO Training Material
TAX BASE AMOUNT
In sap, for each company code we can define if tax base amount is inclusive of cash
discount or exclusive of tax discount.
POSTING OF TAX AMOUNT
When a business transaction is recorded, tax code is supplied. System calculates the tax
amount for each condition type. Condition types are mapped to account key and account
key is linked to GL account.
When document is posted, system automatically picks the mapped GL account for posting
tax amount.
Page 3 of 11
SAP FICO Training Material
Let’s put the entire concept together to understand calculation and posting of tax amount in
sap
From entered document, system knows the company code. Company code leads to country
and country leads to tax procedure.
From tax code which is entered while posting document, system fetches the percentage
against each tax condition type and applies the percentage on determined tax base
amount.
Tax condition types are assigned tax percentage in tax code.
Tax condition types are assigned tax percentage in (tax code and tax jurisdiction
code) combination.
Tax percentage is fetched from external sources like vertex/ taxware/ sabrix etc on
the basis of tax jurisdiction code.
Calculated tax is posted in GL account assigned to tax condition type.
Page 4 of 11
SAP FICO Training Material
Goods and Services Tax (GST) is an indirect tax throughout India to replace existing multipl
e taxes levied by the central and state governments.
Applicable GST rates are determined by the combination Nature of Purchase and Harmoniz
ed System of Nomenclature (HSN) code assigned to material.
CGST Central Goods and Service Tax
SGST State Goods and Service Tax
IGST Integrated Goods and Service Tax
Before GST After GST
Goods Purchase within Stat Excise + VAT CGST + SGST
e
Goods Purchase inter State Excise + CST IGST
Import Purchase BCD, CVD, AED, CESS, ECESSIGST
Inward branch transfer Excise/ No Excise No Tax
(Intra State)
Inward branch transfer Excise/ No Excise IGST
(Inter State)
Job work expense No tax, only VAT in case CGST + SGST
of Painting contract
Service expense Service Tax CSGT + SGST/ IGST
GST CGST SGST IGST UGST
RATE % 2.5 2.5 5 *
BANDS* 6 6 12 *
9 9 18 *
14 14 28 *
*Mapped to Material HSN
(Harmonized System Nomenclature)
Single registration per PAN and state of business for CGST, SGST and IGST
The scenario considered is a simple Procure to Pay cycle where Quotations received from t
he Vendor determine the Taxes applicable.
For complex Supply Chain scenarios where multiple goods movements, subcontracting, co
nsignment, etc. are involved, this might not be an efficient solution for GST implementation.
SAP recommended Notes and Patches should be followed in this case.
Page 5 of 11
SAP FICO Training Material
Configuration Steps:
Steps t-code
Define Tax procedure OBQ3/OBYZ
Define Tax Access Sequence OBQ2/OBYZ
Define Condition Types(Tax) OBQ1/OBYZ
Create account keys OBCN
Assign Tax Procedure to Country OBBG
Create Tax code in Country FTXP
Assign GL to account keys & GL OB40
Maintain Tax Condition Records FV11
1. Define Tax procedure
T-code: OBQ3
Append your GST condition types to TAXINN tax procedure as shown below;
2. Define Tax Access Sequence
T-code: OBQ2
Copy Access sequence JTAX and create new sequence ZGST.
Include table 03 for condition value determination based on Country and Tax code.
Non-deductible tax percentages will be determined based the last table in access.
Page 6 of 11
SAP FICO Training Material
3. Define Condition Types(Tax)
T-code: OBQ1 or OBYZ
Based on the available information the below listed GST related condition types are create
d:
Tax typeCondition TypeDescription
CGST JICG IN: Central GST
SGST JISG IN: State GST
IGST JIIG IN: Integrated GST
UGST JIUG IN: UnionTer. GST
CGST JICN IN: Central GST – ND
SGST JISN IN: State GST – ND
IGST JIIN IN: Integrated GST – ND
UGST JIUN IN: UnionTer. GST – ND
CGST JICR IN: CGST Rev. Charge
SGST JISR IN: SGST Rev. Charge
IGST JIIR IN: IGST Rev. Charge
IGST JIMD IN: Import GST deduct
IGST JIMN IN: Import GST – ND
ND- non-deductible
Page 7 of 11
SAP FICO Training Material
4. Create Account Keys
T-code: OBCN
Create new Account keys for all conditions who need to be assigned individual GLs
Non-deductible conditions can be assigned to standard key NVV
5. Assign Tax Procedure to Country
T-code: OBBG
6. Create Tax Codes in Country IN
T-code: FTXP
Create tax codes in Country India
Page 8 of 11
SAP FICO Training Material
Tax codes are required to be captured in a TR separately;
FTXP-Tax Code-Transport-Export and save in TR
7. Assign GL to account keys & GL
T-code: OB40
Assign GLs to transaction key at chart accounts level. Separate GLs can be assigned for ea
ch Tax code.
Page 9 of 11
SAP FICO Training Material
9. Maintain Tax Condition Records
T-code: FV11
Complete this master data activity and maintain the required tax percentages according to y
ou access sequence/key combination for them to be determined in PO.
The below message may appear while maintaining Condition Record;
Tax ID G2 cannot be checked (there are several/no tax records)
Message no. VK242
This is because we did not maintain any Tax Percent. Rate in FTXP. This will not affect tax
determination in PO.
Page 10 of 11
SAP FICO Training Material
Accounting Entry
Page 11 of 11