Step 1: Define Tax Codes
A tax code in SAP FICO is used to identify the applicable tax rate for transactions like purchases and sales. GST tax codes are set up to determine how much tax is charged or reclaimed during a transaction. Each tax code corresponds to a specific GST rate (e.g., 5%, 12%, 18%).
How to Define Tax Codes
- Access the Tax Code Configuration Screen:
- Path: SAP Easy Access → SPRO → IMG → Financial Accounting (New) → Financial Accounting Global Settings (New) → Tax on Sales/Purchases → Basic Settings → Check Calculation Procedure → Define Tax Codes for Sales and Purchases.
- Transaction Code: FTXP
- Create a New Tax Code:
- In the "Define Tax Code" screen, enter the country for which the GST is applicable (e.g., "IN" for India).
- Click on "Create" to define a new tax code.
- Enter the Tax Code Information:
- Tax Code: Enter a unique two-digit identifier (e.g., "A1").
- Description: Provide a description for the tax code (e.g., "18% GST Output Tax").
- Tax Percentage Rate: Enter the applicable GST rate. For example, if the rate is 18%, input "18.00."
- Assign Tax Type: Assign the type of tax (e.g., Input tax for purchases, Output tax for sales). SAP FICO allows the user to configure different tax codes for output (sales) and input (purchase) taxes.
- Save the Configuration: Once the tax code and rate have been defined, save the configuration.
At Version IT, the best institute for SAP FICO Training in Hyderabad, students are taught how to navigate this process and define tax codes precisely to ensure compliance with GST regulations.
Step 2: Assign Tax Code to the Calculation Procedure
Once the tax code is defined, it must be assigned to the correct tax calculation procedure. This ensures that SAP calculates the GST accurately based on the tax code selected during transactions.
How to Assign the Tax Code to the Calculation Procedure
- Access the Calculation Procedure Screen:
- Path: SAP Easy Access → SPRO → IMG → Financial Accounting (New) → Financial Accounting Global Settings (New) → Tax on Sales/Purchases → Basic Settings → Assign Tax Codes for Non-Taxable Transactions.
- Transaction Code: OBYZ
- Assign Tax Code:
- Enter the relevant tax calculation procedure (e.g., "TAXINN" for India).
- Map the tax code created (e.g., "A1") to the procedure, ensuring that the GST rate reflects correctly in transactions.
- Configure Account Keys: The tax code must also be assigned to the appropriate account key to determine how the tax is posted in the ledger. For GST, specific account keys (e.g., "MWAS" for input tax, "MWVS" for output tax) are used to track tax credits and liabilities.
- Save Configuration: After the assignment, save the changes to ensure that the tax code functions correctly during posting.
Step 3: Define Input and Output Tax GL Accounts
For proper posting of GST transactions in SAP FICO, you need to assign General Ledger (GL) accounts for input and output taxes. This helps in tracking GST liability (output tax) and GST credit (input tax) efficiently.
How to Define GL Accounts for GST
- Access the GL Account Assignment Screen:
- Path: SAP Easy Access → SPRO → IMG → Financial Accounting (New) → Financial Accounting Global Settings (New) → Tax on Sales/Purchases → Posting → Assign Tax Accounts.
- Transaction Code: OB40
- Assign GL Accounts:
- Select the tax code created earlier (e.g., "A1").
- Assign the respective GL accounts for input and output taxes:
- Input Tax (Purchase): Assign a GL account to track input GST (tax paid during purchases). For example, "GST Input - 18%" would be mapped to the relevant GL account.
- Output Tax (Sales): Assign a GL account for output GST (tax collected from sales). For example, "GST Output - 18%" would be mapped to the respective account.
- Save the Configuration: Save the GL account assignments.
Step 4: Set up Tax Rates for Country and Jurisdiction
Tax rates vary across countries, and SAP FICO allows you to define these tax rates according to the country and jurisdiction (e.g., state-wise GST rates). You can configure country-specific GST rates, ensuring compliance with regional tax laws.
How to Define Tax Rates for Country
- Access the Tax Rate Configuration Screen:
- Path: SAP Easy Access → SPRO → IMG → Financial Accounting (New) → Financial Accounting Global Settings (New) → Tax on Sales/Purchases → Basic Settings → Define Tax Rates.
- Transaction Code: FTXP
- Assign the Tax Rate:
- Select the relevant country (e.g., "IN" for India).
- Define the applicable tax rate (e.g., 18%) for various goods and services.
- Maintain Validity Dates: Specify the start and end dates for which the tax rate is applicable. This is particularly useful for handling changes in tax rates over time.
- Save the Configuration: After setting up the tax rates for different jurisdictions, save the data.
Step 5: Test the GST Configuration
Once the tax code, tax rate, and GL accounts have been configured, it's essential to test the GST configuration by posting a sample transaction. This ensures that the GST is calculated and posted correctly.
- Create a Sample Transaction: Create a sales or purchase order and apply the newly created tax code.
- Check the GST Calculation: Ensure that the GST is calculated correctly based on the defined tax rates.
- Verify Financial Postings: Confirm that the input and output taxes are posted to the correct GL accounts.
Conclusion
Maintaining tax codes and tax rates for GST in SAP FICO is a crucial step for automating tax compliance and ensuring accurate financial reporting. The steps involve defining tax codes, assigning them to the tax calculation procedure, configuring GL accounts, and setting country-specific tax rates. Properly maintained tax codes help businesses comply with GST regulations, ensuring accurate financial postings and smooth transactions.
At Version IT, the leading provider of SAP FICO Training in Hyderabad, you will learn to configure and manage GST tax codes effectively, empowering you to handle complex financial scenarios in real-world business environments.