Oracle has released a patch for service tax reverse tax mechanism (India Localization). I have tested and the solution is working fine.
Only in one point I got stuck up and need to know the procedure.
1. Created two tax codes for service tax, one with reverse charge flag and other one normal. (e.g. ST1 4.2 % with reverse charge and ST2 with 4.2% normal both are CENVATABLE)
2. Attached both the tax codes in in PO and generated invoice. (say PO amount is 100, then total tax will be 8.4 where 4.2 will be paid to the provider and 4.2 to Govt)
3. In invoice the service tax for reverse charge got reversed (Invoice amount is 100+ 4.2 (provider portion) + 4.2 (Reverse Charge Portion) - 4.2 (Reverse Charge Portion)
4. Supplier liability is for 104.2 which is correct, I paid the invoice and am able to view the tax amount in settlement screen.
My Question is how to generate the invoice for Govt? (for tax amount 4.2, which is to be paid directly to the Govt) Will it be generated automatically, or I need to prepare a manual invoice in the name of Service Tax Authority of India and pay the invoice? If there are number of such invoices, how can I keep a track of liability towards Govt. while making the payment on due date? Till I pay the invoice to Govt, I cannot claim CENVAT on that.
The normal settlement process (Navigation - India Localization >India VAT/Service Tax > Period END > Settlement) would do a netting between how much Service tax has been paid and how much has been received for claiming the credit purposes and generates a payable invoice for the Service tax authority if the net is payable ...
However in this case, you are reversing one part .... i would suggest to have the "Update Vendor" checkbox enabled for the second tax code and while entering the transaction, click on the Calcualte tax button, where tax codes gets defaulted by precedence... scroll to the extreme right side of the form, where you have a column for vendor name, update that field with a Supplier and continue with the transaction.
once the transaction is complete, check whether system has created a seperate invoice for that value. This approach is normally adopted for a Third party tax where when we define a tax code we would select the type as "Any Other Tax" .. not sure whether the same approach would work for Sales Tax Type ...If not, the service tax code can be created of "Any Other Tax" type and tested with a transaction, in which case it wont be considered in the Service Tax Settlement process.
If no such automation is feasible, you can manually claim it by performing a transaciton for Service Tax Regime (Navigation - India Localization >India VAT/Service Tax > Transactions > Manual Entry)
However i am expecting Oracle to enhance/clarify the Settlement process for service tax with this new amendment, since any workarounds adopted might not take care of the CENVAT credit...
Before the patch was applied we were following similar workaround. Now we have applied the patch and testing.
Here I am not able to understand the "Payment to Service Tax Authority" part.
Somewhere I have read that the invoice will be generated at the time of settlement in the subsequent period. Is this true? While running period end settlement in the subsequent period, system will generate an invoice automatically in the name of service tax authority for "Reverse Charge" on AP Invoice? If so is it only in subsequent period or even in the same period, if I run the settlement.
As we are in testing phase we have not closed the current period, and hence not able to test that scenario.
But even if the same is true, how can we generate the invoice on say 31, March.
The behavior of the patch is not fully clear and also no detailed document is available on the subject till date.
Yes Sandeep, For VAT / Excise / Service tax during the settlement process, system would check the taxes paid in P2P cycle and received for that REGIME in O2C Cycle and performs an internal computation for CENVAT credit, if the net result is PAYABLE, then system automatically creates the Payable Invoice for that Tax authority in the system. This is the Intended behaviour of the Settlement process.
You can run settlement at any point of time, whenever you run this system would create the Invoice as on that settlement date ... However people often do it at the Month end or beginning of the month, since for return filing and payment of taxes to GOVT there are due dates and time intervals, which needs to be considered as well....
Out of two tax codes, first tax code has the service tax component which you paid to the vendor that would be considered for the CENVAT credit anyways .. the other part with the second tax code is created and reversed on the Invoice .. how the system would treat this, i am not sure... If the settlement process considers both the tax codes, then there would not be any issue ...
Can you try the settlement process for Service tax with the new reversal setup you have done and review the end results ...Also share to all of us ...
(Only for TDS, the settlement process is different, because system generates an Individual Tax authority invoice for every payables Transaction ...)
Yes, I am aware about the normal settlement process.
In my scenario I was talking about only P2P cycle and there is no service tax liability wrt O2C cycle.
In the above case 1. tax payment to supplier (no issues) and 2. tax payment to govt. (still unclear).
I got another message that "At the time of settlement these liability entries (reverse charge) will be considered and tax authority invoice will be created along with other liability entries. The payment for the tax authority invoice is to be like normal settlement invoice."
I ran the settlement process in the mid of the month but could not get any invoice in the name of the service tax authority.
take your time .. below information should be useful/known to you as well
Before performing the Service Tax settlement before are normally done...
1) Run the concurrent program "India - Service Tax Processing" ( This program is normally available under Receivables Localization responsibility)
2) Once done, you can review the Service tax distribution from
India Localization > India VAT/Service Tax > Period End > Service Tax - Distribution
In this form, select your Inventory Org / Operating unit and click GET DETAILS button, system would let you know how much debits and credits are done...
3) Before processing the settlement, you can find out from the settlement screen whether there is any amount due or not .. navigate to India Localization > India VAT/Service Tax > Period End > Settlement and select your Regime, Registration details and Click GET DETAILS button. This should show the cumulative figure of Debits and Credits .... only when one is over the other, you would see the payment amount field with the value ... if there is an amount due then you can click the process button, which would in turn generate the Invoice for sales tax authority in payables ... if there is no amount due, then clicking process button does not make a difference ....