RCM tax code creation

1 Author : Sandeep Rathod

SAP Business One Creating RCM Tax Code

Reverse Charge Mechanism Tax code needs to be created for process where tax

needs to be paid to Tax Authorities without charging to the service provider.

For e.g. : 'A' provides Security services but not entitled to pay any service tax to

government.

'B' is entitled to pay service tax to government when receiving services from 'A'.

'A' provides service bill for Security services of INR 5,000 to 'B'. Payment of 5,000

is paid to 'A'. Service Tax will be Paid By 'B' to Tax Authorities without any set off

considering it 'B' expense

Additional informative URL : http://taxguru.in/service-tax/all-about-service-tax-

reverse-charge-mechanism.html

Steps to create RCM Tax code in SAP B1

• Create Reverse Tax Types

• Create separate Tax Category

2 Author : Sandeep Rathod

• Create Tax Attributes for different rates

• Accounts linked to 'R' Tax Type should be at Payable side under 'Liability'

3 Author : Sandeep Rathod

• In Reverse Tax Formula Tax amount needs to be multiplied by '-1' to convert Tax

amount to negative.

• You need to create same formula for other Tax Types

• Tax Type Combination should include all the Tax Type with its reversal Types

4 Author : Sandeep Rathod

• Above A/P Invoice is illustration of RCM tax code usage.

• Here service amount is 5000 INR on which TDS is deducted. If you see Tax

Amount calculation is zero

• In above Journal Entry TDS is deducted on 5000 INR and Vendor is Credited by

4,959 INR

• Krishi Kalyan Cess amount i.e 7.59 INR is Debited as Expense and Credited in

Liability as Payable

• Swach Bharat Cess amount i.e 7.59 INR is Debited as Expense and Credited in

Liability as Payable

• Service Tax amount i.e 212.52 INR is Debited as Expense and Credited in

Liability as Payable. Impact of Taxation is Nullified.