Service Tax Functionality

WHITE PAPER
Service Tax Functionality

in Financials for India
Prepared by
Author: Krishna Surapaneni Financials for India
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Product Design and Architecture
Service tax functionality in Oracle financials for India White Paper Ver 1.0
1
1. SCOPE............................................................................................................................3
2. INTRODUCTION .........................................................................................................4
3. OVERVIEW...................................................................................................................5
4. SETUP.............................................................................................................................6
4.1 REI!E REIS"R#"IO$...................................................................................................%
4.1.1 Service Tax Registration.....................................................................................6
4.1.2 Assigning Tax Types...........................................................................................7
4.1.& #ssi'nin' Or'ani(ations ................................................................................ )
4.* +,S"O!ER #--I"IO$#. I$/OR!#"IO$............................................................................11
4.& S,PP.IER #--I"IO$#. I$/OR!#"IO$..............................................................................1*
5. SIGNIFICANCE OF SERVICE TYPE.....................................................................15
0.1 W1#" IS 2SERVI+E "3PE4..............................................................................................10
0.1.1. I$+.,SIO$ O/ SERVI+E "3PES....................................................................................15
0.* SERVI+E "3PE REVIEW -,RI$ PERIO- E$-............................................16
0.& #++O,$"I$ REVIEW.......................................................................................*0
6. SERVICE TAX ACCOUNTING................................................................................21
%.1 #++O,$"I$ E$"RIES......................................................................................**
%.* SERVI+E "#7 #++O,"I$ PRO+ESS.............................................................*0
7. SERVICE TAX DISTRIBUTION..............................................................................26
8. SERVICE TAX MANUAL ENTRY..........................................................................28
. SERVICE TAX SETTLEMENT................................................................................2
1!. REPORTING.............................................................................................................33
10.1 I$-I# SERVI+E "#7 REPOR".........................................................................................&&
10.* I$-I# SERVI+E "#7 +RE-I" REIS"ER REPOR"................................................................&4
10.& I$-I# SERVI+E "#7 PE$-I$ .I#8I.I"3 REPOR"............................................................&0
10.4 I$-I# SERVI+E "#7 PE$-I$ RE+OVER3 REPOR"..............................................................&%
10.0 I$-I# SERVI+E "#7 S"& REPOR"..................................................................................&5
*
1. SCOPE
This paper is intended for an audience fa,iliar 4ith 3racle Financials for India and see5in0 an
insi0ht into ho4 the ne4 functionality of Service tax re0i,e is -uilt to cover the statutory
re6uire,ent in India7
This paper is functional in nature 5eepin0 in si0ht 3racle8s existin0 literature that has ade6uate
details on the technical aspect of the 3racle Financials for India9 thou0h ade6uate insi0ht is 0iven
to the ta-le level details relevant to the topic7 This is ,ore so9 in the li0ht of the dia0nostic scripts
avaial-le in ,etalin5 note : ;'#<..7.9 thus ,a5in0 ta-le level details easily accessi-le to the
user7 Thus 4e have tried to handle the topi
c fro, the availa-le functionality as 4ell as the data perspective level7
To prevent this docu,ent fro, -eco,in0 too -ul5y9 and also to ,aintain focus throu0hout the
paper9 the scope of this paper is li,ited to the -asic set up need for definin0 the Service tax
re0i,e9 factors to -e 5ept in ,ind 4hile definin0 the Service tax re0i,e9 Transaction flo4 and the
reports availa-le7 It is assu,ed that the audiences are a4are of the -asics of Financials for India9
as only the -ehavior peculiar to Service tax re0i,e is handled in the paper7
This docu,ent is intended to -e supple,entary in nature and does not in any 4ay9 purport to -e
a su-stitute for any official literature -ein0 drafted or currently pu-lished7
&
2. INTRODCTION
Taxes in India are classified as "irect and Indirect taxes7 "irect taxes are those taxes 4hose
i,pact 4ill -e -orne directly -y persons7 Inco,e tax and Wealth tax are the exa,ples of "irect
taxes 4here levy and recovery 4ill -e fro, the persons directly7 Indirect taxes are those taxes
4hose -urden can -e passed on to the =uyers of 0oods and services7 For exa,ple9 Excise taxes
are levied on the ,anufacturers9 ho4ever9 that taxes portion 4ill -e recovered fro, the -uyer of
0oods as part of the price7 Si,ilarly Service tax is levied on the service provider 4hereas the
service provider passes on the -urden to service receiver7
Finance Act9 .>>; introduced the levy of tax on Services rendered9 hereafter referred as Service
tax in India7 Initially service tax 4as i,posed on ? services and the scope is -ein0 4idened every
year7 Service tax solution 4as developed -y 3racle Financials for India to ,eet the statutory
re6uire,ents in India7 Hence features provided in the product are -ased on the provisions of the
Finance act9 as a,ended fro, ti,e to ti,e and the service tax credit rules fra,ed -y the
statutory authority7
4
!. O"ER"IE#
Initially Service tax functionality has -een provided in 3racle Financials for India throu0h
patch : ;#?><?$7 This 4as referred as Service tax -y operatin0 units patch as the
fucntionality 4as delivered at operatin0 unit level7 )ater on the functionality 4as enhanced to
deliver the functionality of service tax distri-ution at inventory or0ani@ation level and includes
the feature of service type as 4ell7 This functionality has -een delivered throu0h patch :
$.$$$>. and the sa,e fixes have -een included in =ud0et #''< patches 1$''?';( or
$'<>#;( or $.$<'A$7 It ,ay -e noted that the first t4o patches ,entioned here are
superceded -y patch $.$<'A$27 Hence if patch : $.$<'A$ is applied9 then the latest Service
tax functionality 4ould -e availa-le9 even thou0h patch : $.$$$>. is not applied7
&aBor features of Service tax functionality provided in the 3racle Financials for India are
,entioned -elo4:
a2 "efinin0 Service tax re0i,e and the re0istration details of the 3r0ani@ation7
-2 "efinition of Service tax type codes9 as applica-le7
c2 "efinition of rules for accoutin0 for Service tax7
d2 Provision to default the Service type applica-le for SuppliersC!usto,ers7
e2 Provision to distri-ute the service tax credit availa-le across inventory or0ani@ations7
f2 Facilitatin0 the settle,ent of Service tax lia-ility7
02 Provision to ,aintain and vie4 the Service tax repository7
h2 Reportin0 re6uire,ents 4ith respect to Service tax7
The a-ove%,entioned functionalities are explained in detail in the relevant sections -elo47 It
,ay -e noted that the functionalities ,entioned in this note are availa-le as of the date of
pu-licaiton of this note and ,i0ht chan0e -ased on the a,end,ents ,ade in the relevant
statutes7
0
$. SETP
$.1 Regi%e Registration
Re0i,e 4ould -e used to define the re0istration details of the or0ani@ation and rules that 4ould
-e applica-le to all taxes assi0ned to it7 Follo4in0 fi0ure depicts the re0i,e structure:
DE&ININ' SER"ICE TA( RE'I)E
"efine Re0i,es
Assi0n
3r0nai@ations
Assi0n
3r0ani@ation
Accounts
Assi0n Tax Types
Assi0n Tax
Accounts
Re0istrations
3n a re0i,e9 you 4ill -e a-le to capture the re0istration details of the 3r0ani@ation and rules that
4ould -e applica-le to the transactions created 4ith service type of taxes7 Infor,ation defined
here 4ould -e 0eneric and 4ould -e applica-le to all the or0ani@ations defined under this re0i,e
unless chan0ed at the 3r0ani@ation level7
4.1.1 S"#$%&" T'( R")%*+#'+%,-
3r0ani@ations have to re0ister 4ith the various Service Tax Authorities7 The re0istration 4ould -e
the -asis for recoverin0 credit on input Tax9 settlin0 tax lia-ility and Tax Reportin07
Those re0istration details can -e captured in the re0istrations ta- as -elo4:
%
In the re0istrations ta-9 para,eters relatin0 to the 3r0ani@ation as a 4hole are defined such as
Re0istration nu,-er of the 3r0ani@ation9 Durisdiction under 4hich the or0ani@ation is fallin0 etc79
Also one i,portant para,eter 4hich 4ill drive the accountin0 on the event of service tax credit
distri-ution is EService tax distri-ution in P)ACRFG7 =ased on the re0ister na,e specified here9
Accountin0 and re0ister updates 4ill happen7
P.#9 Personal .ed'er #ccount is a .ed'er containin' the a:ount paid ;y you in cash to
+entral Excise to<ards Excise -uty Pay:ents. 3ou have to :aintain the a:ount paid
and ad=usted in P.# only
R9 R1 is the re'ister as prescri;ed the excise dept. for daily entry of production and
dispatches <hile R *& is Re'ister used erst<hile at the ti:e of !O-V#" re'i:e for
entry of the Excise duty de;it and credit at the ti:e of dispatch >receipt of :aterial in
factory
4.1.2 A**%)-%-) T'( T./"*
Service Tax Types have to -e assi0ned to the Service Tax re0i,e7 This is a lo0ical 0roupin0 of all
transactions to 4hich these taxes are applica-le7 If the values assi0ned for a particular tax 4ere
different9 these 4ould prevail over those defined for the re0i,e7
5
*nder this ta-9 tax types applica-le for this Service tax and account codes applica-le can -e
assi0ned7 !urrently Education !ess and Secondary Hi0her Education !ess are also levia-le on
the Service Tax a,ount7
Account codes that 4ill -e used for accountin0 of Service taxes need to -e specified in the tax
account details7 As Service Tax is accounted on cash -asis apart fro, final Recovery and
)ia-ility Accounts9 interi, accounts have to -e defined that 4ill store the Service Tax 4hich has
not -een paid C received
$.1.! Assigning Organi*ations
)
Re0i,e has to -e assi0ned to all or0ani@ations to 4hich it is applica-le7 Taxes defined under this
re0i,e 4ould default only for these or0ani@ations7
*nder the 3r0ani@ation details9 *ser 4ill -e a-le to assi0n the Inventory 3r0ani@ations to 4hich
the service tax re0i,e is applica-le7 Also if an inventory or0ani@ation is havin0 ,ultiple locations9
all those locations have to -e assi0ned under this re0i,e7 3ther4ise processin0 of Service taxes
4ill happen only for the assi0ned locations7
6
Re0istration details9 tax type8s assi0n,ent and the account values assi0n,ent can -e assi0ned
to the Inventory or0ani@ations9 if they are different fro, those assi0ned under the header level7
3ther4ise the values 4ill 0et defaulted fro, the header7 "efault chec5-ox 4ill -e chec5ed
4henever default re0istration values at the re0i,e level are retained7 It 0ets unchec5ed 4hen
re0istration value is ,odified7
10
$.2 Custo%er Additiona+ In,or%ation
To -e a-le to ,a5e transactions in 3rder to !ash cycle9 !usto,er additional infor,ation setup
need to -e co,pleted for those !usto,ers fro, 4ho, service tax a,ount 4ill -e recovered7 In
this for,9 Service tax re0istration nu,-er and the Service tax type applica-le for that particular
!usto,er needs to provided7 If Service type is defined here9 then it 4ill -e defaulted in the
transactions7 3ther4ise *sers need to ,anually update the service type in the transactions7
11
$.! Supp+ier Additiona+ In,or%ation
To -e a-le to ,a5e transactions in Procure to pay cycle9 Supplier additional infor,ation setup
need to -e co,pleted for those suppliers to 4ho, service tax a,ount 4ill -e paid7 In this for,9
Service tax re0istration nu,-er and the Service tax type applica-le for that particular supplier
needs to provide7 If Service type is defined here9 then it 4ill -e defaulted in the transactions7
3ther4ise *sers need to ,anually update the service type in the transactions7
1*
$.$ Ta- code de,inition
In Tax code definition for,9 Service tax type codes can -e defined and the sa,e can -e used in
the transactions7 It has to -e noted that Service tax codes have to -e defined as recovera-le
taxes -y specifyin0 the credit percenta0e as .''7 3ther4ise the accountin0 4ill not happen as
,entioned in this docu,ent and those taxes 4ill -e considered for costin0 in Procure to pay
cycle7
!urrently the follo4in0 tax types are applica-le for Service tax and the sa,e have -een provided
as seeded values in the tax type field:
a2 Service tax
-2 Education cess on Service tax
1&
c2 Secondary Hi0her education cess on Service tax7
14
.. SI'NI&ICANCE O& SER"ICE T/PE
..1 #hat is 0Ser1ice type2
Service tax is paya-le on the taxa-le Services as defined in varoius clauses of section $A1.'A2 of
the Finance act .>>;7 Type of service is relevant for deter,inin0 the a,ount char0ea-le for tax
and also to ,eet the reportin0 re6uire,ents under the act7 Hence to capture the type of Service9
additional field HService type8 has -een provided in various for,s7 !urrently the follo4in0 service
types are char0ea-le to tax:
. ActioneerIs Service
# Advertisin0 A0ency Service
? Air Travel A0ent
; Airport Services
A Architects
$ Authorised Service Station
< Auto,ated Teller &achine 3perations9 &aintenance or ,ana0e,ent services
( =an5 J Financial Services
> =eauty Parlour
.' =roadcastin0
.. =usiness Auxiliary Services
.# =usiness Exhi-ition Services
.? =usiness Support Services
.; ! J F A0ents
.A !a-le 3perator
.$ !ar0o Handlin0
.< !hartered Accountant 1.%.A''2
.( !leanin0 Services
.> !lu- or Association services
#' !o,,ercial or Industrial construction services
#. !o,,ercial Trainin0 !oach
## !o,pany Secretary
#? !onstruction of !o,plex
#; !onsultin0 En0ineer
#A !onvention Services
#$ !ost Accountant
#< !ourier
#( !redit C "e-it card or other pay,ent card services
#> !redit Ratin0 A0ency
?' !usto, House A0ent
?. "red0in0 Service of Rivers etc
?# "ry !leanin0 Services
?? Eraction9 !o,,issionin0 J Installation
?; Event &ana0e,ent
10
?A Facsi,ile Services
?$ Fashion "esi0nin0
?< Forei0n Exchan0e =ro5er
?( For4ard !ontract Services
?> Franchise Service
;' Feneral Insurance Service
;. Health !lu-
;# Insurance Auxiliary Service
;? Intellectual Property Services
;; Interior "ecorator
;A Internet !afe
;$ Internet Telephony
;< )eased !ircuits
;( )ife Insurance
;> )ife Insurance Actuary J auxiiliary services
A' &ailin0 )ist !o,pilation
A. &ana0e,ent !onsultantIs Services
A# &ana0e,ent9 &aintenance J Repair
A? &andap Keepers
A; &anpo4er Recruit,ent J Supply
AA &ar5et Research
A$ 3nline Infor,ation J data -ase access or retrival
A< 3pinion Poll Services
A( 3ther port services
A> 3utdoor !atererIs Services
$' Pac5a0in0 Services
$. Pa0ers
$# Pandal or Sha,iana Services
$? Photo0raphy
$; Port Services
$A Pro0ra,,e producer
$$ Pu-lic relations ,ana0e,ent services
$< Rail Travel A0ent Service
$( Real Estate A0ent
$> Recovery A0entIs Services
<' Re0istrar to an issueIs services
<. Rent%A%!a-
<# Sale of Space or ti,e for advertise,ent services
<? Scientific J Technical !onsultancy Service
<; Security A0ency
<A Share Transfer A0entIs Service
<$ Ship &ana0e,ent Services
<< Site For,ation and !learance
<( Sound Recordin0 Services
<> Sponsorship Service
(' Stea,er A0ents
(. Stoc5 =ro5er
(# Stora0e J Warehouse
(? Survey J Exploration of &inerals
(; Survey and &ap ,a5in0
(A Technical inspection and certification
($ Technical Testin0 and Analysis
1%
(< Tele0raph Services
(( Telephone
(> Telex Services
>' Tour 3perator
>. Transport of 0oods -y Aircraft
># Transport of Foods =y Pipeline
>? Transport of 0oods -y Road
>; Transport of 0oods in container -y rail service
>A Transport of passen0ers -y air e,-ar5in0 in India durin0 international Bourney
>$ Transport of persons e,-ar5in0 fro, india -y cruise ship
>< Travel A0ents
>( *nder Writer R J "
>> /ideo Tape Services
The a-ove%,entioned service types have -een provided as seeded values in the loo5up codes7
..1.1. Inc+usion o, Ser1ice Types
It ,ay -e noted that the user in the application can ,anually add service types7 The need for
addition of service types arises 4henever Fovern,ent of India added ,ore services vide
inclusion in Finance Act7 The sa,e can -e done usin0 the -elo4 steps:
a2 +avi0ate to 3racle Purchasin0 K Setup K Purchasin0 K )oo5up !odes
-2 Luery 4ith Type as DAIMSER/I!EMTNPE
c2 !lic5 on +e4 and specify the code9 &eanin09 description and effective fro, date7
=y doin0 this9 *ser 4ill -e a-le to select the ne4 service types as 4ell in the transactions7
Service type ,entioned in the Supplier additional infor,ation and !usto,er additonal infor,ation
4ould -e used to default auto,atically in transactions li5e Purchase 3rder and Receiva-les
transaction and Sales 3rder respectively7 This defaulted value can -e chan0ed in those
transaction for,s7 If this setup is not carried out and service type is not ,entioned even in the
transaction for,s also9 then *sers 4ill not -e a-le to perfor, settle,ent7
15
In Purchase 3rder locali@ed for,9 as sho4n a-ove9 Service type 0ot defaulted fro, the Supplier
additional infor,ation setup7 Also the *ser can chan0e this value7 Si,ilarly in Sales 3rder
locali@ed for, and Receiva-les transaction locali@ed for, also9 *ser can chan0e the defaulted
service type values7 Ho4ever service type cannot -e chan0ed 4hen a R&A is created 4ith
reference to 3rder or Invoice7 In this case9 Service type of the ori0inal order 4ill 0et copied to the
R&A order and is sho4n in vie4 ,ode only7

1)
..2 SER"ICE T/PE RE"IE# DRIN' PERIOD END
3ption has -een provided to capture the Service type for those transactions 4here it 4as either
not captured durin0 the transactions or could not -e captured for any reason7 It is reco,,ended
that -efore carryin0 out settle,ent9 revie4 need to -e done usin0 the -elo4 ,entioned screen7 It
is also possi-le to 6uery the existin0 transaction 4ith service type and ,odify the sa,e7
In the a-ove 4indo49 *ser 4ill -e a-le to 6uery the records updated in the Service tax repository7
Source )3/ 4ill -e displayin0 the values Paya-les9 Receiva-les9 "istri-ution and &anual7 These
are the sources fro, 4here service tax repository 4ill -e updated7 *ser 4ill -e a-le to 6uery the
records only 4ith +ull service type7 Also *ser has the facility to 6uery the records -ased on
3r0ani@ation and location co,-ination9 transaction fro, and to dates7
3n providin0 the filters9 the follo4in0 for, 4ill -e opened
16
In the a-ove for,9 *sers can update the Service type for the transactions7 It can -e updated
-ased on the setup done or a specific service type can -e selected7 Also -y chec5in0 the fla0
E"efault only 4here service type is nullG9 only those transactions 4here service type is null 4ill -e
updated7 3ther4ise all the transactions 4ill 0et updated7
This for, 4ill also display the transaction level details for all the records that 4ere updated in the
service tax repository7 Hence this for, is Service tax repository revie4 for,7
..! ACCONTIN' RE"IE#
*0
This for, can also -e used to vie4 the accountin0 entries ,ade a0ainst Service tax7 For all those
transactions updated in the repository9 on clic5in0 vie4 accountin0 -utton9 accountin0 entry for
that particular transaction 4ill -e displayed7
Also it ,ay noted that the entries in repository revie4 for, and the accountin0 entries can -e
seen only for those transactions updated in repository post application of Service tax -y Inventory
or0ani@ations and Service type patch7
3. SER"ICE TA( ACCONTIN'
This section provides an overvie4 on the tax accountin0 process7 Follo4in0 fi0ure depicts the
Accountin0 re6uired for Taxes7 +or,ally tax accountin0 happens alon0 4ith -ase transaction
accountin07 This varies 4hen the Tax is deferred and can -e recovered or the lia-ility arises only
on happenin0 of a particular accountin0 event in the future7 For exa,ple9 Service Tax recovery is
on cash -asis7 So is the accountin07 In such cases9 the actual Recovery happens on pay,ents to
vendors and lia-ility accountin0 happens on receipts fro, the custo,ers7

3nce the transaction has passed throu0h the recovery and lia-ility event9 the next phase is to
distri-ute the credit availa-le under this re0i,e to taxes under other re0i,es7 3n the sa,e lines
*1
transfers fro, other re0i,e 4ould reduce the tax lia-ility7 The total of recovered a,ount 1net of
transferred a,ounts2 is 4hat re,ains to set%off a0ainst the Tax )ia-ility under the re0i,e7 The
+et )ia-ility is settled -y ,a5in0 a pay,ent to the Tax Authority7
Follo4in0 picture depicts the cate0ory of accountin0 events and their flo4
Interi, Recovery
Accountin0
=ase Transaction Accountin0
Recovery
Accountin0
RecoveryC)ia-ility Event
TA( ACCONTIN' PROCESS
"istri-ution Tax
Accountin0 %
Entry to reduce
Tax !redit
"istri-ution of Tax Recovered
under different Re0i,es
Interi, )ia-ility
Accountin0
)ia-ility
Accountin0
"istri-ution Tax
Accountin0 % Entry
to reduce Tax
)ia-ility
Accountin0 to
arrive of +et Tax
lia-ility for the
Period
Settle,ent % Set%off of Tax
recovered a0ainst Tax )ia-ility
Pay,ent
Pay,ent of +et
Tax to the
Authorities
Purchase Sa+e
3.1 ACCONTIN' ENTRIES
Accountin0 for Service taxes 4ould -e done in t4o phases7 The first 4ould -e on the Purchasin0
and sale event7 3n initial purchase and sale event9 the Service Tax 4ould -e de-itedCcredited to
an interi, account7 This de-itCcredit to Interi, account 4ould -e reversed on to RecoveryC)ia-ility
accounts on recoveryClia-ility event7
Follo4in0 ,atrix 0ives the sche,e of accountin0 entries that 4ould -e created to account Service
Tax at each event7 The H!ondition8 field provides infor,ation on transaction process or setup
variation that causes difference in accountin0 entries7
**
Docu%ent Accounting E1ent Condition Ser1ice Ta- Accounting
Purchase 3rder Purchase 3rder
Receivin0 Receive
Accrue on Receipt
is Set to INesI
"e-it: Service Tax Interi, Recovery Account
!redit: AP Accrual Account
"eliver
Return to Receivin0
Receivin0 Return to /endor
"e-it: AP Accrual Account
!redit: Service Tax Interi, Recovery Account
!orrection !orrect% Receive
!orrect% Return to
/endor
Invoice Invoice Accountin0
Receipt &atched
Invoices 4ith
IAccrue on
ReceiptI
!redit: Supplier )ia-ility Account
!ancellation
Receipt &atched
Invoices 4ith
IAccrue on
ReceiptI
"e-it: Supplier )ia-ility Account
Invoice Invoice Accountin0
P3 &atched
Invoices 4ith
Accrue on Receipt
as H+o8
!redit: Supplier )ia-ility Account
AdBust,ent
P3 &atched
InvoicesCPeriod
End Accrual
!ancellation
P3 &atched
InvoicesCPeriod
End Accrual

Prepay,ent
Application
"e-it: Service Tax Recovered Account
A,ount 4ould -e in proportion of the A,ount
applied has to Invoice A,ount
*&
Prepay,ent *napply
!redit: Service Tax Recovered Account
*napplied has to Invoice A,ount
Pay,ents Pay,ent
paid has to Invoice A,ount
Pay,ent &aturity
paid has to Invoice A,ount
Pay,ent !ancellation
This entry 4ould -e created 4ith ne0ative
a,ounts
"e-it &e,o "e-it &e,o % RTS
Accrue on Receipt
is Set to INesI
Refund
This entry 4ould -e created 4ith ne0ative
a,ounts
Sales 3rder Sales 3rder
Ship,ent Pic5 Release
Ship,ent
Invoicin0 AR Invoice Accountin0
"e-it: Receiva-le Account
!redit: Service Tax Interi, )ia-ility Account

AR Invoice
!ancellation
"e-it: Service Tax Interi, )ia-ility Account
!redit: Receiva-le Account
Receipt Application
!redit: Service Tax )ia-ility Account
Reversal
"e-it: Service Tax )ia-ility Accoun
!redit &e,o AR !& Accountin0
!redit: Receiva-le Account
AR !& !ancellation
"e-it: Receiva-le Account
Refund
Settle,ent "istri-ution
!E+/AT to
Service Tax
!redit: P)A Account
"istri-ution
Service Tax to
!E+/AT
"e-it: P)A Account
!redit: Service Tax Recovered Account
P)A Account defined for the or0ani@ation is
used here

Pay,ent to Tax
Authority
"e-it: Tax )ia-ility Account
!redit: Service Tax )ia-ility Account

*4
A
Accountin0 Event7 This event tri00ers Tax Accountin07 In case of Recovera-le Taxes the Tax
A,ount is passed to Interi, Account
R Recovery Event7 This event tri00ers Tax Recovery Accountin0 and Re0ister *pdates
3.2 SER"ICE TA( ACCOTIN' PROCESS
All Accountin0 events 4ould -e accounted 4hen the =ase transaction line is -ein0 accounted7
The HIndia Service Tax Processin08 !oncurrent pro0ra, 4ould process the recovery Accountin0
events7 At each run9 the pro0ra, 4ould create accountin0 and Service Tax repository entries for
all eli0i-le transactions7
*0
4. SER"ICE TA( DISTRI5TION
This facility has -een provided to transfer the excess service tax credit availa-le and set off
a0ainst the serviceCexcise tax lia-ility9 4hich is per,itted under the !envat credit rules and
Service tax credit rules7 *ser 4ill -e a-le to transfer the service tax credit 4ith in the follo4in0
per,issi-le co,-inations:
Sr. No. &ro% Org To Org Trans,er Type Co%%ents
. Inventory 3r0ani@ation Inventory
3r0ani@ation
Service % Service Handled
# 3peratin0 *nit Inventory
3r0ani@ation
Service
Service
Handled
? Inventory 3r0ani@ation Inventory
3r0ani@ation
Service Excise Handled
; Inventory 3r0ani@ation Inventory
3r0ani@ation
Excise Service Handled
*%
It ,ay -e noted that co,-ination : # specified in the a-ove ta-le is possi-le only under the
scenario 4here service tax -y operatin0 units patch 4as applied and later on service tax -y
Inventory or0ani@ations is applied7 It ,eans that if you are already usin0 the service tax
functionality and up0raded to latest patch sets9 then for transferrin0 the service tax -alances lyin0
in operatin0 units to Inventory or0ani@ations9 this co,-ination can -e used7 Post application of
the latest patches9 it is not possi-le to transfer service tax credit fro, one operatin0 unit to other7
It ,ay -e noted that prior to carryin0 out the First settle,ent -alances availa-le in operatin0 units
have to -e nullified7
*ser can select the service type a0ainst 4hich distri-ution needs to -e carried out7 Service Tax
type in the destination or0ani@ation 4ill -e the sa,e as the Service Type 0iven in the source
or0ani@ation at header7
To confir, the transfer *ser 4ill have to press the H"istri-ute8 -utton7
Please note that the total of a,ount1s2 transferred to the destination or0ani@ation have to ,atch
the a,ount transferred fro, the source or0ani@ation7
*5
6. SER"ICE TA( )ANA7 ENTR/
This functionality is provided as a ,eans for handlin0 exceptional scenarios in your -usiness
process that necessitate capturin0 of such transactions outside the nor,al transaction cycles7
&anual Entry transactions for Service tax ,ay -e used for passin0 AdBust,ent entries for service
tax Recovery C )ia-ility transactions done in the Procure to pay and 3rder to cash !ycles7 Service
tax Recovery C )ia-ility9 Service tax Pay,ent transactions can also -e created directly usin0 this
4indo47
*)
It ,ay -e noted that for the transaction type pay,ent9 no accountin0 entries 4ould -e 0enerated
-y the syste,7 This is -ecause9 the accountin0 4ould happen at the ti,e of ,a5in0 the Invoice
Pay,ent in paya-les and the Service Tax % &anual Transaction OPay,entO entry is Bust to enter
the pay,ent in to the service tax repository 4ithout any accountin0 entry7 Any OPay,entO type
,anual entry9 4ithout a correspondin0 AP Invoice Pay,ent 4ith appropriate accountin0
distri-ution9 4ill cause incorrect settle,ent7
8. SER"ICE TA( SETT7E)ENT
*sers need to perfor, the periodic settle,ent of Service tax to the Authorities7 For this purpose9
settle,ent for, has -een provided7 In this for,9 *sers 4ill -e a-le to the process the records for
settle,ent 4hich 4ill 0enerate an AP Invoice a0ainst the Service tax authorities7 Settle,ent
process should -e perfor,ed -efore pay,ent is ,ade to the Service Tax authority and
su-,ission of returns7 This 4ill ensure that the records are processed for settle,ent and
necessary accountin0 is passed7
*6
The syste, 4ill auto,atically create an AP invoice in favor of the Service Tax authority7 *sers
4ill have to select the Service Tax authority and site for 4hich AP invoice needs to -e created7
Pay,ent ,ade to the Service Tax authorities is ,ade -y TR%$ challan9 you can capture the TR%$
challan nu,-er and challan date in the fields provided7
3n 0ivin0 the re6uisite details9 press the HProcess8 -utton7 3n doin0 this9 the syste, 4ill internally
0enerate distri-ution entries -et4een different or0ani@ations and ,ar5 the selected records as
Hsettled87 This 4ill also create an AP invoice in favor of the Service Tax authority7
Service tax settle,ent illustration:
&0
3n perfor,in0 the settle,ent process9 *sers 4ill have to navi0ate to the Find Settle,ents
screen7
*sers can find all the settle,ents perfor,ed fro, this screen7 )3/ for HSettle,ent Status8
contains # values vi@7
Sett+e%ent Status Description
Settled This ,eans that AP invoice has -een paid and
pay,ent has -een processed in the
HSettle,ent "etails8 screen7
Pay,ent "ue This ,eans the AP invoice has -een
paidCunpaid -ut the pay,ent has not -een
processed in the HSettle,ent "etails8 screen7
3n processin0 the records in the HService Tax Settle,ent8 screen *sers can find out the AP
invoice nu,-er that has -een 0enerated usin0 this screen7 3n findin0 out the AP invoice nu,-er9
they should navi0ate to AP and pay the invoice7
&1
3n pay,ent of AP invoice you 4ill a0ain find the AP invoice usin0 the a-ove find 4indo4 to sho4
the follo4in0 screen
Invoice status 4ill -e sho4n in the a-ove screen7 The different statuses are as follo4s:
In1oice Status Description
I,ported AP invoice has -een created and not yet paid
Partially Paid AP invoice partially paid
Paid AP invoice fully paid
In Interface Invoice is created -ut is stuc5 in the interface
Pay,ent processed Indicates that settle,ent process is co,pleted
&*
3nce the AP Invoice is paid9 *sers need to navi0ate to the a-ove for, and chec5 in the process
pay,ent fla0 and clic5 the process pay,ent to ensure that the settle,ent process is co,plete7
1!. REPORTING
The follo4in0 reports are availa-le currently 4ith respect to Service tax functionality in Financials
for India:
a2 India Service tax Report
-2 India Service tax credit re0ister report7
c2 India Service tax Pendin0 )ia-ility report
d2 India Service tax pendin0 recovery report
e2 India Service tax ST? report7
1!.1 I-0%' S"#$%&" +'( #"/,#+
This report display transactions leadin0 to Service Tax lia-ility7 3nly those Invoices9 4hich have
Service Tax Type of Taxes9 and for 4hich Receipt has -een assi0ned 4ill -e considered for this
report
&&
1!.2 I-0%' S"#$%&" +'( C#"0%+ #")%*+"# #"/,#+
This report lists the transactions fro, 4hich service tax credit 4as availed7
&4
1!.3 I-0%' S"#$%&" +'( P"-0%-) L%'1%2%+. R"/,#+
This report sho4s the AR transactions 4here in Service tax type of taxes have -een used and
receipt is not yet applied for those transactions7
&0
1!.4 I-0%' S"#$%&" +'( /"-0%-) #"&,$"#. #"/,#+
This report displays the AP Invoices 4here in Service tax type of taxes are used and 4hich are
not yet paid7
&%
1!.5 I-0%' S"#$%&" +'( ST3 #"/,#+
This Report 0ives you the Service Tax repository data in ST? For,at7
It ,ay -e noted that this report output 4ill capture data only to the extent relevant input data is
entered in the syste,7 For exa,ple as per the for,at provided -y Authorities9 in the report output9
*ser has to enter details li5e exe,ptions availed9 a-ate,ent etc79 4hich are not captured in the
syste, and hence the sa,e colu,ns in the report 4ill not display any values7
&5
11. DIA'NOSTIC SCRIPTS
"ia0nostic Scripts provides an overvie4 on trou-leshootin0 the service tax related issues usin0
the dia0nostic scripts provided in ,etalin5 note : ;'#<..7. 1Financials for India "ia0nostic
scripts27
11.1 Interpreting PO9AP Diagnostic Scripts
Script Na%e: +oc;rec;po11i;$.s<+
The a-ove script needs to -e run for a receipt nu,-er and or0ani@ationMid7 This script output
sho4s the receipt transactions details and the relevant setups done7 In the a-ove script9 the
follo4in0 ta-le details are relevant 4ith respect to Service tax:
1. Receipt detai+s:
Fro, the ta-les DAMI+MRE!EIPTM)I+ES and DAMI+MRE!EIPTMTAPM)I+ES9 receipt line details
and the taxes attached to the receipt line can -e verified7
2. Ta- code Setup:
Fro, the ta-le IDAMI+MTAPM!3"ESI9 you 4ould 5no4 the tax type of all the taxes attached to the
ship,ent lines of the receipts7
a7 Ta-;account;id: When the char0e account is specified 4ith &odMcrMpercenta0e
less than H.''89 non recovera-le a,ount 4ill -e apportioned to this account7
-7 )odi,iab+e;,+ag: If INI allo4s to ,odify the tax at transaction level7
c7 )od;cr;percentage: For excise taxes if the QR.'' then the Receipt 4ill appear
in !lai, !E+/AT screen and !E+/AT9 Excise re0isters 4ill -e 0enerated7
!. &inancia+s ,or India Organi*ation setup detai+s:
The IAdditional 3r0ani@ation Infor,ationI setup details can -e had for that particular or0ani@ation
fro, the ta-le IBaMinMhrMor0ani@ationMunitsI7
Script Na%e: +oc;ap+ist11i.s<+
The a-ove script needs to -e run for an InvoiceMid 1AP Invoice2 and the vendorMid7 This script
lists the ta-le level details for an AP Invoice and the relevant setups done7 In the a-ove script9 the
follo4in0 ta-le details are relevant 4ith respect to Service tax:
1. Regi%e registration setup detai+s:
Fro, the ta-les DAIMRF&MREF+S and DAIMRF&MPARTIES9 re0i,e re0istration setup details
done at inventory or0ani@ation level can -e verified7
&)
2. Ser1ice ta- Repository detai+s:
DAIMRF&MTRPMREFS ta-le 4ill 0et populated 4hen the invoice is accounted and the India
Service tax processor concurrent pro0ra, is run successfully7 This ta-le sho4s the service tax
a,ounts populated in the AP Invoice7
DAIMRF&MTRPMRE!3R"S ta-le 4ill 0et populated 4hen the invoice is paid and the India
Service tax processor concurrent pro0ra, is run successfully7 This is the ta-le that holds the
service tax repository data7
-a-u-enitaS0,ail7co,
&6

Service Tax Functionality

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Service Tax Functionality

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