With the encasement of the Finance Bill 2016, Krishi Kalyan Cess @0.5% will be levied on all taxable services. So from 1st june 2016 effective service tax rate will be 15%. The tax break up will be:
Service tax @ 14%
Add: Swach Bharat Cess @ 0.5%
Add: Krishi Kalyan Cess @ 0.5%
Total: - 15%
In addition to that CENVAT credit will be applicable for Krishi Kalyan Cess. So total CENVAT credit available on service tax will be14.5%.
Now we have to map the cess in SAP. For that SAP is already released the note 2319788. In that note the customization document also provided. Here I want to brief about the configuration maintained in it in the receivable (A/P) point view.
Basically service tax categories are in 2 ways.
1. Full reverse charge : Under full reverse charge the service receiver is liable to pay service tax and
2. Partial/joint reverse charge: In this Mechanism, both the service receiver and the service provider are liable to pay service tax at specified percentage
of the value of taxable service.
I am not going in depth above topic. Now come to configuration point of view in SAP. In the customization document the below conditions have been created.
1. JKKP - IN: AP KK Cess -
The above condition will use for full reverse charge
2. JKK1 - IN: AP KKC RCM
JKK2 - IN: KKC RCM Offset
These 2 conditions will use for partial reverse charge
In addition to that the below account keys are created for posting to GL accounts
1 .KP1: A/P KK Cess Tax - Is used for full reverse charge
2. KP2: A/P KKC RCM & KP3: A/P KKC RCM Offset - These keys are used for partial reverse charge
As I already mentioned CENVAT credit available for the KKC. For that we have to create a KKC receivable a/c and assign it to the keys KP1 & KP2 in OB40. In addition to that create KKC payable a/c and assign it to KP3.
When you make invoice posting,after done other configuration mentioned in the document. The system will pass below entry in 2 cases:
1. Expense A/c Dr
Service tax receivable A/c Dr
Swach Bharat Cess A/c Dr
KKC receivable A/c Dr
Vendor A/c
2. Expense A/c Dr
Service tax receivable A/c Dr
Swach Bharat Cess A/c Dr
KKC receivable A/c Dr
Service tax payable A/c Dr
Swach Bharat Cess Payable A/c Dr
KKC Payable A/c Cr
Vendor A/c Cr
In case if the company is EOU & SEZ scheme, then it cannot take CENVAT credit. In that case the KKC should be posted to separate expense account or distribute it to relevant account. The two cases I have mentioned below:
1. If we want to post it to separate expense account, then assign the expense GL account for the keys KP1 & KP2 in OB40.
2. If want to distribute it to relevant expense, then assign the key NVV to the tax conditions JKKP & JKK1 in the tax procedure in OBQ3.
However, we can map partial reverse charge under withholding tax also. The configuration will share in another document.
KKC configuration in withholding tax
Please go through the document and share your valuable feed back.
Thanks & Regards,
Mukthar Ali N
