Performing MIRO for service PO

[Former Member]

Hi,

Here is the scenario. For services, we are not allowed to recognize VAT/withholding tax during invoice receipt (MIRO). We are only allowed to post to VAT/WHT account at the time of payment but the vendor invoice already contain VAT.

We want to post the amount of invoice completely to GRIR.

Example:

Invoice total amount = 112 (service = 100, vat = 12)

Normal MIRO entry is below:

Dr. GRIR              100

Dr. Input VAT         12

Cr. Vendor account   112

what we want:

Dr. GRIR              112

Cr. Vendor account   112

This is service PO. Is there a way to override the GRIR amount by MIRO?

GR entry is below

Dr. Service Expense   100

Cr. GRIR                          100

Hope to hear from you.

[former_member183424]

If you don't want to debit amount from VAT expenses, then why you are using vat amount?

You can use the whole amount as service charge.

Think about one thing, if the GR/IR account will credit as 100 but debit as 112, then how the 12 amount will be nullified ?

Isn't create a problem during reconciliation ?

[Former Member]

During payment: the entry will be below:

Dr. Vendor Account  112

Dr. Input VAT             12

Cr. Cash                         110

Cr. Withholding tax             2

Cr. GRIR Account             12

This will close the GRIR account.

[former_member183424]

Here, you are debiting the VAT expenses and crediting the GR/IR account.

So, ultimately you are doing the same which is happening in MIRO - accounting entry.

[Former Member]

Yes, but the thing is, we are recognizing the VAT expense in different timing. There is a strict regulation that we can only recognize VAT at the time of payment, which can be months away from the time of invoice receipt.

[sanilbhandari]

Hi

The way with holding tax and VAT work will need to have two sets of configuration.

For VAT you can use the deffered tax functionality. Since the amount is VAT, it should be posted to a balance sheet asset account and not GR/IR, which is a short term liability account. So using the deffered tax for VAT, your accounting should look like below:

At time of GRN

Stock Dr     100

    To GR/IR  100

At Time of Invoivce

GR/IR Dr 100

Input VAT Interim A/c Dr 12

       To Vendor 112

At time of Payment

Vendor A/c Dr 112

         To Bank 112

Than run the transfer program for Deffered tax

Input VAT Credit A/c Dr 112

      To Input VAT Interim A/c 112

Note that the transfer entry to final VAT Account will happen only to the extent that the payment has been made to the vendor.

The below link will help you in configuration for deffered tax in SAP

For with holding tax at the time of payment for Vendor Invoices, you will have to create a with holding tax type for payment and assign it in vendor master. So when you make a payment, this will get deducted at the time of payment to vendor

Thanks & regards

Sanil Bhandari