SAP FICO Training in Hyderabad

Configuring input tax (ITC) and output tax for GST in SAP FICO is crucial for ensuring compliance with GST regulations and accurately reflecting taxes in financial transactions. Input tax refers to the tax paid on purchases, which can be claimed as a credit (Input Tax Credit or ITC), while output tax is the GST collected on sales. These configurations ensure that businesses manage GST liabilities efficiently, maintaining smooth financial operations.

Step 1: Define Tax Codes for Input and Output Tax

Tax codes in SAP FICO represent different GST rates applicable for input and output tax. Defining these codes is the first step toward configuring the system for GST compliance.

How to Define Tax Codes:

1. Access the Tax Code Configuration Screen:
   
   
   
   • Path: SAP Easy Access → SPRO → IMG → Financial Accounting (New) → Financial Accounting Global Settings (New) → Tax on Sales/Purchases → Basic Settings → Check Calculation Procedure → Define Tax Codes for Sales and Purchases.
   
   
   • Transaction Code: FTXP
   
   
   
   


2. Create a New Tax Code:
   
   
   
   • Select the relevant country (e.g., "IN" for India, where GST is applicable).
   
   
   • Click "Create" to define a new tax code for GST.
   
   
   • For input tax, create a separate tax code (e.g., "I1" for 18% input tax).
   
   
   • For output tax, define another tax code (e.g., "O1" for 18% output tax).
   
   
   
   


3. Enter Tax Rates:
   
   
   
   • For input tax: Enter the GST percentage rate (e.g., 18%) for purchases.
   
   
   • For output tax: Enter the GST percentage rate (e.g., 18%) for sales.
   
   
   
   


4. Save the Tax Code: Once both the input and output tax codes are defined with the appropriate rates, save the configuration.

This configuration process helps in identifying and calculating the correct GST rate when processing financial transactions.

At Version IT, the best institute for SAP FICO Training in Hyderabad, you'll learn how to define tax codes and ensure correct GST configuration in real-world scenarios.

Step 2: Assign Tax Codes to Tax Calculation Procedure

After defining the tax codes, you need to assign them to the tax calculation procedure in SAP FICO. This ensures that GST is calculated correctly during transactions involving purchases (input tax) and sales (output tax).

How to Assign Tax Codes to Tax Calculation Procedure:

1. Access the Tax Calculation Procedure:
   
   
   
   • Path: SAP Easy Access → SPRO → IMG → Financial Accounting (New) → Financial Accounting Global Settings (New) → Tax on Sales/Purchases → Basic Settings → Assign Tax Codes for Non-Taxable Transactions.
   
   
   • Transaction Code: OBYZ
   
   
   
   


2. Assign Tax Codes:
   
   
   
   • Assign the tax codes you created (e.g., "I1" for input tax, "O1" for output tax) to the relevant tax calculation procedure (e.g., "TAXINN" for India).
   
   
   
   


3. Configure Account Keys:
   
   
   
   • Assign the tax codes to appropriate account keys in the tax calculation procedure. For example, MWAS for input tax and MWVS for output tax.
   
   
   
   


4. Save the Assignment: Once the tax codes are linked to the tax procedure, save the configuration to ensure that GST is calculated correctly during financial postings.

Step 3: Create and Assign GL Accounts for Input and Output Tax

General Ledger (GL) accounts must be assigned for input and output tax to ensure accurate posting of GST transactions in financial statements. GL accounts track GST liability (output tax) and the credit (input tax) claimed from purchases.

How to Configure GL Accounts for Input and Output Tax:

1. Access the GL Account Assignment Screen:
   
   
   
   • Path: SAP Easy Access → SPRO → IMG → Financial Accounting (New) → Financial Accounting Global Settings (New) → Tax on Sales/Purchases → Posting → Assign Tax Accounts.
   
   
   • Transaction Code: OB40
   
   
   
   


2. Create GL Accounts for GST:
   
   
   
   • Create separate GL accounts for input tax (ITC) and output tax in the Chart of Accounts. For example:
     
     
     
     • GL Account for Input Tax (ITC): "GST Input 18%"
     
     
     • GL Account for Output Tax: "GST Output 18%"
     
     
     
     
   
   
   
   


3. Assign GL Accounts to Tax Codes:
   
   
   
   • For the tax code defined for input tax (e.g., "I1"), assign the input tax GL account.
   
   
   • For the tax code defined for output tax (e.g., "O1"), assign the output tax GL account.
   
   
   
   


4. Save the Configuration: After the GL accounts are assigned, save the configuration to ensure that tax postings are directed to the appropriate GL accounts during transactions.

Step 4: Maintain GST Tax Rates by Country and Jurisdiction

GST rates may vary based on the country or state. SAP FICO allows you to configure specific GST rates for different jurisdictions to comply with local tax laws.

How to Configure Tax Rates by Country:

1. Access the Tax Rate Configuration Screen:
   
   
   
   • Path: SAP Easy Access → SPRO → IMG → Financial Accounting (New) → Financial Accounting Global Settings (New) → Tax on Sales/Purchases → Basic Settings → Define Tax Rates.
   
   
   • Transaction Code: FTXP
   
   
   
   


2. Assign the Relevant Tax Rate:
   
   
   
   • Select the relevant country (e.g., "IN" for India) and define the GST rates based on the jurisdiction.
   
   
   • For example, assign 18% GST for most goods and services, while a lower rate (e.g., 5%) may be assigned for specific items.
   
   
   
   


3. Set Validity Period:
   
   
   
   • Set the validity period for each tax rate to handle future changes in tax regulations. This ensures that the tax rate remains valid for the defined period and changes automatically when new rates are introduced.
   
   
   
   


4. Save the Configuration: Once the tax rates are configured by country and jurisdiction, save the settings.

Step 5: Test the Configuration for Input and Output Tax

Before using the configured tax codes in live business operations, it’s important to test the GST setup to ensure it functions correctly.

1. Create a Test Purchase Order (Input Tax):
   
   
   
   • Create a purchase order in the system and select the input tax code (e.g., "I1") during the transaction. Verify that the input tax is calculated correctly based on the defined GST rate.
   
   
   
   


2. Create a Test Sales Order (Output Tax):
   
   
   
   • Similarly, create a sales order and apply the output tax code (e.g., "O1") to ensure the system calculates the output GST correctly.
   
   
   
   


3. Verify Financial Postings:
   
   
   
   • After testing the purchase and sales orders, verify that the input and output GST amounts are posted to the correct GL accounts (input and output tax accounts).
   
   
   
   


4. Check Tax Credit (ITC) Posting:
   
   
   
   • Ensure that the input tax credit (ITC) is being tracked properly in the GL and is available for offset against output tax liabilities.
   
   
   
   

Conclusion

Configuring input tax (ITC) and output tax in SAP FICO for GST involves setting up tax codes, assigning them to the tax calculation procedure, and mapping them to the appropriate GL accounts. These steps ensure that businesses comply with GST regulations and maintain accurate tax postings.

At Version IT, recognized as the best institute for SAP FICO Training in Hyderabad, you will master this configuration process, learning how to efficiently manage GST in a real-world SAP environment. Through hands-on training, you will gain the skills needed to configure and optimize SAP FICO for GST compliance, helping organizations maintain seamless tax operations.