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Service Tax calculation while receiving the advance from Customer/Vendor based on POT & Service Tax reveres charge rule (Payment to Invoice).

Hi,

Below are the scenario's of transaction posted in AX 2012 R 3 RTM :-

1. Advance amount collected from the customer including service tax amount.

2. Posting the sales invoice and later settling against the payment entry.

3. At the time of posting itself settling with the payment entry.

I am facing an issue while calculating the Service Tax in payment Journal. Service Tax is calculated as per the POT rules, but the calculated service tax is not posting to the Customer Sub ledger.

Assume that the Taxable service is 10,000 Rs and the service Tax % is 14. Now customer pays an advance amount even before the service is completed nor a Sales Invoice is raised.

Customer pays the Taxable service amount + Service Tax amount which will be 10,000+1,400 = 11,400 Rs.

Now, while accounting this scenario in AX in Payment Journal lines i have updated the taxable service amount as 10,000 and selected the appropriate Sales tax group code & Item sales Tax group. When clicked on the Sales Tax button system is calculating the service Tax amount as 1,400. But after posting the transaction if I check in the customer sub-ledger, i am able to see only the Taxable service amount i.e 10,000 Rs.

Below is the Voucher entry for the 'payment journal' posted:

Bank A/C....... Dr 10,000 (Should have been 11,400 Rs)

To Customer A/c..... Cr 10,000 (Should have been 11,400 Rs)

For the above Voucher, If "All related voucher" is checked for the 'payment journal' posted:

Service Tax Payable Interim A/c.... Dr 1,400

To Service Tax Payable A/c...........Cr 1,400

Below are the two Posted Sales Invoice scenarios tried to check on how the Service Tax payable interim ledger account gets knocked off:

1^st scenario:-

After posting the invoice, the invoiced transaction is settled with the advance receipt entry. Below is the ledger effect for the invoice posted & in the customer sub-ledger the balance is to the extent of the service tax amount.

Customer A/c.... Dr 11,400

To Miscellaneous Income A/c......Cr 10,000

To Service Tax Payable A/c............Cr 1,400 (Instead off hitting to Service Tax Payable Interim)

This leads in wrong accounting and the liability of service tax payable is doubled.

2^nd scenario:-

At the time of posting the Invoice transaction, “Settle open transactions” functionality has been used. This Transaction is related to the above posted payment journal transaction.

Customer A/c.... Dr 11,400

To Miscellaneous Income A/c......Cr 10,000

To Service Tax Payable Interim A/c............Cr 1,400

Here we can note that system has exactly reversed the “Service Tax payable interim” ledger a/c.

Please let me know how to resolve the issue whenever there is a service tax advance payment received from the Customer.

Regards,

Sandesh

HI BGK,

Thanks for your suggestion.

I have checked the AR parameters "Sales tax on Prepayment voucher" is ticked and in the payment journal if try to tick the "Prepayment journal voucher" then the error info log appears as "Prepayment must be created in a journal where amount is including sales tax".

Based on this I even tried to post by ticking the "Amount including tax" under setup tab. Then it allows me to place a tick mark in "Prepayment journal voucher" field, but after this if i click on the 'sales tax' button then the error info log appears as "Tax code Service Tax cannot be calculated when the transaction has the Amount incl. sales tax option selected, and the tax code contains tax amount limits or taxable amount limits."

Is this could be a BUG in the AX 2012 R3 RTM version.

Regards,

Sandesh

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