(IND) Calculate reverse charges on service tax

Important

This content is archived and is not being updated. For the latest documentation, see Microsoft Dynamics 365 product documentation. For the latest release plans, see Dynamics 365 and Microsoft Power Platform release plans.

Applies To: Microsoft Dynamics AX 2012 R3, Microsoft Dynamics AX 2012 R2

Use the following procedure to create and post a purchase order that has a reverse charge on the service tax.

Note

This topic does not apply to versions of Microsoft Dynamics AX 2012 prior to cumulative update 1 for AX 2012 R2.

Prerequisites

The following table shows the prerequisites that must be in place before you start.

Category	Prerequisite
Version	Microsoft Dynamics AX 2012 R3
Country/region	The primary address for the legal entity must be in the following countries/regions: India
Related setup tasks	In the General ledger parameters form, in the Sales tax pane, in the Apply India taxes field group, select the Service tax check box. For more information, see (IND) General ledger parameters (modified form). In the Service tax field group, in the Accounting basis field, select Point of taxation basis only.

Create and post a purchase order that has a reverse charge on the service tax

1. Click Accounts payable > Common > Purchase orders > All purchase orders.

2. Create a purchase order, and then create purchase order lines. For more information, see Create a purchase order and (IND) Purchase orders (modified form).

3. In the Purchase order form, on the Purchase order lines FastTab, enter the quantity and the purchase price of the items.

4. On the Line details FastTab, on the Setup tab, select the sales tax group and item sales tax group for the service tax. For more information, see (IND) Sales tax groups (modified form) and (IND) Item sales tax groups (modified form).

5. On the Tax information tab, modify the details as required.

   Note

   If you attached a service tax code (STC) number to the address of the legal entity in the Manage tax information form, the STC number field is updated with the STC number of the legal entity. The STC number is used to identify the ledger accounts that service tax amounts are posted to. For more information, see (IND) Key tasks: Tax information for legal entities.

6. On the Action Pane, on the Purchase tab, click Confirm to confirm the purchase order.

7. On the Action Pane, on the Invoice tab, click Invoice to open the Vendor invoice form, where you can generate an invoice for the purchase order. For more information, see (IND) Vendor invoice (modified form).

   Note

   On the Tax information tab, the Recoverable/Expense on tax settlement check box is selected. A selected check box indicates that the service tax is posted to the recoverable account or the expense account after the tax settlement process is completed.

8. Click Post to post the purchase order, and then close the form. The tax amount for the vendor is posted to the payable account instead of an interim payable account. The service tax for the vendor is posted to the service tax receivable account and the service cost account. For more information, see (IND) Create tax ledger posting groups and attach an STC number.

   Note

   In the Item sales tax groups form, select the Accrue payable service tax at invoicing check box. A selected check box indicates that the payable service tax is accrued when an invoice is posted in the reverse charge mechanism.

9. Create and post the journal to settle the invoice in the Payment journal and Journal voucher forms. For more information, see Journal header (form), (IND) Journal voucher - Vendor payment journal (modified form), and (IND) Calculate service tax using a vendor payment journal.

10. In the Sales tax payments form, complete the sales tax payment process. For more information, see (IND) Calculate sales tax settlements and (IND) Sales tax payments (modified form).

11. Create and post the journal to pay the service tax to the tax authority by using the Payment journal and Journal voucher forms.