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Process documentationService Tax

 

In India, companies leasing buildings or properties for commercial purposes are required to pay Service Tax to the corresponding federal tax office.

Real estate contracts are considered as contracts for services and not for goods, therefore from business point-of-view in India no value-added tax (VAT) needs to be maintained in the contracts, only Service Tax. From technical point-of-view the Service Tax is handled like VAT. It is levied on the services rendered and is applied on the total price of the service. For lease-out contracts it is a deferred tax that is levied at the time of the incoming payment.

In case of commercial contracts, the owner of the real estate object reports and pays the Service Tax to the corresponding federal tax authorities. The geographical location of the real estate object determines which federal tax authority the Service Tax should be reported to. The owner of the real estate object enters the tax office information in the real estate object master data.

Residential contracts are not subject to Service Tax.

The business place represents the organizational unit responsible for collecting Service Tax. You maintain business places in the following master data of Flexible Real Estate Management (RE-FX):

  • Business entities (Sites)

  • Buildings

  • Properties (Land)

You do not need to maintain the business place on the rental object level.

Process

  • You make required Customizing settings

  • You maintain business entities, buildings, properties, and rental objects

  • You assign the objects to your commercial contract and create conditions for your contract with tax types and tax groups that correspond to the Service Tax

  • Each month you make a periodic posting of your commercial contract

    To do so, on the SAP Easy Access screen, choose Start of the navigation path Accounting Next navigation step Flexible Real Estate Management Next navigation step Accounting Next navigation step Periodic Postings Next navigation step Periodic Posting: Contracts End of the navigation path.

  • You send the invoices to your tenant

    You create the invoice with the Create Invoices (RERAIV) program and print it with the Print Invoices (RECPA520) program.

  • The tenant pays the rent for the real estate object

  • You post the incoming (partial) payments with the Incoming Payments program

    To access the program, on the SAP Easy Access screen, choose Start of the navigation path Accounting Next navigation step Flexible Real Estate Management (RE-FX) Next navigation step Accounting Next navigation step Incoming Payments Next navigation step Incoming Payments End of the navigation path.

    This program creates entries in the Data for Deferred Taxes (DEFTAX_ITEM) table for the deferred tax transfer.

  • You transfer the Service Tax on the G/L final tax accounts from the temporary tax accounts with the help of the Deferred Tax Transfer (RFUMSV50) report at the time of the payment or partial payment

    The program uses a separate database (table DEFTAX_ITEM) that stores the data of invoices, payments, down payments, tax transfer documents, and any other documents that are relevant for deferred taxes.

    For more information on deferred taxes, see Deferred Taxes in Business Transactions.

  • After transferring the tax amounts, you pay the Service Tax to the federal tax authorities and report them with the Advance Return for Tax on Sales/Purchases (RFUMSV00) program.

    For generic information about the RFUMSV00 program, refer to the system report documentation.