This document discusses how to create a reverse charge mechanism (RCM) tax code in SAP Business One. The RCM tax code is needed when tax needs to be paid to tax authorities without being charged to the service provider. The steps include creating reverse tax types, a separate tax category, tax attributes for different rates, and ensuring tax amounts are multiplied by -1 in the tax formula. An example journal entry illustrates using the RCM tax code where service tax is deducted and credited to the vendor but also debited as an expense and credited as a payable to the tax authorities.

1. 1 Author : Sandeep Rathod
SAP Business One
Creating RCM Tax Code
Reverse Charge Mechanism Tax code needs to be created for process where tax
needs to be paid to Tax Authorities without charging to the service provider.
For e.g. : 'A' provides Security services but not entitled to pay any service tax to
government.
'B' is entitled to pay service tax to government when receiving services from 'A'.
'A' provides service bill for Security services of INR 5,000 to 'B'. Payment of 5,000
is paid to 'A'. Service Tax will be Paid By 'B' to Tax Authorities without any set off
considering it 'B' expense
Additional informative URL : http://taxguru.in/service-tax/all-about-service-tax-
reverse-charge-mechanism.html
Steps to create RCM Tax code in SAP B1
• Create Reverse Tax Types
• Create separate Tax Category

2. 2 Author : Sandeep Rathod
• Create Tax Attributes for different rates
• Accounts linked to 'R' Tax Type should be at Payable side under 'Liability'

3. 3 Author : Sandeep Rathod
• In Reverse Tax Formula Tax amount needs to be multiplied by '-1' to convert Tax
amount to negative.
• You need to create same formula for other Tax Types
• Tax Type Combination should include all the Tax Type with its reversal Types

4. 4 Author : Sandeep Rathod
• Above A/P Invoice is illustration of RCM tax code usage.
• Here service amount is 5000 INR on which TDS is deducted. If you see Tax
Amount calculation is zero
• In above Journal Entry TDS is deducted on 5000 INR and Vendor is Credited by
4,959 INR
• Krishi Kalyan Cess amount i.e 7.59 INR is Debited as Expense and Credited in
Liability as Payable
• Swach Bharat Cess amount i.e 7.59 INR is Debited as Expense and Credited in
Liability as Payable
• Service Tax amount i.e 212.52 INR is Debited as Expense and Credited in
Liability as Payable. Impact of Taxation is Nullified.