- 1. Introduction to Provision and Utilization:
- 1.1 Why Provision:
In India there are certain situations where vendor has provided you some service but not yet sent you an invoice and also you have not done any down payment to vendor but as per the Indian taxation law we need to pay tax on the services received. So we make an adjustment entry for the taxes that you will withhold on the vendor payment. To create an adjustment entry in SAP system we use Provision program. (T-code J1INPR)
- 1.2 Why utilization:
Provision creates an adjustment entry for the taxes using which we pay tax to government, now later on when you receive invoice from the vendor for the same service then again you will have tax entry/line in the invoice document. So to avoid paying double tax on the same service we need to reverse one of the tax line. For this purpose we use Utilization program in SAP system. (T-code J1INUT)Process Flow:1. Enter the Purchase order for the services to be provided (Tcode Me21) and after that create the service entry sheet for that PO (Tcode Ml81N) 2. Say you have received some service of amount 15000 INR from vendor and at month-end of January, the vendor has not sent you an invoice. You will be required to withhold tax on the payment, so you enter a provision for the withholding tax.The system creates an accounting document as follows: (Tax rate is 2%) You can now prepare your financial statements correctly.3. On 7 February, the vendor sends you the invoice, and you enter it in the system.When you enter the invoice, the system automatically calculates how much tax you have to withhold when you pay the vendor. It does not clear the provision against the invoice, so at this moment your accounts are actually incorrect, because they have two entries for the same amount of withholding tax.
- In the evening, you reverse the provision.
How do we achieve this functionality in SAP system:
a. Customization required : For Provision we need to make customization setting at following place,
- SPRO Financial Accounting (FI) Financial Accounting Global Settings Withholding Tax Extended Withholding Tax Postings India Provisions for Taxes on Services Received.
b. Transactions to be used in flow:
ME21N : For posting PO.
ML81N : For Creating service entry sheet
J1INPR : Transaction to run provision report.
J1INUT : Transaction to run Utilization report.
MR8M : Transaction to reverse MIRO invoice.
J1INPRREV : Provision reversal (New report has been created)
Table and fields getting affected:
- J_1IEWTPROV-EBELN field refers to the PO number
- J_1IEWTPROV-RECTYP is ‘G’ for provision document, ‘I’ for MIRO document.
- J_1IEWTPROV-AWKEY field of MIRO invoice stores the Utilization document number.
- J_1IEWTPROV-AWREF Field of MIRO invoice stores the provision document number(First 10 digits)
- When We post provision document INDI is ‘X’ but once we post MIRO for this provision document this INDI field becomes Blank.
- Similarly When we post MIRO field INDI is blank but once utilization is done this becomes ‘X’.
- IF MIRO is reversed in that case INDI becomes ‘R’.
- A new field has been added to table J_1IEWTPROV table Called J_1ISESN. This field will store the SES (Service entry sheet) number for every provision document and MIRO. There would be always one to one mapping between provision document and SES number it means for each SES we will post a separate provision document.
- When Provision document is reversed then field J_1IEWTPROV-INDI will be set as ‘R’ for Corresponding provision entry.
- If for any MIRO utilization document has been posted then while reversing that MIRO entry using MR8M Tcode corresponding Utilization document will be reversed automatically so there is no need to reverse utilization manually after reversing the MIRO invoice.
New features Supported from year 2012 Onwards:
- Posting at service entry sheet level so now you can create PO for multiple type of service and post provision with separate tax type tax code for each service entry sheet document.
- Option to see if already a down payment has been posted for given Purchase order.
- Single MIRO for multiple PO number is supported now in provision.
- While doing MIRO reversal using MR8M there was no check to see whether corresponding utilization document is reversed or not. user had to manually reverse the utilization document. If utilization is not reversed manually then it may leads into incorrect Challan posting. Bu now when you reverse MIRO corresponding utilization will reverse automatically.
- Earlier there was not option to default the tax type tax codes and section code for provisioning so user had to manually enter everything but now user exit has been given where they can default the values to reduce manual effort.
- Option to give service entry sheet date range on selection screen.
- Plant has been given as selection criteria for provisioning.
- Option to simulate tax before posting in provision report.
- Exchange rate can be given on selection screen which will be considered for provision.
- Option to select and deselect service entry sheet lines while doing provision
- Tax type tax code F4 help brings data specific to Vendor in provision report.
Notes to be implemented to get the new features:
1. 1724872 Provision and Utilization Enhancement
2. 1769027 J1INPR: Provision Report Enhancement