India Localization-SD Workshop

7/31/2019 India Localization-SD Workshop

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Copyright 2003 Bristlecone, Inc. | Dec 18 th 2004

www.bcone.com

India Localization & VATwith respect to SD

Kumar Armugam


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Copyright 2003 Bristlecone, Inc. | April 14 2004 10

Modus Operandi

Session - I

Introduction

CENVAT Concept

CENVAT Rules and Terminologies

India Localization in SAP R/3

CENVAT and Sales Process.

India Localization Configurations in SD

Q&A

Conclusion


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Modus Operandi

Session II

Introduction

Glossary of Terms

VAT Basic Concepts

VAT implications on SD

SD Configuration with respect to 4.7 EE

Q&A

Conclusion


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Introduction

Hi


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What is CENVAT!?

Indian Tax Structure

Excise & Customs Duty - Excisable Goods of 4Ms

Sales Tax & Value Added Tax

Service TaxCess

Withholding Tax / TDS

Maintaining and Printing of Statutory Registers


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CENVAT!?

Excise duty is a duty on production or manufacture of goods. It is a taxlevied on manufacture of goods and the liability to pay excise duty arises

immediately on manufacture or production of goods

Once manufacture of goods is complete, excise duty is payable, whether

the goods are sold or self-consumed. Excise duty does not depend on the

end use of the goods.

Excise Duty is a tax on manufacture of goods but for the sake of

administrative convenience, it is collected only on removable of goods from

the factory.

CENVAT Credit


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CENVAT Credit

RM-A

RM-B

FG-C

Rs.100 ED: Rs.10

Rs.50 ED: Rs.5 Input Tax credit availed: Rs.15

Rs.500 ED:Rs.50

Tax liability: OTL CENVAT credit

Rs.35: Rs.50 Rs 15


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CENVAT!?

Types of excise dutiesUnder the excise laws, the following are the various types of duties, which are levied: -

Basic duty: This is the basic duty levied under the Central Excise Act.

Special excise duty: This special duty is levied under special circumstances where

the levy of such additional duty is justifiable or found necessary to protect other

industries.

Additional Duty in lieu of Sales Tax : It can be charged on all goods by the central

government to counter balance exemptions from sales tax granted by various State

Governments to the detriment of industries in other States.

Additional Duty on specified items under the Act : If the Tariff Commission set up

by law recommends that in order to protect the interests of industry, the Central

Government may levy additional duties at the rate recommended on specified

goods.


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CENVAT!?

WHEN AND HOW MUCH CREDIT CAN BE TAKEN

The Cenvat Credit in respect of inputs may be taken immediately on receipt of the

inputs.

The Cenvat credit in respect of Capital Goods received in a factory at any point of

time in a given financial year shall be taken only for an amount not exceeding fifty

percent of the duty paid on such capital goods in the same financial year and the

balance of Cenvat Credit may be taken in any subsequent financial year.The Cenvat credit shall be allowed even if any inputs or capital goods as such or

after being partially processed are sent to a job worker for further processing,

testing, repair etc. and it is established from the records that the goods are received

back in the factory within180 days of their being sent to a job worker.

Where any inputs are used in the final products which are cleared for export, the

Cenvat Credit in respect of the inputs so used shall be allowed to be utilised towardspayment of duty on any final product cleared for home consumption and where for

any reason such adjustment is not possible, the manufacture shall be allowed refund

of such amount.


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CENVAT

Rule 1. Short title, extent and commencement.-

Rule 2. Definitions.-

Act capital goods Customs Tariff Act exempted goods final products first stage

dealer an importer input manufacturer or producer

Rule 3. CENVAT credit.-

Rule 4. Conditions for allowing CENVAT credit.-

Rule 5. Refund of CENVAT credit.-Rule 6. Obligation of manufacturer of dutiable and exempted goods.-

Rule 7. Documents and accounts.-

Rule 8. Transfer of CENVAT credit.-

Rule 9. Transitional provision

Rule 10. Special dispensation in respect of inputs manufactured in factories located in

specified areas of North East region and Kutch district of Gujarat.-

Rule 11. Power of Central Government to notify goods for deemed CENVAT credit.-

Rule 12. Recovery of CENVAT credit wrongly taken.-

Rule 13. Confiscation and penalty.-

Rule 14. Supplementary provision


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CENVAT

So far

Overview of Indian Tax Structure.

What is Excise Duty and Types of Excise duties?

What are CENVAT Rules?

What is CENVAT credit?

How and when CENVAT is availed?


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SAP R/3 and CENVAT

CIN Country India Version

India localization (earlier CIN) is no longer add-on component in version SAP 4.7EE

SAP provides following std. tax procedure for country india

Formula based tax procedure TAXINJ

Condition based tax procedure TAXINN

Automatic tax code determination possible for inbound orders

Refer Oss notes 608238 & 607272

CIN data updation directly possible from

Material master

Vendor master

Customer master

Tax/Excise Duty set up for MM & SD

Tax Procedures

Pricing Procedures

CENAVT registers

Transaction Codes


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Tax/Excise Duty set up for MM & SD

Basic SettingsMaster Data

Account Determination

Business Transactions

Tools


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Basic Settings

Excise Registration IDsCompany Code Settings

Plant Settings

Excise Groups

Series Groups

Excise Duty Indicators


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Excise Registration IDs

A number assigned to each premises orlocation that has registered as a manufacturer

with the excise authorities.

Mention whether AED, SED, CESSapplicable. If blank will not be available for

inputs

Max no. of lineitems in outgoing EI

Permits deductible /non deductible ED

at GR


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Company Code Settings

User can editDr account

during JVUtilizes from

PLA in JVFirst month for

excise year

Excise invoiceselection


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Plant Settings

Plant defined as Depotor not

Multiple plants to oneExcise Registration ID

GRs per EI can be set asbelowMulti GR Multi CreditMulti GR Single creditSingle GR


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Excise Groups

Excise Reg ID linkedto Excise group &Plant

Depot definition atExcise Grp & Plant


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Series Groups


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Excise Tax Indicators


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Account DeterminationDescribe which excise accounts (for excise duty and CENVAT) are to be

posted to for the various transaction types including sub transaction type if

any


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During transactions system determines which G/L accounts to post to by

looking at the:

Excise group, Company code & Chart of accounts


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Tax Procedures

SAP provides following std. tax procedure for country IndiaFormula based tax procedure TAXINJ

Condition based tax procedure TAXINN

Factory sales and Depot Sales

JINFACT, JDEPOT,JSTKTR w.r.t TAXINN -

JFACT, JINDEP, JINSTK w.r.t TAXINJ

Pricing Procedures
http://../DOCUME~1/KUMAR~1.ARM/Desktop/CIN-Settings/taxinj.HTMhttp://../DOCUME~1/KUMAR~1.ARM/Desktop/CIN-Settings/TAXINN.HTMhttp://../DOCUME~1/KUMAR~1.ARM/Desktop/CIN-Settings/JINFACT.HTMhttp://../DOCUME~1/KUMAR~1.ARM/Desktop/CIN-Settings/JFACT.HTMhttp://../DOCUME~1/KUMAR~1.ARM/Desktop/CIN-Settings/JFACT.HTMhttp://../DOCUME~1/KUMAR~1.ARM/Desktop/CIN-Settings/JINFACT.HTMhttp://../DOCUME~1/KUMAR~1.ARM/Desktop/CIN-Settings/TAXINN.HTMhttp://../DOCUME~1/KUMAR~1.ARM/Desktop/CIN-Settings/taxinj.HTM


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Excise Registers

Excise Laws require you to maintain a number of registers in a specified

format relating to excise duty. They have to be printed out monthly andshown to the authorities in the event of an audit. The SAP captures this

requirement.

Type of Registers:

RG23A PART I

RG23A PART II

RG23C PART I

RG23C PART II

RG I

RG23D


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Excise Registers

RG23A: Raw MaterialThe entries pertaining to quantity will go into RG 23 Part I and that of

duty will go into Part II in the appropriate duty column. i.e. Basic Excise,SED, Additional duty, etc

RG23C: Capital GoodsRG23CI-Part I entry: Excise stock entry at the time of GR (only

quantity)

RG23CII-Part II entry: Credit entry of Capital goods (only value)

RG-I : Finished Goods (only Quantity)The finished goods (manufactured, sub-contracted or gained) and sales

or stock transfer are entered in the RG I Register

Register RG I is updated after creation of an excise invoice whiledispatching the goods from the factory premises with reference a

commercial invoice or a pro-forma invoice

RG23D: Depot (this indicates both the Quantity and the amount)


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CIN Master - J1ID

Maintain Chapter IDsExcise Duty Indicators

Determination of Excise Duty

i i i


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Excise rate Determination

Is theCustomer

SSI?

Get SSIduty

Rates.

Yes

No

Excp ratesMaintained?

Yes

No

GetExcepdutyrates

Get Ch IDOf thematerial

Get CustomerExciseindicator

Get plantExcise

indicator

Get finalExcise

indicator

Get rateBased on

Ex Ind & CH ID


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CENVAT Availment and UtilizationOn-Line Transactions

Fortnightly Transactions

Excise Duty UtilizationTransaction

DespatchSales ExciseInvoice Process

Excise DutyPayable Account

Goods

Receipt

Vendor ExciseInvoice Process

CENVAT on holdfor Capital goods

CENVAT Account

SelectRegister

PLA Account

Deposit funds in PLAAccount

Credit CENVATon-hold A/c

Credit CENVAT A/c

Debit ED Payable A/C

Debit CENVAT A/c

Debit PLA A/c

Credit PLA A/c

Credit ED Payable A/C


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CENVAT Utilization

Payment to be made toExcise Department for the Self Removals forthe last month.

Utilization to be done against the last months incoming excise duties

and CVD.

CENVAT utilization to be done before the 5th of next month.


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SAP Transactions

Activity SAP Transactions

Register Updates J1I5RG23 A (Part I & II and RG I)

Register Extraction J2I5

Register Printing J2I6

Utilization J2IU


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India Localization: Sales & Distribution

Features: It covers the following

Sales from Factories

Sales from Depots

Stock Transfer

Export Sales


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Factory Process - Materials

In the Process of Manufacturing the Factory uses two kinds of

materials.

Input Material:Is defined as the one which loses its own identity in the

finished product.

Capital Goods:Is defined as the one which does NOT lose its own identity inthe finished goods.


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Sales from Factory

Supplying Plant DispatchExcise Invoice

J1IIN

Add up to Excise Duty Payable A/c

J1IEX

Capture EI


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Factory Process- RegistersThe Factory uses the following Excise Registers

RG23 A - Part I (Captures the material A/c)

RG23 A - Part II ( Captures the Duty A/c)

RG23 C - (Captures Capital Goods Duty A/c)

RG 1 - Is a finished Goods Register


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Factory Process- Registers

RG23 A Part I & Part II

Material is received in the factory as for Quality

inspection or for Direct Input.

Material after QualityInspection or when used as

DirectInput will go into the RG 23 A Registers.

The entries pertaining to quantity will go into RG 23

Part I and that of duty will go into Part II in the

appropriate duty column. i.e. Basic Excise, SED,

Additional duty, etc.


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Factory Process- RegistersRG23 C

Purchase ofCapital Goods by the factory for manufacturingpurpose are only passed in RG23 C Register.

The excise law permits claiming 50% MODVAT Credit in the

current year and 50% in the next year for Capital Goods.


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Factory Process- RegistersRG I

The finished goods(manufactured, sub-contracted or gained) andsales or stock transfer are entered in the RG I Register.

Register RG I is updated after creation of an excise invoice whiledispatching the goods from the factory premises with reference a

commercial invoice or a pro-forma invoice.


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Depot Process:

The RG 23 D register is used to update the excise entries in case of

Exciseable Depots.

The Excise duty is payable when the goods are sent from the factory.

However, it is not levied again when the goods are sent from the

DEPOT.

However, while taking sale from the DEPOT and if price escalationshappen, then the extra excise is paid using a A certificate. These

details are entered in the RG23 D register and excise recovered from

the customer.


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Sales From Depot

Depot DispatchExcise Invoice

Add up to the Excise Duty Payable A/c

Reduce the Quantity

MIGO

J1IG

J1IJ

Plant

ME21N

J1IIN


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Depot Process

Transactions can happen through two scenarios:

Scenario1: Depot receives goods from the companys factory

through stock transfer.

Scenario 2: Depot procures goods directly from external sources.


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Export Process

In the process of Exports under bond duty is not payable and the

goods move out from the factory against an ARE1.

However, goods not under bond move out of the factory by paying the

duty and refund is separately claimed on showing proof of export I.e.

shipping bill.

In case of Deemed Exports, the same procedure is followed as inexports, However, the form used is ARE3.


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Important Things to Know

Determination of Excise Rate in Sales and Distribution

Information on Tax Procedure and Conditions

FI Entries related to Excise taking place in SD


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Determination of ED Rate in Sales and Distribution

Settings for the same done through Transaction Code J1ID

Material: Material Chapter ID

Customer Excise Details: Excise Indicator for Customer

Plant Excise Details: Excise Indicator for Plant

Excise Indicator Customer + Excise Indicator Plant = Excise Indicator Final

Material Chapter ID + Excise Indicator Final = Excise Tax Rate

Refer Slide No.27


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FI Entries related to Excise in SD

During the passing of Billing document to Accounting: (VF02, Release toAccounting)

Dr Customer Rs. 125/-

Cr Sale Rs. 100/-

Cr Excise Duty Recoverable Rs. 16/-

Cr Taxes Rs.9/-

During creation of Excise Invoice: (J1IIN)

Dr Excise Duty Recoverable Rs.16/-

Cr Excise Duty Payable Rs.16/-

During Monthly Utilization: (J2IU)

Dr Excise Duty Payable Rs. 16/-

Cr CENVAT Clearing Rs.16/-



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Menu Path:

SPRO Financial Accounting Financial Accounting Global Settings Tax on

Sale and Purchase Define ProcedureProcedure: TAXINJ

The various Condition types applicable in SD are:

Excise Conditions: JMOD, JSED, JAED , JCES, etc.

Tax Conditions:JIN1, JIN2,etc.

Note:

Excise Conditions are statistical. Since, these are determined from SD pricing

procedure

Tax conditions are non-statistical. Since, these are determined from TAXINJWhile defining tax codes (using Transaction Code: FTXP), to maintain Excise

Duty (JMOD) as a changeable field, remove statistical check and maintain 100%

for JMOD. After the changes are made, one has to again put the statistical checksin procedure TAXINJ


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Lets Clarify our Doubts

India Localization-SD Workshop

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