Excise Bond

Definition
A document that effectively licenses a manufacturing plant to remove goods from its premises without paying basic excise duty, on condition that the goods are then exported. An excise bond covers a fixed amount of excise duty. The excise duty of the goods exported under bond cannot exceed the bond value. In the R/3 System, the term "excise bond" also covers letters of undertaking, and all of the excise bond functions apply equally to letters of undertaking, unless stated otherwise.

Use
Master Data
When you obtain a bond from the excise department, enter it in the system. The system numbers each bond automatically.

Day-to-Day Activities
When you assign an ARE-1 to a bond, the system automatically warns you of any reservations that have already been made against the bond. The system keeps track of the bond balance for you. When you post an ARE-1, the bond balance decreases automatically. In the case of running bonds, the balance increases again when you close the ARE-1. Once an excise bond is no longer of any use to you, for example, if it expires or if you have exhausted a fixed bond, you can close it. This prevents any users from using it afterwards.

Reporting
You can use the SAP System to prepare two statutory reports, the Pro Forma of Running Bond Account and the Statement Regarding Export of Excisable Goods. One further report, the Bond Summary Report, gives you an overview of all of your bonds.

letters of undertaking A form of excise bond, as used in India. In most respects the letter of undertaking is the same as an excise bond. However, the letter of undertaking is not printed on stamp paper.

Assigning Excise Bonds to ARE-1s

Use
When you create an ARE-1, you must specify which bond covers it. You can change the bond until such time as you post the ARE-1.

Prerequisites
You have obtained an excise bond from the excise department and you have entered in the system.

Procedure
1. On the Bond/UT-1 Detail tab, enter the number of the excise bond that you want to cover the ARE-1 and the year in which it was issued. 2. Choose . The system displays the bond details. 3. If you want to see which other ARE-1s the bond is already assigned to, choose .

Reservations
Use
The system records the total amount of excise duty from ARE-1s that you have created (but not yet posted) under a given bond. This reservation amount is for information only. It serves to warn you, when you create an ARE-1, that other clerks have already created other ARE-1s under a bond and that they intend to post them under this bond as well.

Activities
When you create a new ARE-1 in the R/3 System, you specify which bond the ARE-1 is covered by. When you do so, the system displays the bond's reservation amount. If the reservation amount is already over the bond balance, you might want to use a different bond, if another one is available. But since the reservation amount is for information only, the decision is up to you.

Posting ARE-1s
Use
When you have created an ARE-1 and the excise officer has confirmed that all the details are correct, you can post the ARE-1. You can still make any changes that you need to before you post it.

Procedure
1. From the SAP Easy Access screen, choose Indirect Taxes Sales/Outbound Movements Exports Under Excise Regulations Exports Central Processing Post ARE-1. 2. In the top line: a. Select Post. b. Select ARE-1 Internal Document. c. Enter the internal ARE-1 number and fiscal year and choose

3. On the Certification Dates tab, enter the date and time that the goods are being dispatched. 4. Save the ARE-1.

Result
The system: Assigns the ARE-1 an official ARE-1 number (see ARE Document Numbering) Clears the excise duty from the bond's reservation amount and debits it to the bond (see Bond Balance)

You can no longer change the ARE-1. However, you can still reverse it, if need be. Otherwise, the next step is to update it.

ARE Document Numbering

Use
In the R/3 System, each ARE document has two numbers: an internal number, which is the number that the system uses to identify the ARE document, and an official number, which corresponds to the serial numbers assigned to you by the excise department for the ARE document forms.

Activities
Customizing
To activate internal numbering, maintain the number range object J_1IINTNUM in Customizing for Logistics General, by choosing Tax on Goods Movements India Tools Number Ranges.

To activate official numbering, maintain the number range object J_1IARE1 for ARE-1s, and J_1IARE3 for ARE-3s. Create a separate number range for each series group.

Day-to-Day Activities
When you create an ARE document, the system automatically assigns it an internal document number. The system only assigns the ARE document an official number when you post it. Both numbers are displayed on the Doc. Details tab. You cannot change either of the numbers manually.

Bond Balance
Use
Each excise bond only covers a limited amount of basic excise duty, the bond value. Every time you post an ARE-1, the system reduces the bond balance automatically.

Features
Every time you post an ARE-1 under a fixed bond, the system debits the excise duty stated on the ARE-1 to the bond, which reduces the bond balance. When the balance reaches zero, the bond is exhausted. Running bonds, on the other hand, are automatically replenished: Once an export is complete and the excise department sends you confirmation that the ARE-1 is correct, the system automatically credits the excise duty back to the bond (but see also Fast Credit). You can check the bond balance at any time in the bond master or the Bond Summary Report. If you want to check the debits and credits on a running bond, use the Pro Forma of Running Bond Account.

bond value. The amount of basic excise duty (BED) that is covered by an excise bond, as agreed with India's Central Board of Excise and Customs. This is the amount of BED that a company is exempt from paying on exports.

bond balance

The amount of money remaining on an excise bond. Example You have a fixed excise bond with a value of INR 10,000. Since you obtained the bond, you have exported goods with a total basic excise duty (BED) of INR 6,000. That means that the bond balance is INR 4,000.

fixed bond An excise bond whose value is the total amount of basic excise duty (BED) that the bond can cover over its entire lifetime. Every time you post an export, the bond value is reduced by the BED amount. Eventually, the net bond value reaches zero and cannot be used any more. Example You have an excise bond with a value of INR 10,000. You export some goods with a basic excise duty value of INR 8,000, then you export some more with a BED value of INR 2,000. The excise bond now expires.

Running bonds An excise bond in which the bond value refers to the maximum amount of basic excise duty (BED) that can be covered at any one time. The net bond value is reduced when you submit an ARE-1, but goes up again once you receive confirmation that the goods have been exported. Example You have an excise bond with a value of INR 10,000. You create an ARE-1 for an export with a BED amount of INR 8,000. The net bond value goes down to INR 2,000. When you receive confirmation that the goods have been exported, the net bond value goes back up to INR 10,000.

Fast Credit

Use

When you close an ARE-1 covered by a running bond, the system credits the excise duty back to the bond automatically. However, some local excise departments may allow you to credit the excise duty back as soon as you receive the countersigned ARE-1 back from the customs department. This procedure is known in the system as fast credit.

Activities
Customizing
If you have a fast credit agreement with its local excise department, enter this information in Customizing for Logistics General, by choosing Tax on Goods Movements India Business Transactions Exports Under Excise Regulations Exports Make Settings for ARE-1 Procedure.

Day-to-Day Activities
If you do not have a fast credit agreement, the system credits the excise duty to the running bond when you close the ARE-1. With fast credit, the system credits the excise duty back to the running bond when you enter the Arrived Back date (see Updating ARE-1s).