India Localization with respect to SD

T.Muthyalappa
www.bcone.com

Copyright © 2003 Bristlecone, Inc. | Dec 18th 2004

Modus Operandi Session - I
Introduction to Indian Taxes Different Sales processes. CENVAT Concept CENVAT Rules and Terminologies CENVAT and Sales Process. Base for the CENVAT Credit. Tax Procedures. Registers. India Localization Configurations in SD. Master Data. SAP Easy Access settings Relevant For India Localization. Q&A. Conclusion.

Copyright © 2003 Bristlecone, Inc. | April 14 2004 10

Introduction
Hi« Let us Discuss, What are Indian Taxes and how they are differentiated.

Copyright © 2003 Bristlecone, Inc. | April 14 2004 10

Copyright © 2003 Bristlecone. Sales Taxes and Service taxes. Direct Tax ² It consists of the Capital tax and Personnel income tax. Indirect Tax ² Indirect tax constitutes Excise duties. The goods must be excisable. The manufacture or production has to be within India. | April 14 2004 10 . Excise duties : X It must be a duty on the goods. The goods must be manufactured or produced. Inc.Indian tax structure It is of Two Types.Indirect Tax. 1. 2.Direct Tax.

3.It Must be Mentioned in Excise laws. Inc. 4.It must be Manufactured. Excise duty is a duty on production or manufacture of goods. It is a tax levied on manufacture of goods and the liability to pay excise duty arises immediately on manufacture or production of goods Copyright © 2003 Bristlecone.It is valuable to Money. | April 14 2004 10 .It Must be Movable.Excise Duties is Mainly based on 4 M·s 1. 2.

Copyright © 2003 Bristlecone. Inc. Excise Duty is a tax on manufacture of goods but for the sake of administrative convenience. whether the goods are sold or self-consumed. Excise duty does not depend on the end use of the goods. it is collected only on removable of goods from the factory.Once manufacture of goods is complete. excise duty is payable. Sales Tax : Sales Tax is a tax on Sales and can be imposed only when there is a Sale. | April 14 2004 10 .

the soap will be liable to pay excise duty as it has been manufactured. Copyright © 2003 Bristlecone. For example: If a Company manufactures soap within the factory for its own use. Whether these goods are sold are not is immaterial.Difference between Excise duty and Sales Tax. duty can be imposed immediately after goods are manufactured. Sales Tax is a tax on Sales and can be imposed only when there is a Sale. However. So. Central Excise Duty has to be distinguished from Sales Tax. there will be no sales tax on the soap. Inc. Excise Duty is a duty on the manufacture of the goods. On the other hand. | April 14 2004 10 .

either it is for sales or for own consumption. Additional Excise Duty : Excise duty that is Levied to protect the local industries. for example. | April 14 2004 10 . Inc. Copyright © 2003 Bristlecone. which are levied: Basic Excise duty : Excise duty that is levied at the time of the Goods removal. one state may give more subsidies in order to attract the investments or to encourage the industries of that state. This is varies depending on the products. Special Excise duties :Excise duty that is levied in order control the competition between the states. the following are the various types of duties.Types of excise duties Under the excise laws.

the Central Government may levy additional duties at the rate recommended on specified goods. Inc. | April 14 2004 10 .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. Copyright © 2003 Bristlecone.

Exports.Different Sales Process 1. Job works. Auction Sales especially for Scrap. 2.Sales From Depot. | April 14 2004 10 . Stock transfers. Inc. Scrap Sales.Sales From Factory. Copyright © 2003 Bristlecone.

Capital Goods: Is defined as the one which does NOT lose its· own identity in the finished goods. Inc. Copyright © 2003 Bristlecone. In the Process of Manufacturing the Factory uses two kinds of materials.Sales From Factories. Input Material: Is defined as the one which loses its own identity in the finished product. | April 14 2004 10 .

Inc.Sales from Factory J1IEX Capture EI Supplying Plant Excise Invoice J1IIN Dispatch Add up to Excise Duty Payable A/c Copyright © 2003 Bristlecone. | April 14 2004 10 .

Inc. Usually in the stock transfers we create the excise invoice while the goods is moving from plant to Stock yard. From stockyard to customer usually we are not going to create the Excise invoice. There is no price escalations here. | April 14 2004 10 . Copyright © 2003 Bristlecone. In Stock transfers we will transfer the Materials from Plant to plant and Plant to Stock yards. because stock which is coming in to the Stock is not an input. it is just a transfer from one place to other.Stock transfers.

Inc.Depot process Depot is also almost same as Stock yards. but the difference is in Depots. are Price escalations. and here also we are transferring goods from Plant to Depot. In Depots goods is coming as input. Scenario 2: Depot procures goods directly from external sources. | April 14 2004 10 . Copyright © 2003 Bristlecone. Transactions can happen through two scenarios: Scenario1: Depot receives goods from the company·s factory through stock transfer.

Inc. | April 14 2004 10 .Depot Process: For Doing Goods Receipt: Scenario 1: Stock Transfer Step1: Do GR (Transaction code:MB01) Step 2: Excise Invoice Capture at Depot (Transaction Code: J1IG) Scenario 2: Step 1: Do GR (Transaction Code: MIGO) Step 2: Excise Invoice Capture at Depot (Transaction Code: J1IG) At the time of Sale: Sales Order number) PGI Delivery Billing J1IJ (always requires a delivery Copyright © 2003 Bristlecone.

| April 14 2004 10 . Inc.Sales From Depot ME21N J1IIN MIGO J1IG Excise Invoice J1IJ Plant Depot Dispatch Add up to the Excise Duty Payable A/c Reduce the Quantity Copyright © 2003 Bristlecone.

 However. the same procedure is followed as in exports. 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. In case of Deemed Exports. shipping bill. Inc. Copyright © 2003 Bristlecone. However.Export Process  In the process of Exports duty under bond is not payable and the goods move out from the factory against an ARE1. | April 14 2004 10 . the form used is ARE3.

Inc. CENVAT : Amount that is paid on the value that is added at that time of sale to the government.What is CENVAT«!? Commonly used word. when ever discussing on Indian Tax. For Ex. Copyright © 2003 Bristlecone. | April 14 2004 10 .

50 RM-A FG-C RM-B Rs.15 Tax liability: OTL ± CENVAT credit Rs.35: Rs.50 ± Rs 15 Copyright © 2003 Bristlecone.50 ED: Rs.10 Rs. Inc. | April 14 2004 10 .CENVAT Credit Rs.100 ED: Rs.500 ED:Rs.5 Input Tax credit availed: Rs.

| April 14 2004 10 . 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 manufacture shall be allowed refund of such amount. 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. the Cenvat Credit in respect of the inputs so used shall be allowed to be utilized towards payment of duty on any final product cleared for home consumption and where for any reason such adjustment is not possible. Inc. 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. Where any inputs are used in the final products which are cleared for export. Copyright © 2003 Bristlecone. repair etc.«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. testing.

Rule 14. Power of Central Government to notify goods for deemed CENVAT credit. Obligation of manufacturer of dutiable and exempted goods. Transitional provision Rule 10. CENVAT credit. Confiscation and penalty. Short title. Inc. | April 14 2004 10 .Rule 8.Rule 12. Definitions. Refund of CENVAT credit.Rule 5. Transfer of CENVAT credit.Rule 2. Documents and accounts.Rule 9. Supplementary provision Copyright © 2003 Bristlecone.Rule 7. extent and commencement.«CENVAT Rule 1. Conditions for allowing CENVAT credit. Recovery of CENVAT credit wrongly taken.´Actµ ´capital goodsµ ´Customs Tariff Actµ ´exempted goodsµ ´final productsµ ´first stage dealerµ an importer ´inputµ ´manufacturerµ or ´producerµ Rule 3. Special dispensation in respect of inputs manufactured in factories located in specified areas of North East region and Kutch district of Gujarat.Rule 6.Rule 4.Rule 13.Rule 11.

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? Copyright © 2003 Bristlecone. Inc. | April 14 2004 10 .

| April 14 2004 10 . Answer is Tax procedures and Excise registers.7 we are using TAXINN. tax procedure for country India Formula based tax procedure TAXINJ Condition based tax procedure TAXINN Currently From 4. Inc. What are these. SAP provides following std.Tax procedures and Registers. Copyright © 2003 Bristlecone. Settings needed in SAP for TAXINN First we need to Maintain TAXINN procedure as shown in the slide. Now we will going to discuss on Tax Procedures. How we are going for the CENVAT credit in SAP and What is the Base for IT.

Inc. | April 14 2004 10 .Menu path ² SPRO ² Logistic General ² Tax on goods on movement ² India ² Basic Settings ² Determination of Excise duty ² Maintain Excise defaults. Copyright © 2003 Bristlecone.

| April 14 2004 10 . Menu path ² SPRO ² Logistic General ² Tax on goods on movement ² India ² Basic Settings ² Determination of Excise duty ² Select Tax Calculation Procedure. Copyright © 2003 Bristlecone.Then we need to assign the Tax procedure TAXINN to county India As shown below. Inc.

| April 14 2004 10 . Copyright © 2003 Bristlecone.Sales and Distribution Pricing procedure. Inc.

| April 14 2004 10 .Copyright © 2003 Bristlecone. Inc.

| April 14 2004 10 . Inc.Copyright © 2003 Bristlecone.

Inc.Copyright © 2003 Bristlecone. | April 14 2004 10 .

How the Excise registers are using at Different Business Scenarios and How hese are updating. Excise register. Inc. The SAP captures this requirement. They have to be printed out monthly and shown to the authorities in the event of an audit. Type of Registers: RG23A PART I RG23A PART II RG23C PART I RG23C PART II RG I RG23D Copyright © 2003 Bristlecone. | April 14 2004 10 .What is Excise register and how many are they. Excise Laws require you to maintain a number of registers in a specified format relating to excise duty.

Inc. Additional duty. Basic Excise.Excise registers.e. | April 14 2004 10 . 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 while dispatching 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) Copyright © 2003 Bristlecone. i. etc RG23C: Capital Goods RG23CI-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. SED. RG23A: Raw Material 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.

Inc. Material after ´Quality Inspectionµ or when used as ´Direct Inputµ will go into the RG 23 A Registers. SED. etc. i. Copyright © 2003 Bristlecone. 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. Additional duty.Factory Process.e.Registers RG23 A ² Part I & Part II Material is received in the factory as ´for Quality inspectionµ or ´for Direct Inputµ. | April 14 2004 10 . Basic Excise.

while taking sale from the DEPOT and if price escalations happen. it is not levied again when the goods are sent from the DEPOT. 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. Inc. | April 14 2004 10 . However. Copyright © 2003 Bristlecone. The Excise duty is payable when the goods are sent from the factory.Depot Process:  The RG 23 D register is used to update the excise entries in case of Exciseable Depots.  However.

Copyright © 2003 Bristlecone. Inc. | April 14 2004 10 .Depot Process Transactions can happen through two scenarios: Scenario1: Depot receives goods from the company·s factory through stock transfer. Scenario 2: Depot procures goods directly from external sources.

Inc. | April 14 2004 10 .Transaction Codes relevant For Registers. Activity SAP Transactions Register Updates RG23 A (Part I & II and RG I) J1I5 Register Extraction J2I5 Register Printing J2I6 Utilization J2IU Copyright © 2003 Bristlecone.

Inc. Copyright © 2003 Bristlecone.So Far We discussed on Tax Procedures Pricing Procedure Relevant to SD. | April 14 2004 10 . CENAVT registers Transaction Codes.

Tax/Excise Duty set up for MM & SD Basic Settings Master Data Account Determination Business Transactions Tools Copyright © 2003 Bristlecone. | April 14 2004 10 . Inc.

Inc. | April 14 2004 10 .Basic Settings Excise Registration ID·s Company Code Settings Plant Settings Excise Groups Series Groups Excise Duty Indicators Copyright © 2003 Bristlecone.

Inc. Mention whether AED. of line items in outgoing EI Copyright © 2003 Bristlecone. | April 14 2004 10 . If blank will not be available for inputs Permits deductible / non deductible ED at GR Max no.Excise Registration ID·s A number assigned to each premises or location that has registered as a manufacturer with the excise authorities. SED. CESS applicable.

Inc.Company Code Settings User can edit Dr account during JV Utilizes from PLA in JV First month for excise year Excise invoice selection Copyright © 2003 Bristlecone. | April 14 2004 10 .

Plant Settings
Plant defined as Depot or not

Multiple plants to one Excise Registration ID

GRs per EI can be set as below Multi GR ± Multi Credit Multi GR ± Single credit Single GR

Copyright © 2003 Bristlecone, Inc. | April 14 2004 10

Excise Groups
Excise Reg ID linked to Excise group & Plant

Depot definition at Excise Grp & Plant

Copyright © 2003 Bristlecone, Inc. | April 14 2004 10

Series Groups

Copyright © 2003 Bristlecone, Inc. | April 14 2004 10

Excise Tax Indicators Copyright © 2003 Bristlecone. | April 14 2004 10 . Inc.

Inc.Account Determination Describe which excise accounts (for excise duty and CENVAT) are to be posted to for the various transaction types including sub transaction type if any Copyright © 2003 Bristlecone. | April 14 2004 10 .

| April 14 2004 10 . Company code & Chart of accounts Copyright © 2003 Bristlecone. Inc.During transactions system determines which G/L accounts to post to by looking at the: Excise group.

Copyright © 2003 Bristlecone. Inc. | April 14 2004 10 .SD settings Relevant to India Localization. Assigning Billing types to Delivery Types.

Copyright © 2003 Bristlecone. Inc. | April 14 2004 10 . Maintain the Excise Defaults in order determine Excise group and Series Group Automatically at the time of Excise invoice creation.Maintain Excise Defaults.

Copyright © 2003 Bristlecone.Maintain Utilization Determination. | April 14 2004 10 . Inc.

Copyright © 2003 Bristlecone. | April 14 2004 10 .Maintain Scripts for Registers. Maintain the Excise registers Form along with company code to get the Print out put for Excise Registers. Inc.

Copyright © 2003 Bristlecone.J1ID Maintain Chapter ID·s Excise Duty Indicators Determination of Excise Duty Material and Chapter ID Combination Customer Excise Details Excise Indicator for plant.CIN ² Master . | April 14 2004 10 . Inc. Excise Indicator for Plant and Customer.

| April 14 2004 10 .J1ID Screen. Copyright © 2003 Bristlecone. Inc.

Inc.Excise rate Determination Get SSI duty Rates. Yes Is the Customer SSI? No Get Excep duty rates Yes Excp rates Maintained? Get Ch ID Of the material Get Customer Excise indicator Get plant Excise indicator Get final Excise indicator Get rate Based on Ex Ind & CH ID No Copyright © 2003 Bristlecone. | April 14 2004 10 .

| April 14 2004 10 .Let us Discuss on Sap Easy Access relevant to India Localization. Copyright © 2003 Bristlecone. 1.Creation Excise Invoice. Print registers. Utilization determination. Pass JV by using J1IH. Extracting Registers. Inc. Updating the Registers.

Inc.Creation Of Excise invoice We will create the Excise invoice with reference to Commercial invoice it may be Proforma or Normal invoice. Copyright © 2003 Bristlecone. | April 14 2004 10 .

Copyright © 2003 Bristlecone. Inc. | April 14 2004 10 .

Register Updation By using J1I5. Inc. Copyright © 2003 Bristlecone. First We need to update the RG1 register by selecting the class RMA and ROP. | April 14 2004 10 .

| April 14 2004 10 .Copyright © 2003 Bristlecone. Inc.

Inc. | April 14 2004 10 .Once u complete the RG1 updation with RMA and ROP we need to do for IDH for ISSUES Copyright © 2003 Bristlecone.

Copyright © 2003 Bristlecone. Inc. it gives the following result.Then continue the next step as shown in Slide 55. | April 14 2004 10 .

We need select the RG1 in the initial screen and execute. | April 14 2004 10 . Copyright © 2003 Bristlecone. Inc.Extract the Excise registers.

Inc. | April 14 2004 10 .System give the following screen. Copyright © 2003 Bristlecone.Click on continue.

To do this First we need to maintain the Values in table J_2IRG1BAL as follows. | April 14 2004 10 . Inc.Print the Excise register. Copyright © 2003 Bristlecone.

Too print Excise registers use T. Copyright © 2003 Bristlecone. System gives the all details of RG1 Register. J2I6.C. Inc. | April 14 2004 10 .

Inc. Copyright © 2003 Bristlecone. Utilization to be done against the last month·s incoming excise duties and CVD. | April 14 2004 10 .CENVAT Utilization Payment to be made to Excise Department for the Self ²Removals for the last month. CENVAT utilization to be done before the 5th of next month.

CENVAT Availment and Utilization On-Line Transactions Goods Receipt Credit CENVAT on-hold A/c CENVAT on hold for Capital goods Sales Excise Invoice Process Debit ED Payable A/C Despatch Vendor Excise Invoice Process CENVAT Account Credit CENVAT A/c Debit CENVAT A/c Excise Duty Payable Account Fortnightly Transactions Deposit funds in PLA Account Select Register Credit ED Payable A/C Excise Duty Utilization Transaction Credit PLA A/c PLA Account Debit PLA A/c Copyright © 2003 Bristlecone. Inc. | April 14 2004 10 .

Do Fortnight Utilization of cenvat. Copyright © 2003 Bristlecone. | April 14 2004 10 . Inc.

Inc.Copyright © 2003 Bristlecone. | April 14 2004 10 .

| April 14 2004 10 .Pass JV by using J1iH. Inc. Copyright © 2003 Bristlecone. Use of JV is to adjust amount in RG23A and RG23C In JV we use other adjustments to Debit the amount from the Registers.

Copyright © 2003 Bristlecone. Inc. | April 14 2004 10 .

| April 14 2004 10 .Copyright © 2003 Bristlecone. Inc.

Inc. | April 14 2004 10 .Additional excise is used to Credit the Registers through J1IH. Copyright © 2003 Bristlecone.

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 Copyright © 2003 Bristlecone. Inc. | April 14 2004 10 .

Inc.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 Copyright © 2003 Bristlecone. | April 14 2004 10 .

| April 14 2004 10 .FI Entries related to Excise in SD During the passing of Billing document to Accounting: (VF02.9/- Cr Excise Duty Recoverable Cr Taxes During creation of Excise Invoice: (J1IIN) Dr Excise Duty Recoverable Cr Excise Duty Payable During Monthly Utilization: (J2IU) Dr Excise Duty Payable Rs.16/Rs. Release to Accounting) Dr Customer Cr Sale Rs. 100/Rs. 125/Rs. Inc.16/- Cr CENVAT Clearing Copyright © 2003 Bristlecone. 16/Rs.16/Rs. 16/Rs.

Note: ‡Excise Conditions are statistical. | April 14 2004 10 Tax on Sale .etc.Information on Tax Procedure and Conditions Menu Path: SPRO Financial Accounting Financial Accounting Global Settings and Purchase Define Procedure Procedure: TAXINJ The various Condition types applicable in SD are: ‡Excise Conditions: JMOD. Inc. remove statistical check and maintain 100% for JMOD. one has to again put the statistical checks in procedure TAXINJ Copyright © 2003 Bristlecone. etc. Since. these are determined from SD pricing procedure ‡Tax conditions are non-statistical. these are determined from TAXINJ ‡While defining tax codes (using Transaction Code: FTXP). JCES. JSED. After the changes are made. JIN2. ‡Tax Conditions:JIN1. Since. to maintain Excise Duty (JMOD) as a changeable field. JAED .

| April 14 2004 10 .Lets Clarify our Doubts« Copyright © 2003 Bristlecone. Inc.