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

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

2. 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. Excise duty is a duty on production or manufacture of goods. 4.Excise Duties is Mainly based on 4 M’s 1.It Must be Movable. Inc. | April 14 2004 10 . 3.It must be Manufactured.It Must be Mentioned in Excise laws.It is valuable to Money.

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

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

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

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

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

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

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.

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

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

Inc.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  Delivery  J1IJ (always requires a delivery number)  PGI  Billing 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. | April 14 2004 10 .

In case of Deemed Exports. Inc.e.  However. | April 14 2004 10 . 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. 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. shipping bill. the form used is ARE3. Copyright © 2003 Bristlecone.

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

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

repair etc. 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 utilized towards payment of duty on any final product cleared for home consumption and where for any reason such adjustment is not possible. testing. Copyright © 2003 Bristlecone.…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. 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 manufacture shall be allowed refund of such amount. 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. | April 14 2004 10 . 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.

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

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

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

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

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

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

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

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

Type of Registers: RG23A PART I RG23A PART II RG23C PART I RG23C PART II RG I RG23D Copyright © 2003 Bristlecone. Inc. How the Excise registers are using at Different Business Scenarios and How hese are updating. The SAP captures this requirement. Excise register.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. They have to be printed out monthly and shown to the authorities in the event of an audit. | April 14 2004 10 .

Excise registers. i. Inc. 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. Additional duty. SED. 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. | April 14 2004 10 .e. Basic Excise. 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.

Factory Process. | April 14 2004 10 . Inc. Additional duty. 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.Registers RG23 A – Part I & Part II Material is received in the factory as “for Quality inspection” or “for Direct Input”. etc. Basic Excise. Material after “Quality Inspection” or when used as “Direct Input” will go into the RG 23 A Registers.e. Copyright © 2003 Bristlecone. SED. i.

 However. Inc. These details are entered in the RG23 D register and excise recovered from the customer. Copyright © 2003 Bristlecone. it is not levied again when the goods are sent from the DEPOT. The Excise duty is payable when the goods are sent from the factory. However. | April 14 2004 10 . then the extra excise is paid using a A certificate. while taking sale from the DEPOT and if price escalations happen.Depot Process:  The RG 23 D register is used to update the excise entries in case of Exciseable Depots.

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

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

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

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

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.

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

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 . Inc.

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

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

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. Inc. | April 14 2004 10 .

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

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

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.

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

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

CIN – Master . Inc. | April 14 2004 10 . Excise Indicator for Plant and Customer. 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.

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

| April 14 2004 10 . 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.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Inc.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. | April 14 2004 10 .

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

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

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

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

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