Chapter-1

Materials Management (MM)

Purpose
The Materials Management (MM) component covers the most important laws and business practices
specific to India. The following documentation describes these aspects of the component.

Features
Country-Specific Functions
Country Version India comes with functions for calculating, posting, remitting, and reporting excise duty,
and for handling incoming and outgoing excise invoices.
For these purposes, extra fields are available in the vendor master data and material master data for
information required in India only.
Country Version India offers two ways of calculating excise duty, a condition-based method and a
formula-based method.
You can enter incoming excise invoices in the SAP system for goods receipts arising from external
procurement, subcontracting, and stock transfer. Excise clerks can capture incoming excise invoices
using a dedicated transaction, or, alternatively, warehousemen can capture them in the standard Goods
Movement transaction, MIGO, when they enter a goods receipt.
Finally, you can prepare copies of all excise registers for submission to the excise authorities.

Country Template
The country template for India comes with settings for calculating and posting all forms of taxes from MM,
and with the necessary document copying control settings.

Chapter-2

Excise Invoice (Incoming)

Definition
A business document, in India, that your vendor sends you when it delivers excisable goods. It lists the
goods and states how much excise duty applies on them. Your use the excise invoice to claim back the
excise that you have paid from the excise authorities.

Use
When you procure goods externally, each delivery that your vendors make is accompanied by an excise
invoice. You have to post these in the system. This document is required as proof of the excise duty that
you have paid, so that you can then offset the duty against the excise duty that you levy on outputs.
You can capture and post excise invoices in one or two steps, depending on your business requirements.

In the two-step procedure, the excise clerk captures the incoming excise invoice. This means that
the clerk enters the data, but the system does not yet create an entry in Part II of the appropriate
excise register. Another user (the excise supervisor) checks the excise invoice and posts it. The
system then creates a Part II entry.

In the one-step procedure, the excise clerk captures and posts the incoming excise invoice
simultaneously. The system creates the Part II entry automatically.
Generally speaking, you have one excise invoice for each goods receipt, but see also Multiple Goods
Receipts for a Single Excise Invoice.
See Below

{{{{{{((( (

Multiple Goods Receipts for a Single Excise Invoice

Use
Under normal circumstances, your vendors send you one excise invoice per delivery.
Sometimes one excise invoice covers more than one delivery, for example, if you
order a large quantity of oil and the vendor requires several trips to complete the
delivery.

Prerequisites
You have specified the maximum number of goods receipts per excise invoice per
excise group, and whether you want multiple goods receipts with single or multiple
CENVAT credits. You do so in Customizing for Logistics General, by choosing Taxes on
Goods Movements India Basic Settings Maintain Excise Groups.
You have also specified which materials multiple goods receipts are allowed for. If
you do not, the system will display a warning for each material when you come to
post the excise invoice (see Material Master (Excise Data)).

Features
The system allows you to control:

Which of your excise groups allow multiple goods receipts (see above)

Which materials you allow multiple goods receipts for (see above)

When to credit the excise duty on the goods to your CENVAT account, either:

As soon as the accounts supervisor has verified and posted the excise
invoice, irrespective of whether the delivery has been made in full

Whether to wait until the full quantity has been delivered

You have ordered a consignment of INR 800,000 worth of fuel from a vendor with excise
duty at INR 80,000. The vendor sends the fuel in two batches. When the first batch arrives,
the warehouseman posts the goods receipt for INR 400,000 (plus INR 40,000 of duty); the
excise supervisor does not post the excise invoice for the quantity delivered. When the
second batch arrives, you can credit INR 80,000 to your CENVAT account.

Activities
Working with multiple goods receipts entails the following activities:

Posting goods receipts

When you post a second (or third, or fourth) goods receipt for an excise invoice, the system
prompts you to confirm that this is correct.

Posting excise invoices

When you come to post an excise invoice, the system displays all the receipts created for the
invoice. If at material level multiple credit is disallowed, the system prompts you to confirm that you
want to accept the credit. Otherwise, you can credit the CENVAT account for each receipt
separately.

Structure
In the SAP system, the excise invoice consists of header data and line items. The header data
comprises:

An internal number

The excise invoice number

The date of the excise invoice

The details of the original vendor who generated the excise invoice, if your vendor purchased the
goods from another vendor and was merely selling them on to you
At line item level, the excise invoice lists the materials on the excise invoice, showing the following
information:

Chapter ID

Quantity of materials

Excise duty base amount

Rates of excise duty

Amount of duty paid

))))}}}}}}}}}}}

Chapter 3.

Material Master (Excise Data)

Definition
The part of the material master record where you record excise information.
To access the material master, from the SAP Easy Access menu, choose Logistics Materials
Management Material Master Material
The excise data is displayed in a separate group box on the Foreign Trade: Import Data and Foreign
Trade: Export Data tabs.

Use
Customizing
In order for the users to be able to see the excise data group box, carry out the IMG activity in
Customizing for Logistics General, by choosing Taxes on Goods Movements India Master Data
Assign Users to Material Master Screen Sequence for Excise Duty.

Chapter 4

Vendor Master (Country Version India Data)

Definition
The part of the vendor master record where you record information about a vendor relating to sales tax,
excise duty, and withholding tax.
To access the vendor master, from the SAP Easy Access screen, choose Logistics Materials
Management Purchasing Master Data Vendor Central .

Use
When you have entered the vendor that you want to process, you can access the excise data from every
screen, by choosing CIN Details.
There are three separate tabs, one for each sort of tax.
If you prefer, you can also maintain this data in the Excise Rate Maintenance transaction (see Vendor
Master (Excise Data)).

Chapter 5

Condition-Based Excise Determination

Use
When you enter a purchasing document, for example, a purchase order, the system automatically
calculates the applicable excise duties using the condition technique.

Features
The standard system comes with two tax calculation procedures. TAXINN is only supports conditionbased excise determination, whereas TAXINJ supports condition-based excise determination and
formula-based excise determination.
Both tax procedures contain condition types that cover all of the excise duties and sales taxes applicable.
Since the exact rates of excise duty can vary on a large number of factors, such as which vendor you
purchase a material from, or which chapter ID the vendor stocks the material under, you create condition
records for every sort of excise duty.
When you come to enter a purchasing document, the system applies the excise duty at the rates you
have entered in the condition records.

Activities
Customizing
Make the settings in Customizing for Logistics General, by choosing Taxes on Goods Movements
India Basic Settings Excise Duties Using Condition Technique and Account Determination.
These activities include one activity where you define a tax code for condition-based excise
determination.

Master Data
Create condition records for all excise duties that apply, and enter the tax code for condition-based excise
determination in each.

Day-to-Day Activities
When you enter a purchase order or other purchasing document, enter the tax code for condition-based
excise determination in each line item. The system then calculates the excise duties using the condition
records you have created.
When the ordered materials arrive, you post the goods receipt and the excise invoice. The system posts
the excise duty to the appropriate accounts for deductible input taxes when you enter the excise invoice.

Chapter 6

Creating Condition Records for Excise Duty

1. In the command field, enter FV11 and choose

2. Enter the condition type that you want to create a condition record for and choose

The Key Combination dialog box appears.

3. Select the combination of objects that you want to create the condition record for.
On the dialog box, Control Code means "chapter ID."
So, for example, to create a condition record for a tax that applies to a combination of country,
plant, and chapter ID, select Country/Plant/Control Code.
4. Choose .
5. Enter data as required.
In the Tax Code field, enter the dummy tax code that you have defined.
6. Save the condition record.

Chapter 8.

Creating Condition Records for Excise Duty

1. In the command field, enter FV11 and choose .
2. Enter the condition type that you want to create a condition record for and choose

The Key Combination dialog box appears.

3. Select the combination of objects that you want to create the condition record for.
On the dialog box, Control Code means "chapter ID."
So, for example, to create a condition record for a tax that applies to a combination of country,
plant, and chapter ID, select Country/Plant/Control Code.
4. Choose .
5. Enter data as required.
In the Tax Code field, enter the dummy tax code that you have defined.
6. Save the condition record.

Chapter 9.

Configuration of Tax Calculation Procedure TAXINN

Purpose
TAXINN is a tax calculation procedure for country version India and it supports
condition-based excise determination. You need to configure this tax calculation
procedure.

Process Flow
Execute the following steps in the Implementation Guide to configure the tax
calculation procedure TAXINN:
Procurement
1. ...
1. Set up the following Access Sequences in the the IMG under Financial Accounting
Financial Accounting Global Settings Tax on Sales/Purchases Basic Settings
Check Calculation Procedure Access Sequences:

JTAX
JST1

2. Set up the Condition Types for the following conditions in the IMG under Financial
Accounting Financial Accounting Global Settings Tax on Sales/Purchases Basic
Settings Check Calculation Procedure Define Condition Types:
1. MM Excise Conditions

JMOP
JMOQ
JAOP
JAOQ
JSOP
JSOQ
JMIP
JMIQ
JAIP
JAIQ
JSIP
JSIQ
JMX1
JAX1
JSX1

IN: BED setoff %

IN: BED setoff Qty
IN: AED setoff %
IN: AED setoff Qty
IN: SED setoff %
IN: SED setoff Qty
IN: BED inventory %
IN: BED inventory Qt
IN AED inventory %
IN AED inventory Qty
IN SED inventory %
IN SED inventory Qty
IN: A/P BED setoff
IN: A/P AED setoff
IN: A/P SED setoff

JMX2
JAX2
JSX2
JECP
JECI
JEX1
JEX3

IN: A/P BED inventor

IN: A/P AED inventor
IN: A/P SED inventor
IN:A/P e-cess setoff
IN: Eces inventory
IN: A/P ecs setoffT
IN: A/P ecs invT

1. LST/CST/VAT Conditions

JIPS
JIPC
JIPL
JIP5

IN Sales tax setoff

IN Central sales tax invoice
IN Local sales tax invoice
A/P RM Deductible

1. Service Tax Conditions

JSRT
JEC3

A/P Service Tax

A/P ECS for ST

3. Define the Tax Procedure according to the settings in the figures below.
You can do this in the IMG under Financial Accounting Financial Accounting Global Settings
Tax on Sales/Purchases Basic Settings Check Calculation Procedure Define Procedures.

4. Set up the following Account Key in the IMG under Financial Accounting Financial
Accounting Global Settings Tax on Sales/Purchases Basic Settings Check and
Change Settings for Tax Processing.
1. VS6
Input Tax
5. Assign Tax Procedure to the country.
You can do this in the IMG under Financial Accounting Financial Accounting Global Settings
Tax on Sales/Purchases Basic Settings Assign Country to Calculation Procedure.

Sales
2. ...
6. Set up the Condition Types for the following conditions in the IMG under Financial
Accounting Financial Accounting Global Settings Tax on Sales/Purchases Basic
Settings Check Calculation Procedure Define Condition Types:
1. Excise Conditions

JASS
JEXP
JEXQ
JEAP
JEAQ
JESP
JESQ
JCEP
JCEQ
JEXT
JEAT

IN
IN
IN
IN
IN
IN
IN
IN
IN
IN
IN

A/R
A/R
A/R
A/R
A/R
A/R
A/R
A/R
A/R
A/R
A/R

BED
BED
BED
AED %
AED Qty
SED %
SED Qty
CESS %
CESS Qty
BED total
AED total

JEST
JCET
JECT

IN A/R SED total

IN A/R CESS total
IN A/R ECS total

1. LST/CST/VAT Conditions

JCST
JCSR
JLST
JLSR

IN
IN
IN
IN

A/R
A/R
A/R
A/R

CST
CST Surcharge
LST
LST Surcharge

1. Export Conditions

JFRE
JINS

IN Frieght
IN Insurance

7. Set up the Access Sequence in the the IMG under Financial Accounting Financial
Accounting Global Settings Tax on Sales/Purchases Basic Settings Check
Calculation Procedure Access Sequences:
8. Set up the following Pricing Procedures according to the settings in the figures
below.
You can do this in the IMG under Sales and Distribution Basic Functions Pricing Pricing
Control Define And Assign Pricing Procedures.

1. JDEPOT (IN:Depot sale with formula)

1. JEXPOR (IN:Export sales with formula)

1. JFACT (IN:Factory sale with formula)

1. JSTKTR (IN:Stock transfer with formula)

Chapter 10.

External Procurement (Domestic)

Purpose
This process illustrates how manufacturing plants can use the SAP system to
procure excisable goods.
In addition to the standard procedure, you also have to capture and post the
incoming excise invoice, and the system creates the appropriate entries in the
excise registers.

Process Flow
3. ...
9.

1. You create a purchase order for the goods you want and send it to the
vendor.
After a few days, the vendor sends you the goods together with an excise invoice.

10.

2. When the goods arrive at your company, the warehouseman enters the
goods receipt.
The system:

Creates a material document to record the goods receipt

Creates an accounting document to debit the inventory account and

credit the GR/IR clearing account:

Creates a Part I entry in register RG 23A or 23C

Note that if you first want to post the goods to blocked stock, for any reason, do so using the
standard procedure. The excise clerk then captures the excise invoice as normal.

11.

3. The excise clerk captures the excise invoice.

For information about what to do if the vendor sends the goods in more than one delivery, see
Multiple Goods Receipts for a Single Excise Invoice.

12.

4. The excise supervisor checks the excise invoice captured by the clerk,
makes any changes necessary, and posts it.
The system automatically debits the excise duty to the excise duty accounts and credits the
CENVAT clearing account:

It then creates a Part II entry in register RG 23A or 23C to record this posting.

13.

5. You enter the vendor's invoice, following the

standard procedure.

If the excise supervisor has reduced the amount of excise duty that is to be credited to the CENVAT
account, the system adds the difference to the material price.
The system also creates an accounting document. The document contains debit postings to clear
the clearing accounts for goods receipts and CENVAT; and a credit posting to create an open item
on the vendor's account:

Alternatives
The above procedure is just one way of using the SAP system to handle incoming
excise invoices. If your business processes differ from the procedure described
above, there are a number of alternatives available to you.

One-Step Procedure
In the procedure described above, the excise clerk captures the excise invoice and
the excise supervisor posts it (the two-step procedure). If you want, you can have
one person perform both of these activities in a single step, using the transaction
under Indirect Taxes Procurement Excise Invoice Incoming Excise Invoice Central
Processing Capture/Change/Cancel/Display/Post.

Capture Excise Invoice and Goods Receipt Combined

Steps 23 involve two different system transactions (goods receipt and excise
invoice capture). You can combine these two steps one, if you wish, so that the
warehouseman can capture the excise invoice at the same time as he enters the
goods receipt (see Goods Receipts and Incoming Excise Invoices Combined).
If you want, he can even capture and post the excise invoice at the same time.

Capture Excise Invoice Before Goods Receipt

In the procedure described above, the goods receipt is entered before the excise
invoice. However, your business processes may require you to capture the excise
invoice before the goods receipt.

When the warehouseman enters the goods receipt, the system adjusts the material
value for any changes to the taxes that the clerk has made in the captured excise
invoice. An accounting document to debit the inventory account and credit the
GR/IR clearing account is created.

Chapter 11.

Entering Goods Receipts

Use
In this procedure, you enter the goods receipts, following the

standard procedure. In addition:

You enter the number of the excise invoice, if it is available

The system automatically creates an entry in Part I of the excise register RG 23A or RG 23C

This procedure only applies if the warehouseman is not entitled to enter excise invoices himself (see
Goods Movements and Excise Documents Combined).

Prerequisites
You have specified whether you want the system to create a Part I entry when you post goods receipts to
blocked stock, for stock transport orders, and to consumption stock. You do so in Customizing for
Logistics General, by choosing Taxes on Goods Movements India Basic Settings Maintain
Excise Groups.

Procedure
1. From the SAP Easy Access screen, choose Logistics Materials Management Inventory
Management Goods Movement Goods Receipt For Purchase Order GR for Purchase
Order.
2. In the top line, enter the purchase order number and choose
.
A dialog box appears.
3. Enter data as required:
o

If you have not yet captured the excise invoice:

Leave the Excise Invoice field blank.

Fill out all of the other fields.

If you have already captured the incoming excise invoice, enter the excise invoice
number.

4. To close the dialog box, choose

If you choose , the system will not make an entry in Part I of the excise register, in which case
you must update the register later.
5. Check that all the line items are correct, and adjust them as required.
6. Save the goods receipt.

Entering and Verifying Invoices

Follow the standard invoice verification procedure, but select Calculate tax on the Vendor Items screen.
The system proposes the deductible excise duty items in the invoice document.

Import Case.
Chapter 12.

External Procurement (Imports)

Purpose
This process shows you how to handle the countervailing duty (CVD) on imports, which is levied in place
of excise duty. Unlike other forms of customs duties, such as basic customs duty or special customs duty,
you can credit CVD paid on imports to your CENVAT account.

Prerequisites
Vendor Master Record for Customs Office
Create a vendor master record for the customs office, so that you can create liabilities for the CVD (see
step 3 in the process flow).

Condition Type for CVD

The system handles CVD using a condition type for planned delivery costs. Specify which condition type
you use in Customizing for Logistics General, by choosing Taxes on Goods Movements India
Basic Settings Determination of Excise Duty Excise Defaults.
For more information, see

CVD Clearing Account

Planned Delivery Costs.

When you post CVD to a CENVAT account (see step 5 below), the system debits the CVD to the BED
account and credits it to a CVD clearing account.
Specify which G/L account you want to use as the CVD clearing account, in Customizing for Logistics
General, by choosing Taxes on Goods Movements India Basic Settings Maintain Company Code
Settings.

Process Flow
1. You create a purchase order for the goods that you want and sent it to the vendor.
For each material that you will have to pay CVD on when it comes through customs, you enter
the CVD as a pricing condition.
2. The vendor ships the goods to you.
When the goods arrive in India, they go through customs. The customs officers issue a bill of
entry for the goods, which is in effect an invoice for the CVD on the goods. Once they have
inspected the goods, they send them on to you.
3. The goods arrive at your plant, together with the bill of entry. In order to record the bill of entry in
the system:
a. The excise clerk enters an invoice for the bill of entry
In Accounts Payable (FI-AP), the system creates a new vendor item for the CVD at the
customs office. The item is offset to the CVD clearing account.
b. He then captures an excise invoice for the bill of entry
4. The warehouseman posts the goods receipt.
5. The excise supervisor posts the excise invoice.
6. The excise clerk enters the vendor invoice for the materials, following the

standard procedure.

Chapter 14

Creating Purchase Orders

Use
You follow this procedure to create a purchase order for imports.
Country Version India contains a sample pricing procedure for imports, JIMPOR.

Procedure
Create a purchase order for the materials that you want to order using the
standard procedure, but
when you fill out the item information, make sure that you observe the following:

Invoice tab
o

Enter a zero-rate tax code

Deselect GR-based IV

Conditions tab
a. Select the countervailing duty (CVD) condition and choose

b. In the Rate field, enter the rate of CVD that will be levied on the material when it arrives
at customs.
c.

In the vendor field, enter the vendor master record that you have created for the customs
office.
Then, once the vendor has delivered the goods and you enter the invoice, the system will
automatically credit the CVD liability to the customs office.

Chapter 15.

Entering Invoices for Bills of Entry

To enter an invoice for a bill of entry, you follow the
sure you observe the following:

standard invoice verification procedure, but make

Header Data

Basic data tab

o

In the Amount field, enter the amount of countervailing duty (CVD) stated on the bill of
entry in rupees.

Do not enter any other taxes.

Details tab
o

Assuming you specified in the purchase order that the CVD was to be paid to the
customs office, the system shows the customs office as the vendor. If not, enter the
customs offices vendor master record in the Inv. party (Invoicing party) field.

Line Items
On the PO reference tab, enter data as follows:
1. Enter the number of the purchase order related to this delivery.
o

If you only created one purchase order for the goods, enter the purchase order number
and select Planned delivery costs.

If you sent more than one purchase order to the vendor and it sent you all of the
ordered materials together in one shipment:
i.

Choose

ii.

Enter all of the purchase order numbers in the table.

iii.

Select Planned delivery costs.

iv.

Select Deliveries and deselect Returns.

v.

Choose

Adopt.

In both cases, the system displays the line items in the line item overview.
2. For each line item:
o

In the Amount field, enter the amount of CVD on the item (if you have more than one
item, you may have to work the amount out manually).

In the Quantity field, enter the quantity of goods on the invoice.

Enter a zero-rated tax code.

3. Choose

Simulate.

A dialog box appears with a list of the postings that will be made to Financial Accounting (FI).
4. Choose

Post.

Chapter 16

Capturing Excise Invoices for Bills of Entry

1. From the SAP Easy Access screen, choose Indirect Taxes Procurement Excise Invoice
Incoming Excise Invoice Individual Processing Capture/Display.
2. In the top line:
a. Select Capture Excise Invoice
b. Select Purchase Order.
c.

Enter the purchase order related to the bill of entry.

d. Choose

A dialog box appears.

3. Enter the number of the invoice that you entered for the bill of entry and choose
.
4. If you need to enter any other purchase orders, enter the number in the top line as for step 3.
Note that this time, you do not need to enter the invoice number.
5. Enter other data as required.
Note that the countervailing duty is displayed in the basic excise duty fields.
6. Save the excise invoice.

Chapter 17

Entering Goods Receipts

Use
In this procedure, you record the receipt of the goods from the vendor abroad, following the
procedure.

standard

Procedure
1. From the SAP Easy Access screen, choose Logistics Materials Management Inventory
Management Goods Movement Goods Receipt For Purchase Order GR for Purchase
Order.
2. In the top line, enter the purchase order number and choose
.
A dialog box appears.
3. Enter the number of the excise invoice that you created for the bill of entry and choose
.
4. If you need to enter more purchase orders for example, if you sent the vendor more than one
purchase order and it sent you back all the ordered materials in a single delivery for each
purchase order, enter the number in the top line and choose
.
5. Check that the line items in the goods receipt are correct.
6. Save the goods receipt.

Result

The system creates:

A goods receipt document

An accounting document

An entry for the goods receipt in Part I of the appropriate excise register

Chapter 18.

Posting Excise Invoices

1. From the SAP Easy Access screen, choose Indirect Taxes Procurement Excise Invoice
Incoming Excise Invoice Individual Processing Change/Display/Post/Cancel.
2. Select Post CENVAT and Vendor Excise Invoice.
3. Enter the number of the excise invoice that you created for the bill of entry.
4. Check that the data is correct.
5. Choose

Simulate CENVAT.

A dialog box appears with a list of the accounting entries that will be made to transfer the CVD
from the clearing account to the excise duty account.
To close the dialog box, choose

6. If the data is correct, choose Post CENVAT.

The system posts the CENVAT and creates a corresponding entry in Part II or the appropriate
excise register.

Chapter 19.

Subcontracting
Use
If you work with subcontractors, there are two ways of handling the excise invoice on the goods that you
provide them with:

Subcontracting without payment of excise duty

Subcontracting under full payment of duty

Country Version India supports both of these approaches.

For information about the standard subcontracting procedure in the SAP System, see

Subcontracting.

Chapter 20.

Subcontracting Without Payment of Excise Duty

Purpose
When you issue materials to a subcontractor, you need to keep track of what materials you have issued
and when they have to be returned by.
The reason for this close monitoring has to do with Indias tax law. Under excise law 57AC, when you
send materials to a subcontractor for processing, you are not required to pay any excise duty, even
though the materials have left your premises. However, if the materials have not been returned to you
within a given length of time specified by the law (in 2000, 180 days), you will have to reverse any excise
credit that you posted when you purchased the materials (see Completion, Reversal, and Recredit). In the
case of materials that you have manufactured in-house, you will have to post credit entries to the extent of
the CENVAT rate of the assessable value of the materials.

Prerequisites
You have made the Customizing settings in Customizing for Logistics General, by choosing Taxes on
Goods Movements India Business Transactions Subcontracting.
You have made the Customizing settings for the accounting postings in Customizing for Logistics
General, by choosing Taxes on Goods Movements India Account Determination.
You have set up the number range for the subcontracting challan in Customizing for Logistics General,
by choosing Taxes on Goods Movements India Tools Number Ranges.
You have maintained the subcontracting information in the material masters (see Material Master (Excise
Data)).
You have made the following settings in Customizing for Materials Management Inventory
Management and Physical Inventory:

Goods Issue/Transfer Postings Define Screen Layout.

For movement type 541, in the Change View Field Selection Overview, pick the 541 movement
type and in the Select Group Materials Management, make the Purchase Order field an optional
entry.

Output Determination Maintain Output Types

Output Determination Assign Forms and Programs

Output Determination Printer Determination Printer Determination by Plant/Storage

Location

Process Flow
1. You create a subcontract order for the goods that you want to subcontract.
2. You create a transfer posting order for the materials that are to be sent to the vendor. This
document is, however, for your own use only.
3. You create a subcontracting challan on the basis of the transfer posting order.

This is the consignment document that you will send to the subcontractor along with the materials
that are to be processed.
4. You send the materials to the subcontractor, along with a printout of the subcontracting challan.
5. The subcontractor processes the materials and returns the finished goods. When the goods are
delivered back to you, the storeperson posts the goods receipt and the challan.

The delivery may not necessarily cover all the goods from the challan: It may also include goods
from a number of different challans. The SAP functions allow for this eventuality.
6. The excise department reconciles the goods receipt against the challan, thereby accounting for
the return of the materials that you have sent for subcontracting.
The challans here include those that have been captured online at the time of goods receipt and
those entered manually.
7. You create a list of the outstanding challans.
8. You complete the challan.
If a subcontractor fails to return all the materials within the time allotted, you have to scrap the
material by specifying it as such in the bill of material for the parent material then assigning the
bill of material to the subcontracting purchase order. If the scrap generated is not returned by the
subcontractor, excise duty relevant to the scrap generated has to be paid. If this scrap is returned
after the duty has been paid, an excise journal voucher should be created to reverse the excise
duty paid.

Alternatives
The procedure given in step 5 shows how to enter the goods receipt using the old Goods Movement
transaction. If you want to use the new Goods Movement transaction, MIGO, see Entering Goods
Receipts and Subcontracting Challans Together.

Chapter 21.

Subcontracting Challan
Definition
A document that you use to issue and track subcontracting work. It allows you to make sure that all the
materials you have sent to the subcontractor for processing are returned.

The challan is also widely known as the 57F4 challan, after the law under which it was
defined up until the 2000 budget. This law has now been superceded by a new one,
57AC.

Use
You create challans from transfer orders to accompany any materials that you send to subcontractors
under rule 57AC. In this respect, they are an extended form of delivery note, with additional information
about the excise duty on each material that you have supplied. Materials that are not liable to excise duty
do not have to be included in the challan.
As the subcontractors return the finished goods to you, you record the returns in the challan, to make sure
that all are returned within the allotted time limit.
If the finished goods returned to you by the subcontractor are of substandard quality, you can also create
a subcontracting challan from the returns order.

Structure
The challan consists of a header and line items. The header, in addition to organizational data, allows you
to enter:

Preprinted number
Additional data

Identification marks

Nature of processing

Furthermore, each challan has two numbers, an internal document number and a challan number, which
the system assigns to the challan when you save it. From a business perspective, this is the most
important number. Each challan also has a status, which shows you what stage in processing it is at.
The line items are copied across from the transfer posting when you create the challan. You can also
enter additional data for each item.

Chapter 22.

Processing Subcontracting Challans

To access the individual functions shown in the table, from the SAP Easy Access screen, choose Indirect
Taxes Procurement Subcontracting Subcontracting Challans
Function

Follow-on menu path

What you should know

Create a challan

Create.

See Creating Subcontracting Challans

Print a challan

Create or
Change.

See Printing Subcontracting Challans.

Change a challan

Change.

You can only change challans with the status

Posted.
Furthermore, you can only change data that relates
to the challan printout. If you need to change
accounting data, you must delete the challan and
create a new one.

Cancel a challan

Change

To save the cancellation, save the challan.

The challan status changes to Canceled.

Complete/Reverse/Recredit

Complete a challan

See Completing Subcontracting Challans.

The challan status changes to Completed.

Reverse the excise

duty credit

Complete/Reverse/Recredit

Recredit the excise

duty

Complete/Reverse/Recredit

Reconcile
quantities

Reconcile Quantity

See Reversing Excise Duty Credit.

The challan status changes to Reversed.
See Recrediting the CENVAT Account.
The challan status changes to
Reversed/completed.
See Reconciling Quantities.
The challan status changes to Assigned/fully
reconciled.

Chapter 23.

Creating Subcontracting Challans

1. From the SAP Easy Access screen, choose from the SAP Easy Access screen, choose Indirect
Taxes Procurement Subcontracting Subcontracting Challans Create.
2. Enter the following data:
o

Material Document: The transfer posting document number

Material Document Year: The year that you created the transfer posting document

Excise Group

Series Group

3. Choose

The system calculates the excise duty for the materials.

4. Specify which excise invoice the materials are from.
Once you have assigned the materials to an invoice, the system reads how much excise duty you
have paid on the materials that you are sending.
5. If you want to print the challan straight away, select Print immediately on the Posting tab.
6. Change the posting date, if necessary.
This is the date from which the system calculates the return due date. It is set by default to the
days date. However, you can change it you need to.
7. Save the document.

Chapter 24.

Calculation of Excise Duty on Materials for Subcontractors

Use
When you send materials to a subcontractor for processing, you have to determine
how much excise duty is applicable. This of course depends on the base value. The
different amounts of excise duty (basic excise duty, special excise duty, and
additional excise duty) are printed on the subcontracting challan.
Thus, when you create a subcontracting challan, the system determines the base
excise value of each material and the amount of excise due automatically.

Prerequisites
You have maintained the materials excise data (see Material Master (Excise Data)).

Features
When determining the excise duty for materials purchased from third parties,
the system uses the excise rate from the latest excise invoice for the material
received from the vendor.
Where materials manufactured in-house are concerned, the SAP System
determines the taxable value of the material on the basis of the following
information, in this order:
4. ...
14.
15.

1. The latest excise invoice value for the material

2. The material's assessable value (that is, the price determined by an
external auditor)
16. 3. The materials net dealer price (the materials list price; the price at which
you sell the material to customers)

Chapter 25.

Check all this links

CIN Configuation
http://wiki.sdn.sap.com/wiki/pages/viewpage.action?
spaceKey=ERPLO&title=CIN+Configuration&decorator=printable
CIN Settings
http://www.sdn.sap.com/irj/scn/go/portal/prtroot/docs/library/uuid/207dd2ad-bf922b10-a88b-e3a4a01ca7fc?QuickLink=index&overridelayout=true
CIN Accounting entries
http://wiki.sdn.sap.com/wiki/pages/viewpage.action?

spaceKey=ERPLO&title=CIN+Accounting+Entries&decorator=printable
Capital Procurement
http://www.sdn.sap.com/irj/scn/go/portal/prtroot/docs/library/uuid/808c60ca-013b2c10-34a2-94d1eb442e6f?
http://forums.sdn.sap.com/thread.jspa?messageID=3913321#3913321
Excise registers updation,extraction and printing
http://wiki.sdn.sap.com/wiki/display/HOME/EXCISE+REGISTERS+UPDATION,
+EXTRACTION+AND+PRINTING.
Import excise process
http://www.sap-img.com/materials/process-of-imported-material-with-excise.htm
http://www.sap-img.com/materials/procedure-for-import-po-and-duty.htm
Vendor return excise invoice
http://forums.sdn.sap.com/thread.jspa?messageID=8606826#8606826
Subcontracting under Full Payment of Duty
http://forums.sdn.sap.com/thread.jspa?messageID=8205029#8205029
Edited by: Jeyakanthan A on May 29, 2010 9:55 AM
Sub Contracting:
http://help.sap.com/saphelp_47x200/helpdata/en/95/3ca437110511d4b5ae006094b
9ec21/content.htm