Pre-Release Document

Oracle Financials for India (OFI)

Goods and Services Tax (GST)
P2P Tax Defaulting

Author: Ashish Gupta

Creation Date: 21-Mar-2016
Last Updated: 05-Oct-2016
Document Ref:
Version: 1A

Organization: Oracle India Private Limited.

Ashish Gupta OFI-GST P2P Tax Defaulting-Phase-1 1

Document Control

Change Record

Date Author Versio Change Reference

n

21-Mar-16 Ashish Gupta 1A Initial document

30-Sep-16 Ashish Gupta 1.0 Phase-I frozen document

Reviewers

Name Position

Rajnish Kumar Director, Financial Localizations

Development
V S Baburaj Director, Product Strategy

Audience

Name Position
12.2 Implementation team
12.2 Customers

Ashish Gupta OFI-GST P2P Tax Defaulting-Phase-1 2

 Table of Contents

Contents
Introduction ................................................................................................................................................... 4
Scope for this Document.......................................................................................................................... 5
Purpose of this Document ....................................................................................................................... 5
Intended Audience .................................................................................................................................... 5
1. Overview ........................................................................................................................................ 6
1.1 Item Category Basis ...................................................................................................................... 6
1.2 Tax Rules Basis ............................................................................................................................. 6
2 – Setups ...................................................................................................................................................... 7
Master Setups ............................................................................................................................................ 7
2.2 Define Common Configuration Setup ............................................................................................... 8
2. Define Item Category Basis ........................................................................................................ 14
3. Define Rule basis Setup ............................................................................................................. 23
Additional Setups .................................................................................................................................... 24
Flow Chart for Tax Rule Basis ............................................................................................................... 44
3- Test Scenarios ........................................................................................................................................ 45
1. Tax Category default based on Item category setup. ............................................................. 45
2. Tax Category default based on Tax Rule setup. ...................................................................... 47
1. Based on Tax Determination Basis/Rule as Application......................................................... 47
2. Based on Tax Determination Basis/Rule as Customer reporting code(NA for P2P) ............ 47
3. Based on Tax Determination Basis/Rule as First Party Registration Number ...................... 48
4. Based on Tax Determination Basis/Rule as First Party Reporting Code .............................. 50
5. Based on Tax Determination Basis/Rule as Item Classification ............................................ 52
6. Based on Tax Determination Basis/Rule as Ship from Location ........................................... 51
7. Based on Tax Determination Basis/Rule as Ship To ............................................................... 52
8. Based on Supplier Reporting Code ........................................................................................... 54
9. Based on Tax Determination Basis/Rule as Third Party Registration Number ..................... 56
4 - Call to Action –........................................................................................................................................ 58

Ashish Gupta OFI-GST P2P Tax Defaulting-Phase-1 3

Introduction
Oracle Financials for India is tax solution which supports the India Tax requirements across regimes with
respect to tax defaulting, computation, accounting and compliance to reporting.

Tax Defaulting/Determination is a very important part of India Taxation. We are allowed to set up
tax powerful defaulting rules on the base of tax laws or organization special requirement.

The Tax Defaulting/Determination in GST (Goods and Services Tax) solution allows users to default tax on
various documents used in Procure to pay and Order to cash cycles based on the setup performed.

There are two methods by which the tax can be defaulted in GST Solution by Oracle.

 Item Category Basis: Defaulting works on the same logic with existing solution

 Tax Rules Basis: Defaulting works on tax rules defined in the application setup.

Tax Defaulting/Determination

Item Category Tax Rules

Basis Basis

Tax defaulting method

Ashish Gupta OFI-GST P2P Tax Defaulting-Phase-1 4

 Scope for this Document
This document provides the Functional design for ‘Oracle Financials for India’ (OFI) product on defining
user configurable item classification, assigning of item attributes to various items and regimes along with
Tax Determination & Defaulting.

Note: The current content has been compiled in reference to the frozen scope of the Phase-I
deliverables (Ref: GST Phase -1 Deliverables.docx)

Purpose of this Document

This document is aimed at helping the users to configure tax default setup for OFI product.

Intended Audience
Audience for this document is user groups, consultants and support team .

Ashish Gupta OFI-GST P2P Tax Defaulting-Phase-1 5

 1. Overview
Let us have overview about Tax Defaulting/Determination Basis.

1.1 Item Category Basis

Item category uses the same logic as in the current system, to default taxes on the document.
The setup is performed at Organization level; each item is associated with a tax category.
Based on the item used in the document line tax category will be defaulted on the document
line.
Below Diagram illustrates the Item category.

Item Category

Item Tax Category

1.2 Tax Rules Basis

Tax Rules have Tax Determination Basis / Rule Based on which tax will be defaulted on
the Document.
Below Diagram illustrates the tax Determination Basis / Rule available for tax default.

Tax Rules
Tax Determination Basis / Rule

Application

Customer Reporting Code

First Party Registration Number

First Party Reporting Code

Item Classification

Item Reporting Code

Ship from Location

Ship to Location
Supplier Reporting Code

Third Party Registration Number

Ashish Gupta OFI-GST P2P Tax Defaulting-Phase-1 6

2 – Setups
Master Setups
1. Define Common Configuration
2. Define Item Category Basis
3. Define Tax Rule Basis

2.1 What is Common Configuration?

Global(Enterprise)
TAX

Operating Unit 1 Operating Unit 2

Inventory Inventory Inventory Inventory

Organization 1 Organization 2 Organization 3 Organization 4

The environment in which the company operates will dictate which level the Organization will own the Tax
Setups.
Let’s say a company runs within one State, so one setup will be applicable for both the Operating Units and
for the Inventory Organizations serving those Operating Units.
In that case if the whole state is having the same Tax setup that is being owned by the Global Enterprise
which is called Common Configuration.
In this case all Operating Units and Inventory Organizations will share the same Tax Setup.

Ashish Gupta OFI-GST P2P Tax Defaulting-Phase-1 7

2.2 Define Common Configuration Setup

First Step to setup tax defaulting rule is to indicate the defaulting basis for each operating unit. Users have to
define the common configuration, in which they can select one of the two defaulting methods, Item category
basis or Tax rule basis.

(N)  Oracle Financials for India  Tax Configuration  Define Common Configuration

Following screenshot shows the navigation on form:

The defaulting basis depends

on the Business requirement of
the Customer.
As GST is destination based tax
so the Rule Basis can be mostly
used for Defaulting basis.

Navigation to Common Configuration form

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2.3 Tax Configuration
Tax Configuration can be setup at two levels user has to choose one value at the time of setup.

1. Inventory Organization
2. Operating Unit
User can select organization type as Inventory Organization or Operating Unit.

Organization Type list of values

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Inventory organization:
When Inventory Organization is chosen as Organization Type, System will enable Organization
Name (mandatory) and Location (non-mandatory) fields on the form.
User can setup the tax configuration at Inventory organization level without providing the location
field or can also setup the tax configuration at specific to Inventory Organization and Location
combination level.

At Quarter End you need to

check the liability, how much you
have paid, accordingly you need
to access and deposit.

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 Inventory Organization List of values

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 Inventory Organization Name selected

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 Inventory Organization Name and Location selected

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 Note Duplicate header information

Note: If User tries to enter any duplicate record for Inventory organization / location which
already exists in the application then “Duplicate header information” Note appears and doesn’t
allow user to proceed.

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Operating Unit

When Operating Unit is chosen as Organization Type, System will enable Organization Name
(Mandatory) and disable Location field on the form.
User can setup the tax configuration at Operating Unit level by selecting the Operating Unit name
from the list of values

Operating Unit as Organization name selected

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Operating Unit configuration with rule basis

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 Note Duplicate header information

Note: If User tries to enter any duplicate record for operating unit which already exists in the
application then “Duplicate header information” Note appears and doesn’t allow user to proceed.

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Define common configuration for Transaction Tax
For Transaction taxes, customer can have one of two options for each operating unit.
 Item category basis: Which is the same tax defaulting rule in earlier solution
 Rule Basis: the new tax defaulting approach will be applicable to the operating unit. The tax
category will be determined against tax rule setup.
When user defines the tax rule is selected as Item Category Basis, system will use the same logic with
existing solution. I.e. Tax will be defaulted on the Item category setup. When rule basis is selected
then the tax will be defaulted based on the tax rule business configuration defined. (See common
configuration setup for details)

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Define Item Category Basis
When user defines the Default Basis as Item Category Basis in Common Configuration Setup, system
will use the same logic with existing solution. I.e. Tax will be defaulted on the Item category setup. The
Setup can be performed at Operation unit/Inventory Organization- Location level.

Common Configuration Setup for Item Category Basis

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Tax Category Setup
As a prerequisite user has to define the Tax categories which will be populated based on the item
selected.

(N)  Oracle Financial For India  Define Tax Categories

Define tax category:

In Tax category, we define the tax

group and indicate the calculation
precedence between tax rates. The
tax category logic should be as the
same as existing India tax solution.

Navigation Tax Category Setup

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Setup Item categories
To Setup Item category setup user has to follow the below navigation.
Item Category Setup will create a relationship between item and tax category.

(N)  Oracle Financials for India  Item Definition  Define Item Category

Navigation to define Item category Setup

System will ask to select an Inventory Organization

Inventory Organization selection form

Form will open Field Description

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Field Name Description

Name Name of Item category

Description Description of Tax Category

Item Item For which the tax category should be defaulted

Tax Category Name of tax category which should be defaulted.

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 User has to enter the details of the item category name, description, Item name for tax default and
tax category name which will default on the document.

Item category list

Note: If user try to define the same Item in the item category list with different Tax Category
Error message APP-JA-460033: “Item already exists” is displayed.

Error Message when duplicate item is assigned

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Concept of attaching First Party to a Tax regime

First party refers to an Operating Unit or an Inventory Organization

Suppose we have 3 Operating Units under one Global Enterprise (State) and all Operating Units are using
different Taxes.
We will make OU1 and Owner of tax1, OU2 as Owner of tax2 and OU3 as owner of tax3.
Before that we need to assign all the three Operating Units as parties to the Tax Regime.
So you can pick only those entities as the owner that has been assigned as parties to the Tax Regime.
If you want to use Inventory Organization or Operating Unit as the owners of Tax those should be assigned
as a party to the Tax regime.

The below diagram defines the relationship:

Operating Unit
OR
Inventory Organization

Common Configuration Owner

TAX

Tax
Regime Parties

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Attach Item Category to third party registration
(N) Oracle Financials for India  Party Registrations  Define Third Party Registration

Define third party register:

You must define all of your tax-

relevant suppliers and customers as
third party for India Tax.
Third party registration is very
important and mandatory for most
tax entries.

Navigation: Third party registration

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Enter the operating unit and Party Type as Supplier

 Click New If user wants to create a new third party registration

 Click on Find if the Third party registration is already defined.

Find Third Party Registrations form

 Enter the item category defined in the item category field

You must define customer or

supplier in AR or AP module
first, and then select them in
third party UI.

This is the default tax category

for standalone AP invoice or AR
invoice.
tax entries.

tax entries.

Third Party Registration form

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Flow Chart for Item Category Setup Basis

Start

Check
Defaulting based on
Common Configuration Setup:
Item Category Basis
OR
Rule Basis

Default tax by
Rule Basis
Check if Item
Category Setup
is defined

Check Item Category is No Tax

assigned to Supplier in Category
Third party registration defaulted
setup

Default tax on the

purchasing document
on basis of Setup

STOP
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Define Rule basis Setup
When user defines the Default Basis as Rule Basis in Common Configuration Setup, system will Default
the tax based on tax rules defined in the tax rules setup.
The Setup can be performed at Operation unit/Inventory Organization- Location level. (See
common configuration setup for details)

Common Configuration setup for Rule Basis

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Tax Rule basis Setup

(N) Oracle Financial For India  Tax Configuration  Define Tax Rules

Navigation to Define Tax Rules

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Define the header Information
Field Name Description

Operating Unit Operating Unit for which the Tax Rule Setup has to be done.

Tax Rule Code User can provide any Tax Rule Code; It is a user defined field.

Tax Rule Name User can provide any Tax Rule Name; It is a user defined field.

Tax Category Tax category to be defaulted for particular tax rule. This field contains List of
values derived from tax categories defined.

Description Description of the tax category will be derived from the tax category setup.

Priority Based on the priority level user can setup the priority (0 and above), the system
will calculate the taxes. If there is more than one tax rule defined for the
transaction that has met the tax determinants then the tax rule with the highest
priority will be defaulted on the transaction. Lower number will have high priority.

Start date Start date of the Tax Rule Basis, Tax Rule will be applicable from the start date.

End date End date of the Tax Rule Basis, if user wants to end date the tax rule, user can
provide end date. Tax rule won’t be applicable after the end date.

Tax Rules Definition form header information

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Define Line Information

1. Tax Determination Basis/Rule: User has to select the Tax determination basis based on which
application will default tax on the document. At present there are ten Tax determination rule/basis
values are available in the application (refer below image).

Tax Determination Basis/Rule

values

2. Tax Determination value: Based on the Tax Determination Basis/Rule selected user has
to provide Tax Determination value will be available in the Tax Determination list of values.

Tax Determination values list of

values

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 Tax Determination values

3. Sub-Values: This Field will not be enabled in case of Tax Determination Basis/Rule as
“Application”

Sub-Values

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 Additional Setups
Setup to default Tax Category based on First Party Registration Number

First party Registration number setup

(N) Oracle Financials for India  Party Registrations  Define First Party registration

Define first party registration:

First party and third party are important

for tax entries. We can define each
operating unit or Inventory and location
as a first party.

The most tax reports are designed and

organized by first party.

tax entries.

First Party Registration Setup

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User can define new First Party Registration by clicking on New or can
choose the fields to find the existing defined first party registration setup

Field Value to be entered

Regime Type Transaction Tax / Withholding Tax
Organization Type Operating Unit / Inventory Organization
Organization Name Operating Unit/Inventory Organization name

Find First Party Registrations

Check the Primary Registration Number

Primary Registration Number Setup

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Define Tax Rules for First Party Registration Number

Tax Determination Basis / Rule: First Party Registration Number

Tax Determination value: Select from list of values of the first party registration numbers

Tax Rule setup for First Party Registration

Number

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Setup to default Tax Category based on First Party Reporting Code
Define First party reporting Code
(N) Oracle Financials for India  Reporting  Define Reporting Types

Define reporting types:

In the new India tax solution, we use

reporting type and reporting code to
collect additional information for
different entities as well as transactions.

tax entries.

Setup reporting type navigation

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 Enter the details in the reporting code setup form. Choose the reporting usage as “Tax determination”
and Entity as “First Party”

Can define the Entity as First Party,

Third party and Item.
Used for Tax
Defaulting. The Defaulting will happen
accordingly.

Reporting Code setup form

Assign the reporting code to first party registration

(N) Oracle Financials for India  Party Registrations  Define First Party Registrations

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 Navigation First Party Registrations

User has to enter the values and then click on New if they have to define new first party registration or
Find if they want to update existing first party registration

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 Find First Party Registrations

Reporting code tab

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Define Tax Rules for Tax Determination Basis /Rule First Party Reporting code.
(N) Oracle Financials for India Tax Configuration  Define Tax Rules

Navigation Tax Rule

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Tax Rule Definition for First Party Registration Number

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Setup to default Tax Category based on Item Classification

Item Classification Setup

(N) Oracle Financials for India  Item Definition  Define Item Classification

Define item classification

In item classification page, you specify

the item's classifications like raw
materials or finished goods, and define
the item attributes and these
classification and attributes are used for
tax reporting and tax determination.

The item classification page

has the same logic with
existing solution.

‘
/

Define Item Classification Setup Navigation

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Enter Details in Find Item/Template/Assignment form
Operating Unit: Operating unit name for which the classification has to be done.
Item/Template: User can create or assign template or define specific item attribute for the item.
Organization: name of Organization for which the classification has to be done.
Item Name: Name of Item for which the classification has to be done.

Click on New Button.

Find Item/Template/Assignment form

Item/Template Attribute Registration form

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Define Tax Rules for Item Classification
(N)  Oracle Financials for India Tax Configuration  Define Tax Rules

Navigation Tax Rule

Tax Rule for Tax Determination basis/Rule Item Classification

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Setup to default Tax Category based on Ship from Location

Ship from Location Setup

(N) India Local Purchasing  Supply Base  Suppliers

Navigation to Supplier Setup

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1. Search for vendor:

Vendor Search Form

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2. Navigate to Address book

Navigate to address book

3. Update the address and add the State

Update Address form

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 Update the Address to Maharashtra

Define Tax Rules for Ship from Location

(N)  Oracle Financials for India  Tax Configuration  Define Tax Rules

Navigation Tax Rule

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Tax Rule for Tax Determination basis/Rule Ship From

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Setup to default Tax Category based on Ship to Location

Ship to Location Setup

(N) India Local Purchasing  Setup  Organizations  Locations

Navigation to Location Setup

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1. Define the location and assign the state in address

Define location address

2. Assign Ship to location in shipping details tab

Define Ship-To Location for the

location

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3. Assign the Inventory Organization to the location in Other Details Tab

Assign organization to location setup

Define Tax Rules for Tax Determination Basis /Rule: Ship To Location

(N) India Local Purchasing  Oracle Financials for India  Tax Configuration->Define Tax Rules

Navigation Tax Rule

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 Tax Rule Definition for Ship

Setup to default Tax Category based on Third Party Registration

Third party Registration number setup

(N) India Local Purchasing  Oracle Financials for India  Party Registrations  Define Third Party
Registration

Navigation to define third party registration

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Enter the below details:

Operating Unit: Operating unit for which the Tax rule should be applied.
Party Type: Party Type can be “Customer” or “Supplier”.
Party Name: Choose the Party Name.

Click on New Button to create a new record.

Third Party Registration

Enter Details in the form.

Regime Code: Regime for which the registration number is valid

Primary Registration Name: Name of the Primary document.
Primary Registration Number: Primary Registration number of primary document.

Third Party Registration Setup

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Define Tax Rules for Tax Determination Basis / Rule: Third Party Registration
Number
(N) India Local Purchasing  Oracle Financials for India  Tax Configuration  Define Tax Rules

Navigation Tax Rule

Tax Rule Definition for Third Party Registration Number

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Flow Chart for Tax Rule Basis
Start

Check Defaulting Basis

in Common
Configuration Setup

Check Tax Rule

Default tax by Setup
Item category is defined
Defined

Check the Tax No Tax

determination category is
basis/rule is satisfied defaulted

Check
the
Priority

Default tax on the

Purchasing document
Basis of Setup

STOP

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3- Test Scenarios
1. Tax Category default based on Item category setup.
Requirement:

User has a requirement to default tax category “Tax category priority 3” on Purchase order line, when
Item “OU2RMIN” is purchased from Supplier “Vendor for OU2”, Supplier Site “PUNE” for purchase
orders created in Operating Unit “Vision India - OU2”.

Prerequisite Setup required (Click on the below links for details):

1. Common configuration for Item Category Setup at operating unit or inventory org/location.
2. Tax Category Setup
3. Item category Setup to map Item and tax category
4. Addition of Item Category to Third party registration

Create a Purchase order with required details and save it

Operating Unit: Vision India -OU2

Supplier: Vendor for OU2
Supplier Site: PUNE
Item: OU2RMIN

Purchase order created

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Click on purchase order header and navigate to menu: Tools India Tax Details

Navigation India Tax Details

Check that the tax category and tax gets defaulted on PO line number 1 based on setup

Tax Category is populated based on

Setup

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2. Tax Category default based on Tax Rule setup.
Note: In the following examples below values would be used to show the test cases.

Field Name Valu

Operating Unit Vision India e– OU1
Supplier Vendor for OU2
Supplier Site PUNE
Item OU2FGIN

1. Based on Tax Determination Basis/Rule as Application

User has a requirement to default tax category “Tax category priority 38” When “Purchasing”
application is used.

2. Based on Tax Determination Basis/Rule as Customer reporting code (Not

Applicable for P2P)
User has a requirement to default tax category “Tax category priority 38” When “Purchasing”
application is used.

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3. Based on Tax Determination Basis/Rule as First Party Registration Number
User has a requirement to default tax category “Tax category priority 9”, when Operating Unit/
Inventory organization with First Party Registration Number as “AAA” is used

Pre Requisite:

a. Define First party Registration number.

b. Define Tax Rules for Tax Determination Basis /Rule : First Party Registration Number

Create a Purchase order with required details and save it

Field Name Value
Inventory Organization Vision India – OU1
Supplier Vendor for OU2
Supplier Site PUNE
Item OU2FGIN

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Purchase order for Third party registration

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4. Based on Tax Determination Basis/Rule as First Party Reporting Code
User has a requirement to default tax category “Rec GST Tax Category for OU2” When First Party
Reporting Code of Supplier is “TEST_CUST_RC”

Prerequisite Setup required (Click on the below links for details):

1. Define First Party Reporting code.

2. Define Tax Rules for Tax Determination Basis /Rule: First Party Reporting code.

Create a Purchase order with required details and save it

Field Name Valu

Operating Unit Vision India e- OU2
Supplier Vendor for OU2
Supplier Site PUNE
Item OU2FGIN

Purchase order for First Party Registration

Code

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Tax category is Defaulted based on Third Party Registration Number

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5. Based on Tax Determination Basis/Rule as Item Classification
Requirement to default tax category “Tax Category for OU2” When Item to be procured has Item
classification as “Finished Goods Indigenous-IND”

Prerequisite Setup required (Click on the below links for details):

1. Define Item Classification Setup

2. Define Tax Rules for Item Classification Setup

Create a Purchase order with required details and save it

Field Name Valu
Operating Unit Vision India e- OU2
Supplier Vendor for OU2
Supplier Site PUNE
Item OU2FGIN

Purchase Order for tax default based on Item classification.

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Tax category is Defaulted based on Item Classification

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6. Based on Tax Determination Basis/Rule as Ship from Location
Requirement to default tax category “Rec GST Tax Category for OU2” When Ship from Location i.e.
the location from where the goods will be shipped by the supplier is “Maharashtra”

Prerequisite Setup required (Click on the below links for details):

1. Define Ship From Location Setup

2. Define Tax Rules For Ship From Location Setup

Create a Purchase order with required details and save it

Field Name Valu
Operating Unit Vision India e- OU2
Supplier Vendor for OU2
Supplier Site PUNE
Item OU2FGIN

Purchase order for tax Default for Ship

From

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 Tax category is defaulted based on the setup

7. Based on Tax Determination Basis/Rule as Ship To

Requirement to default tax category “Rec GST Tax Category for OU2” When Ship To Location i.e. the
location where the goods have to be shipped by the supplier is “Maharashtra”

Prerequisite Setup required (Click on the below links for details):

1. Define Ship To Location Setup

2. Define Tax Rules for Ship to location Setup

Create a Purchase order with required details and save it

Field Name Valu
Operating Unit Vision India - OU2e
Supplier Vendor for OU2
Supplier Site PUNE
Ship To Vision India –Mfg –Pune
(Maharashtra)

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 Purchase order for tax Default for Ship to

Tax category is defaulted based on the setup

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8. Based on Supplier Reporting Code
User has a requirement to default tax category “Tax category priority 13” When “Purchasing”
application is used

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Third Party Registration Reporting Code Tab

Third Party Reporting Code Setup

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 9. Based on Tax Determination Basis/Rule as Third Party Registration Number
User has a requirement to default tax category “Tax Category for OU2” When First Party
Registration Number of Supplier is “OU200000”

Prerequisite Setup required (Click on the below links for details):

1. Define Third party Registration number

2. Define Tax Rules for Tax Determination Basis /Rule : Third Party Registration Number

Create a Purchase order with required details and save it

Field Name Valu
Operating Unit Vision India e- OU2
Supplier Vendor for OU2
Supplier Site PUNE
Item OU2FGIN

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 Purchase Order for Third Party Registration

Tax category is Defaulted based on Third Party Registration Number

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4- Call to Action
This is not the final document and further changes shall be incorporated as and when there are any further
updates from Product Management / Development teams in regards to the changed features/functionality or
pending product clarifications, if any.

For further reference, you can also refer the below Pre-Release documents released as a part of the
EBS GST Infrastructure Scope:

 OFI-GST-Functional Tax Computation for O2C – Phase1

 OFI-GST-Configuration – Phase1
 OFI-GST-Functional Tax Computation for P2P – Phase1
 OFI-GST-Functional O2C flow – Phase1

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