GST-Tax Procedure Migration-TAXINJ to TAXINN for Sales Process

Customers who have implemented Country Version India (CIN) in the initial
stages are using a formula-based tax procedure named 'TAXINJ' which was
the initial tax procedure released for India. In TAXINJ, tax codes are used to
derive tax rates. Due to multiple Excise duty, Service tax, VAT and CST rates
and many variations/exemptions in central/state taxes, TAXINJ customers
need to use many tax codes in MM and SD, and customers are running out of
tax codes as they have reached the maximum limit of tax codes (2 digits
possible). Many tax codes create problems for users, as they need to keep
track of several tax codes at master data level as well as transaction level.

There is another tax procedure, TAXINN, which is based on the pricing

condition techniques. In TAXINN, tax codes do not play a vital role in rate
determination, where other logistics entities such as plant, material, chapter id,
vendor, customer, regions and so on are used for tax rate derivation. A
seamless migration from TAXINJ to TAXINN was not possible and
customers need to foreclose open purchase orders in TAXINJ, and start with a
new line item in TAXINN tax codes which is a difficult approach, considering
the volume of documents.

Tax procedure migration covers CIN-relevant MM and SD processes in SAP

which have taxes and tax code implications. With this solution, SAP would
like to propose a feasible migration from TAXINJ to TAXINN. The proposed
solution will have an impact on processes such as procurement, sales, job
work, stock transfers, returns, excise duty posting transactions, in logistics and
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financials for goods and services. Non-taxable scenarios would continue

without any impact in TAXINN set up also.

Tax Procedure Migration-TAXINJ to TAXINN

 Sales Process & Solution Proposal

Order to cash process in India has tax implications. Sale of goods in India is
levied excise duty which is a goods movement tax and service provision in
India is levied service taxes which are at the time of invoice. All taxes are
defined in pricing procedures but unlike procurement, tax code has a minimal
role on the SD side. There are state-specific sales taxes such as VAT and CST
which are calculated on top of the excise duty for goods.

A tax code is required in condition record of tax condition types'. So in

general, excise duties condition records do not have tax codes as they are
discount/surcharge in nature, whereas VAT/CST condition types require a tax
code.

Major tax relevant sales processes in India are the following:

· Domestic sales

· Sale to external Customer (EXP)

· Dispatch from a plant (STO)

· Sale from a depot (STO)

· Service provision

· Customer Returns

· Dispatch for job work (sub-contract)

· Credit and debit note to customer scenarios

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Tax Procedure Migration-TAXINJ to TAXINN

 The documents involved which have a tax impact for the above process are
the following:

· Sales order

· Goods issues/deliveries

· Outgoing excise/challan postings

· Customer invoices

· Direct A/R FI transactions with taxes

Prerequisites: Ensure that you have performed the following settings:

· Configured TAXINN (with A/R condition types)

· Defined OB40 settings according to customers' requirement

· Changed the tax procedure in OBBG

Since all your pricing procedure's condition types are not changed, the
pricing procedure determination and condition types mapping to valuation
fields of COPA is not impacted. Configure SD Pricing procedure with access
sequences for all set of condition types.

1. Excise Conditions: If customers are also using pricing formula/routine

for excise relevant conditions in SD pricing procedure (Control via J1ID),
remove the formulas in pricing procedure and configure customers' SD
pricing procedures as per the business requirement.

2. Remove condition type 'UTXJ' which is used for various base value
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determinations, and tax code based rate determination for VAT, CST and

Tax Procedure Migration-TAXINJ to TAXINN

 Service Tax condition types. These have to be done according to TAXINN set
up in SD Procedure, as per customers' business requirement.

3. Maintain required SD relevant access sequence for all (excise, VAT,

CST, Service…) tax conditions.

4. Maintain condition records with appropriate tax rates at required access

levels in the VK11 transaction for all required (Old & present items) cases for
relevant taxes (Excise, Services, VAT, CST...), as per customers' business
requirements.

5. Sales tax/Service taxes: In SD, tax codes are required for all output tax
condition records (transaction VK11) for respective tax condition types (non-
excise).

6. If G/L accounts are maintained based on the tax code in OB40,

customers have to verify/update the same with the new TAXINN tax codes
(for tax conditions VAT, CST, Service Taxes and so on) as shown in the
screenshot below. Customers' need to take a call in this regard based on the
requirement.

7. If customers are using alternate VAT G/L account determination

functionality, where G/L accounts are maintained based on tax codes in the
J_1IT030K_V view, they have to update the same with new TAXINN tax
code as shown in the screenshot below. This needs to be done based on
customers' requirement.

8. If the billing document was created in TAXINJ and not released to

accounting, customers need to carry out the New Pricing Run in billing, so
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Tax Procedure Migration-TAXINJ to TAXINN

 that the TAXINN tax code is considered. Else, they will encounter tax code
error 'FICORE 704' during release to accounting.

9. If customers cancel a billing document posted in TAXINJ, they need to

carry out the New Pricing Run so that tax code error FICORE 704 will not
come up during release to accounting.

Note: Tax calculation in Direct A/R FI transactions are managed with tax
codes only Usage of tax codes or condition record for old Sales Order/Invoice
to be decided at customers' end based on the requirement.
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Tax Procedure Migration-TAXINJ to TAXINN