ARSACO VAT IMPLEMENTATION

BUSINESS BLUEPRINT DOCUMENT

PROJECT IDENTIFICATION

Project Name CPI/Project Number Project Type

(CBI, Implementation, CSS, Upgrade, Internal, other)
VAT Implementation Implementation
Customer Name Customer Number Planned Start/Finish

ARASCO 31.10.2017 to 31.01.2018

SAP Customer Partner Project Sponsor Invenio Project Director

Invenio Business Solutions Mr. Vijay Reddy

Invenio Project Manager Customer Project Manager Partner Project Manager

Mr. Shashank Bapat Mr. Abdullah M. Alquraini

Author Document Location (repository/path/name)

Mr. Navdeep Kanwar

Version Status Date Document Classification

1.0 For Internal Review 27.11.2017 Confidential

1.1 V 1.0 04.12.2017

1.2 Final 22.12.2017

Revision History

Versio Date Description

n

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Review and Approval

Core Business Team

Name Dat Signature

e

Project managers

Name Dat Signature

e
Mr. Abdullah
M. Alquraini
Mr. Faisal F.
Aldakhil
Mr. Abhimanyu
Mukherji

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Table of Contents
1. SUMMARY.................................................................................................................................................. 4
2. ORGANIZATIONAL STRUCTURE................................................................................................................... 4
3. MASTER DATA............................................................................................................................................ 4
3.1 CUSTOMER MASTER..........................................................................................................................................4
3.2 MATERIAL MASTER.........................................................................................................................................6
3.3 VAT MASTER................................................................................................................................................ 7
4. BUSINESS PROCESSES IMPACTED BY VAT.................................................................................................... 8
4.1 LOCAL SALES..................................................................................................................................................8
4.2 SALES UNDER EXPORT....................................................................................................................................10
4.3 INTERCOMPANY SALES...................................................................................................................................11
4.4 CUSTOMER ADVANCE ADJUSTMENT.................................................................................................................11
5 ACCOUNTING............................................................................................................................................ 12
6 LAYOUTS................................................................................................................................................... 12
7 REPORTS................................................................................................................................................... 12
8 CUSTOM DEVELOPMENTS......................................................................................................................... 12
9 ASSUMPTIONS.......................................................................................................................................... 12

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1. SUMMARY

This BBP Document contains the proposed changes to be made in the configuration settings and
Process for SD module in SAP with respect to VAT to make the processes as per the country’s Tax
regulations. Country in Scope considered is KSA.

The Business Process Impact documents and the ERP Impact Assessment documents released by
EY in October 2017 have been considered as a reference document for incorporating the
proposed changes to make the SAP System VAT Compliant for ARASCO Group.

2. ORGANIZATIONAL STRUCTURE

There is no change in existing organizational structure from SD perspective.

3. MASTER DATA

Master data is the core data that is used as a base for any transaction. If the company produces,
transfers stock, sells, purchases or does physical inventory, it requires certain master data to be
maintained.

SAP Customer Master Data, Material Master Data and Pricing Data is of core importance in SAP. A
transaction’s accuracy is based on correct and accurate Master Data. If the Master Data is not
maintained in the SAP system, transactions cannot be performed. If the Master Data is not
properly and accurately maintained, process like either Procure-to-Pay or Order-to-Cash, Record-
to-Report, will not be processed accurately. If same are not processed accurately, accurate
reporting cannot be obtained by any means.

ARASCO maintains Customer Master, Material Master and Pricing Condition Records in ECC
system for use.

3.1 Customer Master

SAP Customer Master Data would include all the details regarding the customers which are to be
maintained into the system and used as and when required. SAP Customer Master Data, as can be
seen from its name, is the Master Data related to Customer information. In SAP, if you wish to
sale finished goods, services or even scrap, you need a Customer so that the sales can be recorded
and executed. Here we have mentioned Customer’s VAT registration No. and Customer TAX
Classifications as these will be impacted by VAT implementation.

VAT Registration Number: Businesses and individuals engaged in any business activity whose
turnover exceeds the mandatory VAT registration threshold specified by the respective national
VAT laws must register for VAT. Voluntary VAT registration will be optional where the business
turnover is below the mandatory VAT registration threshold. The VAT Registration Number should

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 be recorded in the Customer master for further identification and usage. This number will be
entered as per the screenshot below provided SAP gives a specific field to be used for the above-
mentioned purpose. The field CR/ID (KNA1-STCEG) will be used in general data screen for VAT
registration no. This field to be reverted to VAT reg. No. (standard SAP nomenclature) by ARASCO.

DZIT No.: Field Tax Number 4 (KNA1-STCD4) will be used to store DZIT No. This field must be
made optional to maintain the data for all customer account groups

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 Customer Tax Classifications: Once VAT becomes applicable in GCC, the country specific
configuration will be done in a manner that whenever affected country’s customer is
created/changed the TAX classification maintenance becomes mandatory. The values need to be
maintained in this field from the allowed values. Currently this field is suppressed in customer
account groups, it must be made required. PFB the screen shot below.

3.2 Material Master

Material in SAP is a logical representation of goods or service that is an object of production,
sales, purchasing, inventory management etc. We will discuss Material Tax Classifications below
as those will be impacted after VAT implementation.

Material Tax classification: Once VAT becomes applicable in GCC, the country specific
configuration will be done in a manner that whenever affected country’s material is
created/changed the TAX classification maintenance becomes mandatory. The values need to be
maintained in this field from the allowed values. PFB the screen shot below.

Tax Classifications for Materials:

 0 – Tax Exempt for Goods
 1 – No Tax for Goods
 2 – Full Tax for Goods
 3 – Tax Exempt for Services
 4 – No Tax for Services
 5 - Full tax for Services

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3.3 VAT Master

Once the country wise configuration for VAT is in place, master data is maintained accurately, VAT
conditions are in sequence in relevant pricing, the VAT master needs to be maintained. VAT
condition type will occur in sales documents as per the condition record maintenance. Account
key will be assigned to the VAT condition which posts the VAT value in documents to specific GL’s.
Refer FI BBP section 3.1 for GLs and section 4.3.4 for account key to be used for VAT condition.
For tax condition to be reflected in open/pending sales orders, relevant configurations like making
tax condition determination date as billing date and determining new pricing/re-determining
taxes will be done.

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4. BUSINESS PROCESSES IMPACTED BY VAT

4.1 Local Sales

Pricing in Sales and Distribution is used to define the calculation of prices for customers and cost.
This combination is defined as a set of conditions when a price is calculated. In the below
mentioned pricing procedures, TAX condition will be introduced in existing pricing procedures.
The calculation of VAT will be dependent upon the condition records maintained in the system.
Account key MWS will be used against VAT tax condition in applicable pricing procedures. Access
sequence to be used in VAT condition type will have the below combination of condition tables.

No. Table Description Requirement Exclusive

XX XXX Departure Country / Destination Country 8 Yes
XX XXX Departure Country/Sales Org/Sold to party/Tax class material 7 Yes
XX XXX Departure Country/Sales Org/Tax class Customer/Tax class material 7
XX XXX Departure Country/Destination Country/Tax class Customer/Tax class material 8

Business processes using the below sales order types will be impacted as the pricing procedure
determined in these sales order types will have VAT component. Below are the sales document
types and respective billing documents.

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 Del. Order Del. Order
Sales Sales
Description Related Related Description Related Related
DocType DocType
bill bill bill bill
YYRE MEFSCO Returns ZRM ZINS Institutional order ZINS ZINS
ZAM Food Driver Load Ord ZINX MEFSCO Export
ZBUY Food Buy-Back RE ZBUY ZIVO Van Inventory over ZREF
ZBVL AlEmaar Walk-in Sale BV ZIVS Van Inventory shorta VAN
ZBY By-Products order ZBY ZBY ZKEY Key Account Order KEY KEY
ZCA AlEmar Contract ZMRB Standard Order ZF6
ZCLB BHP Credit Memo Req. ZILC ZILC ZOAE AlEmar Export YF1 YF1
ZCLD Rental Ordr (Cold) ZCLD ZOBL AlEmar Interal Ord YF2 YF2
ZCLO Olmasco CM Request ZCLO ZCLO ZOLB BHP Sales Order ZILB ZILB
ZCM MEFSCO Contract ZOLO Olmasco Sales Order ZILO ZILO
ZCQ Arasco Contracts ZOR Arasco Feed Order F2 F2
ZCR Credit Memo Request G2 ZOR1 ARASCO Feed Cash Sls ZF2C ZF2C
ZCRA C.Memo Request AlEm YG2 ZORA Al Wafa Sales Order F2 F2
ZCRE Food Cr. Memo Req. ZCRE ZORB Internal Sales Order F2 F2
ZCRF MEFSCO C.Memo Rx YYG2 ZORC Cont Release Order F2 F2
ZCS Cold Store Contract ZORE Export Sales Order F1 F1
ZCSL AlEmar Cash Order BV ZORF MEFSCO Sales Order YYF2 YYF2
ZDIS Distributor order ZDIS ZORL AlEmar Sales Order YF2 YF2
ZDLB BHPDebit Memo Req. L2 ZORM Maritime Sales F2
ZDLO Olmasco Dbt Request ZDLO ZDLO ZORO MEFSCO 3rd part orde YYF2 YYF2
ZDMG Damages Return ZDMG ZORT EL EMARSample Ord. YF2 YF2
ZDR Debit Memo Request L2 ZORU MEFSCO Procre to Ord YYF2 YYF2
ZDR1 IDAC ORDER L2 ZORX MEFSCO Export YYF1
ZDRA DMemo Rx AlEmar YL2 ZPRE Pre Seller Order ZPRE
ZDRE DMemo Rx Food ZDRE ZPXP Past Expired Returns ZPXP
ZDRF MEFSCO DMemo Rx YYL2 ZQLB BHP Quotation ZPLO ZPLO
ZDVC Driver Cr. Memo Req. ZCRE ZQLO Olmasco Quotation ZPLO ZPLO
ZDVD DMemo Rx Driver ZDRE ZQM Maritime Quotation F5
ZEMP Food Empties returns ZEMP ZQT Arasco Quotation F5
ZEMR MEFSCO Release order YYF2 ZQTA AlEmar Quotation F5
ZEO ARS Export Order Inv ZQTE Export Quotation F5
ZEXO Van Expiry over ZEXP ZQTM MEFSCO Quotation
ZEXP Expired Returns ZEXP ZQTX MEFSCO Export
ZEXS Van Expiry Shortage VAN ZRE Arasco returns order RE RE
ZGOD Food Good Goods Ret ZREF Food return order ZREF
ZHTC Hatechry Sales Order ZHCT ZREL AlEmar Returns ZRE ZRE
ZILB BHP Inquiry ZRTC R&T Credit Note G2
ZILO Olmasco Inquiry ZRTD R&T Debit Note ZDRT ZDRT
ZIN Arasco Inquiry ZRVN Truck Offload(stri)
ZINA AlEmar Inquiry ZSMP Food Sample order ZSMP ZSMP
ZINE Export Inquiry ZVAN Van sales order VAN
ZINM MEFSCO Inquiry ZVLO Virtual load(nxt dy)

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 Business processes using the following billing type, in case of intercompany/STO will be impacted
as the pricing procedure being determined during billing will have VAT component.
Billing Type Description
IG Internal Credit Memo
IGA ICM order-related
IGS Cancel ICM
IV Intercompany Billing
IVA IB order-related
IVS Cancel IB

The following pricing procedures are being considered for tax condition addition
Pricing Procedure Description
ZLG001 ARASCO Logistics St. Pricing
ZBP001 ARASCO BHP Pricing Procedure
ZOL001 ARASCO OLMASCO Pricing Proc.
ZVA004 ARASCO Debit/Credit Pricing
ZVA001 ARASCO Feed Standard Pricing
ZVA002 ARASCO Raw Material Pricing
ZVA003 ARASCO Export PricingProcedure
ZCAA01 Intercompany Billing
ZFOOD Food Pricing
ZIDACP IDAC Pricing
ZAL001 AL EMAAR Agro Sales Pricing
ZAL002 AL EMAAR Vet Sales Pricing
ZMF001 MEFSCO Sales Pricing

The VAT amount needs to be calculated on net value of invoice amount (NETWR), therefore VAT
condition will be added after the net amount calculation in the pricing procedure. The VAT
amount will be added to net value and will become the Net Invoice Value and this final value to be
used for credit purposes.

4.2 Sales under Export

In case the, country of the ship to business partner is not KSA, the same is to be considered as an
Export. The Destination country of the sale is the country of the Ship to Business Partner in the
Order.

In Export sales, the VAT condition will be available in the pricing procedure applicable and will be
present in the conditions also but with a value of 0%. This will not impact the export value of
product and services.

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4.3 Intercompany Sales

For intercompany sales, ARASCO has created 1 customer for each company code and hence follow
the route: Sales order (with intercompany customer) -> Delivery -> Billing.
As per the current scenario ARASCO uses same sales document type for normal sales and for IC
sales. This needs to be changed as per the new requirement of separate no. ranges for IC billing
after VAT implementation. To achieve this, the below matrix will be referred to create new sales
document/new billing types. As per the existing configuration, distribution channel 30 is used for
internal sales. Please note that the customer to be used for intercompany sales should only be
created/extended on a sales area combination of Sales Org./ dist. Ch. (30)/ Division.

Sales organizations not mentioned in the matrix below, are not involved in IC sales as per the
inputs from ARASCO team.

Intercompany Sales
Billing
Whether
SO Type Whether SO type Type wrt New IC
New IC sales being used
Sales Org. used for being used for normal SO in Billing doc
doc required ? for normal
IC sales ? column required ?
billing ?
B
2000 : FEED ZOR YES YES F2 YES YES
7000 : MEFSCO ZORF YES YES YYF2 YES YES
6000 : ALEMAR ZOBL YES YES YF2 YES YES
1310 : OLMASCO ZOLO YES YES ZILO NO NO
1220 : BHP ZOLB YES YES ZILB NO NO

4.4 Customer Advance Adjustment

The advance received from the customer will be settled by Finance team and a finance document
will be created which will be referred to while sales order creation. A user manual has been
shared with ARASCO team for better clarity of the process.

For enabling this process, the business function SD_01 must be enabled. The advance amount to
be adjusted will be entered in the custom tab created in sales order header (advance payment)
and condition type AZWA during sales order creation. This amount gets reflected in condition type
AZWB during billing. This is a condition based down payment process.

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5 ACCOUNTING

The Tax condition added will have accounting key assigned to it in the respective pricing
procedures. This account key in turn will be assigned to GLs via combinations which will help the
value flow in the accounts. VAT to have different GL account for goods and services. Refer FI BBP
section 3.1 for GLs and section 4.3.4 for account key to be used for VAT condition.

In addition to the VAT Postings, in cases where advance conditions are maintained in the Sales
order and a payment has been made for the same in FI module, while posting the Billing
document, the advance collected on this order will be adjusted along with the Invoice posting.

The adjustment of the VAT on the advance will happen along with the Invoicing and the Invoice
will be printed after showing the advance adjustment.

6 LAYOUTS

Following forms/layout will be affected with introduction of VAT and will undergo changes from
SD perspective.

 TAX Invoice
 TAX Credit Note
 TAX Debit Note

7 REPORTS

With VAT implementation, the following reports will undergo changes/will be freshly prepared.
 Sales Tax Register
 KSA VAT Return Report

8 CUSTOM DEVELOPMENTS

Total 10 output forms for SD sales invoice has been identified. These forms will be developed with
inclusion of VAT components and other legal requirements to be met during development of
forms.
Note:
 Any User exit required for checks for the process to be error free will be included in the
RICEF Objects as and when identified.
 Any other requirement that gets identified during development/realization/testing will be
treated as a new requirement.

9 ASSUMPTIONS

Asset sales and purchase process to be continued as per the existing process from FI module. No
change to be made in the existing process.

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