SCP SIDE TRANSACTIONS WORKFLOW

PURCHASES:
Overview Regarding Changes to be implemented
 SCPs to charge TCS on Invoice as an additional line item specifically listed.
 TCS to be accounted for in the system only if charged on the Invoice.
 No Change in Bar Code Structure required, GE System will Auto calculate and
define if TCS charged on invoice.
 TCS accounting flow to be controlled through TAX CODE keys in SAP.
 New Tax Code Keys Having Additional Component of TCS to be defined.

ACCOUNTING ENTRIES after change (Incoming Invoice):

If TCS Charged on Invoice If TCS not Charged on Invoice

Provision Dr. Provision Dr.

TCS Recoverable Dr. GST Recoverable Dr.
To Vendor A/c Cr.
GST Recoverable Dr.
To Vendor A/c Cr.
ALL TRASACTIONS DETAILS:

TDS Deducted TCS

S. No. Particulars
by HMCL Applicability

1 Purchase Orders/Scheduling Agreements NA NA

Action Plan & Key Points to take care:

 Tax Code Keys against Material Codes will have to be changed or current key
as mapped against Material Codes will have to be updated with additional
component of TCS Recoverable with applicable percentage.

TDS Deducted TCS

S. No. Particulars
by HMCL Applicability
Purchase of Component & Consumables
2 NO YES
through IV

Current Process:

 PO/Scheduling Agreement is released to SCP

 SCP Supplies the Material along with the documentations as required and Barcode on
it having details of Invoice encoded on it.
 Gate Entry is done through Scanning the Barcode with Current system of Rate/Qty
Verification through PO
 SCP SIDE TRANSACTIONS WORKFLOW

 All the line items of Invoice (Date, Invoice No., SCP Name & Code, Materials
Supplied, Rate, QTY, Taxable Amount, Taxes (GST) and Total Invoice Value are
captured on the gate entry system.
 GRN is made by the stores of the invoice with reference to GE Number.
 After GRN IV process of Invoice is performed through system in the SAP by Finance
referencing GE Invoice Amount, GRN QTY and PO Rate and Tax rate as maintained
against HSN.
 If GRN QTY * PO Rate * Tax Rate (Tax Key – VZ….) = GE Invoice Amount,
then IV is process and SCP account is credited.

Action Plan & Key Points to take care:

 Communication to vendors required to charge TCS on invoice, Maintenance of TCS

rates table in SAP
 Suggested no change in Bar Code Structure for TCS line Item,
 Changing of Total Invoice value (by including TCS) in Bar Code by SCP
 System to Validate and Auto Populate TCS field at the time of GE by differentiating
between (BASIC+GST) and TOTAL INVOICE VALUE
 At the time of IV as Tax Code Key will be different (having TCS component), it would
validate the Invoice.
 Communication required to SCPs for providing Plant wise & v-code wise breakup of
TCS deposited by them in HMCL's favour for Reconciliation.
 Other processes will remain as is.

TDS Deducted TCS

S. No. Particulars
by HMCL Applicability
In case of GRN Rejection- Rejected quantity
3 is despatched from HMCL on Rejection NO YES
Invoice.

Current Process:

 Rejection DA is prepared by Stores. Accounting Entry

 DA No. is Mailed to the Finance Department. Vendor A/c Dr.
 Finance Creates Rejection Sale Invoice Document. (ZF41E) To Provision A/c Cr.
 Tax Code Key VX is used To GST Payable A/c Cr.

Action Plan & Key Points to take care:

 TCS will be applicable on Rejection Sale Invoices.(MV 122) Accounting Entry

 Tax Code Key used - to be modified/ new generated for Vendor A/c Dr.
TCS Component. To Provision A/c Cr.
 Invoice PDF Generated will need additional TCS line item. To TCS Payable A/c Cr.
 Other processes will remain as is. To GST Payable A/c Cr.
 SCP SIDE TRANSACTIONS WORKFLOW

TDS Deducted TCS

S. No. Particulars
by HMCL Applicability
Short Qty received
4 HMCL has practice to do GRN with the NO YES
actual quantity received.

Current Process:

 GE entry is done through Invoice QTY.

 GRN is done through Actual QTY Received.

Invoice -

Item QTY Rate Taxable GST Total

Part code 10 100 1000 180 1180
xxxx

Actual GRN -

Item QTY Rate Taxable GST Total

Part code 9 100 900 162 1062
xxxx

Action Plan & Key Points to take care:

 TCS will be calculated on actual GRN Qty Proportionate Amount

 Credit note issued by Vendor will adjust the TCS liability.
 Other processes will remain as is.

TDS Deducted TCS

S. No. Particulars
by HMCL Applicability

5 OSP and Job Work Purchases Yes No

Action Plan & Key Points to take care:

 No Change required in Case of Incoming Invoice, Current Tax Keys will remain as is
 TCS will be applicable on Sale of Inputs to OSP vendor.
 SCP SIDE TRANSACTIONS WORKFLOW

TDS Deducted TCS

S. No. Particulars
by HMCL Applicability

6 Suppl. Invoices (Price Increase) No Yes

Current Process:

 PO amendment is released through VD.

 Finance Acknowledges the Amendment and Calculated the Total Price Variance.
 Amendment gets Activated by SS&SC and new rates are implemented.
 SCP demands the Working from Finance Department.
 Finance Calculates the Retrospective Increase Amount and sends the Working to SCP
(ZF156 and ZF156C T-Codes are used)
 SCP Provides the Dr. Note wise Details in the Format as shared (Only Input required
is Dr. Note No. and Date)
 Finance Validates the Details shared by SCP and Credits the SCP account (ZF203)

Action Plan & Key Points to take care:

 TCS will be applicable on the Dr. Notes.

 Tax Keys used in the BDC are (CF, GF etc….)
 BDC requires 3 Major Inputs - Basic, Total Amount and Tax Key
 ZF156 and ZF156C will have to modified to Account for TCS amount.
 Total Amount will be changed to Amount including TCS in the Working file and SCP
will charge TCS on the Digital Signed Suppl. Invoices as separate line item.
 Tax Keys as in SAP will have to be modified to account for TCS.

TDS Deducted TCS

S. No. Particulars
by HMCL Applicability

6 Suppl. Invoices (Price Decrease) No No

Action Plan & Key Points to take care:

 TCS already charged on original Invoice

 TCS will be ignored as No Non-Compliance
 Tax Keys used in the BDC are (XX)
 SCP SIDE TRANSACTIONS WORKFLOW

TDS Deducted TCS

S. No. Particulars
by HMCL Applicability
Amortization cost-Moulds & Dies sent to
7 No No
the Vendors for Component manufacturing

Action Plan & Key Points to take care:

 TCS not to be charged on the amortization amount as the payment is not made
against that amount
 TCS applicability only on the Total Invoice Value (as already discussed above)

TDS Deducted TCS

S. No. Particulars
by HMCL Applicability
Purchase of goods not routed through Gate
8 entry route. Eg. Purchase of LNG, misc. No Yes
purchases like sweets, stationery, etc

Current Process:

 A JV is Parked and Posted in the System manually with All Details like Invoice No.,
Date, Rate, HSN and Tax Code Key etc.

Action Plan & Key Points to take care:

 TCS shall be booked in the books if charged on invoice by the Supplier

 Tax Keys as in SAP will have to be modified to account for TCS.
 Separate Tax Key (Only TCS) will have to be created to account for Non-GST items
like RLNG from GAIL.

TDS Deducted TCS

S. No. Particulars
by HMCL Applicability

9 Service Purchases Yes No

Action Plan & Key Points to take care:

 Processes will remain as is.

TDS Deducted TCS

S. No. Particulars
by HMCL Applicability

10 Import Purchases NA NA
 SCP SIDE TRANSACTIONS WORKFLOW

Action Plan & Key Points to take care:

 Processes will remain as is.

PAYMENTS:
Overview Regarding Changes to be implemented

 Full payment to be made to the SCPs (including TCS amount as charged on Invoice)
 Quarterly reconciliation of TCS recoverable to be done by an Inter-locational team.
 In case of non-compliance by SCP, TCS amount can be recovered from the account

TDS Deducted TCS

S. No. Particulars
by HMCL Applicability
Regular Payment- payment release on due
1 NA NA
dates as per Purchase order terms.

Action Plan & Key Points to take care:

 No Change as Payment will continue to be transferred as per Invoice

 Processes will remain as is.

TDS Deducted TCS

S. No. Particulars
by HMCL Applicability
Working Capital Advance, recovered against
regular supply on EMI basis, Interest
2 charged on Reducing Balance Method. NA Yes
Entry posted in Vendor Account through
JV. Management Approval taken.

Current Process:

 A Dr. Cr. JV is Parked and Posted in the System manually with WCSA account and
respective EMI Line Items as per Due Dates.
Accounting Entry

Vendor A/c Dr. (EMI 1)

Vendor A/c Dr. (EMI 2)
Vendor A/c Dr. (EMI 3)
To Vendor A/c Cr.
Action Plan & Key Points to take care:

 Working Capital Advance is in the nature of advance for goods hence TCS is
applicable and to be controlled at SCP side.
 SCP SIDE TRANSACTIONS WORKFLOW

 WCA can be given without TCS amount and SCP can gross up and pay TCS to
government on our behalf.
 SCP will continue to charge the TCS on Invoices as per the system defined and will
control the TCS Liability at its end.
 No change in HMCL IT system required

TDS Deducted TCS

S. No. Particulars
by HMCL Applicability

3 Interest on Working Capital Advance No No

Action Plan & Key Points to take care:

 TCS not applicable, Processes will remain as is.

TDS Deducted TCS

S. No. Particulars
by HMCL Applicability
Cash Discounting-We release the payment
to some vendors before due dates in terms
4 No No
of discounting after recover the cash
discounting as per company policy.

Action Plan & Key Points to take care:

 TCS Already charged in Invoice and accounted for in the system.

 ZF162 is used for calculating CD through System, No change required.
 Processes will remain as is.

TDS Deducted TCS

S. No. Particulars
by HMCL Applicability

5 SRP for Capex / IMRO No Yes

Current Process:

 There are two systems of SRP, Auto SRP and Manual SRPs
 Payment Tranches are defined in POs
 Common Tranches are (Advance + DAP + After Receipt of Material + Taxes + After
Commissioning)

Action Plan & Key Points to take care:

 Advance SRP can be given without TCS amount and SCP can gross up and pay TCS to
government on our behalf.
 SCP SIDE TRANSACTIONS WORKFLOW

 SRP for Taxes Payment will include TCS (GST + TCS) as defined in PO.
 SCP will charge the TCS on Invoices as per the system defined and will control the
TCS Liability at its end.
 IV Process for Capex and IMRO system will change as stated earlier.

OTHER INVOICES RAISED ON VENDOR:

TDS Deducted TCS

S. No. Particulars
by HMCL Applicability

1 Warranty Debit to Vendor - Parts No No

2 Warranty Debit to Vendor – Service Yes No

Since a commercial debit note is raised, it shall not be considered as a sale.

TDS Deducted TCS

S. No. Particulars
by HMCL Applicability

3 Right to use capital goods - RPT No No

Asset is sent via challan under GST.

Tax Invoice raised on vendor for “Right to use capital goods” under Service category shall not
be considered as sale of goods, thus TCS not applicable.

Further to explore – cases when capital good is eventually sold. (Moulds & Dies)

ISSUES –

1. How to map TCS tax key in SAP?

a. In case of purchase – Material group, vendor code, gate entry

Components

Non Components

Manual JVs (exceptional)

b. In case of sale - Movement type, billing type, material code

Rejection Invoice

Sale of component to OSPs/ Vendors

SCP SIDE TRANSACTIONS WORKFLOW