India Localization

with respect to SD

CIN contents

Introduction to Indian Taxes

Different Sales processes.
CENVAT Concept
CENVAT Rules and Terminologies
CENVAT and Sales Process.
Base for the CENVAT Credit.
Tax Procedures.
Registers.
India Localization Configurations in SD.
Master Data.
SAP Easy Access settings Relevant For India Localization.

Introduction
Let us Discuss, What are Indian Taxes
and how they are differentiated.

Indian tax structure

It is of Two Types.
1.Direct Tax.
2.Indirect Tax.
Direct Tax It consists of the Capital tax and Personnel income tax.
Indirect Tax Indirect tax constitutes Excise duties, Sales Taxes and Service
taxes.
Excise duties :
It must be a duty on the goods;
The goods must be excisable;
The goods must be manufactured or produced;
The manufacture or production has to be within India.

 Excise Duties is Mainly based on 4 Ms

1.It Must be Mentioned in Excise laws.
2.It Must be Movable.
3.It must be Manufactured.
4.It is valuable to Money.
Excise duty is a duty on production or
manufacture of goods. It is a tax levied
on manufacture of goods and the liability
to pay excise duty arises immediately on
manufacture or production of goods

 Once manufacture of goods is complete, excise

duty is payable, whether the goods are sold or
self-consumed. Excise duty does not depend on
the end use of the goods.
Excise Duty is a tax on manufacture of goods
but for the sake of administrative convenience,
it is collected only on removable of goods from
the factory.
Sales Tax :
Sales Tax is a tax on Sales and can be
imposed only when there is a Sale.

Difference between Excise duty and Sales Tax.

Central Excise Duty has to be distinguished from
Sales Tax. Sales Tax is a tax on Sales and can be
imposed only when there is a Sale. On the other
hand, Excise Duty is a duty on the manufacture of
the goods. So, duty can be imposed immediately
after goods are manufactured. Whether these
goods are sold are not is immaterial.
For example: If a Company manufactures soap
within the factory for its own use, there will be no
sales tax on the soap. However, the soap will be
liable to pay excise duty as it has been
manufactured.

Types of excise duties

Under the excise laws, the following are the various
types of duties, which are levied:
Basic Excise duty : Excise duty that is levied at the
time of the Goods removal, either it is for sales or
for own consumption.
Additional Excise Duty : Excise duty that is Levied
to protect the local industries. This is varies
depending on the products.
Special Excise duties :Excise duty that is levied in
order control the competition between the states,
for example, one state may give more subsidies in
order to attract the investments or to encourage
the industries of that state.

Additional Duty on specified

items under the Act : If the Tariff
Commission set up by law
recommends that in order to protect
the interests of industry, the Central
Government may levy additional
duties at the rate recommended on
specified goods.

Different Sales Process

1.Sales From Factory.

Stock transfers.
2.Sales From Depot.
Scrap Sales.
Auction Sales especially for Scrap.
Job works.
Exports.

Sales From Factories.

In the Process of Manufacturing the Factory
uses two kinds of materials.
Input Material:
Is defined as the one which loses its own
identity in the finished product.

Capital Goods:
Is defined as the one which does NOT lose its
own identity in the finished goods.

Sales from Factory

J1IEX
Capture EI
Supplying Plant

Excise Invoice
J1IIN

Add up to Excise Duty Payable A/c

Dispatch

Stock transfers.
In Stock transfers we will transfer the Materials
from Plant to plant and Plant to Stock yards.
Usually in the stock transfers we create the
excise invoice while the goods is moving from
plant to Stock yard.
From stockyard to customer usually we are not
going to create the Excise invoice, because
stock which is coming in to the Stock is not an
input, it is just a transfer from one place to
other.
There is no price escalations here.

Depot process
Depot is also almost same as Stock yards, and
here also we are transferring goods from Plant
to Depot, but the difference is in Depots, are
Price escalations. In Depots goods is coming as
input.
Transactions can happen through two scenarios:
Scenario1: Depot receives goods from the
companys factory through stock transfer.
Scenario 2: Depot procures goods directly from
external sources.

Depot Process:
For Doing Goods Receipt:
Scenario 1: Stock Transfer
Step1: Do GR (Transaction code:MB01)
Step 2: Excise Invoice Capture at Depot (Transaction Code: J1IG)
Scenario 2:
Step 1: Do GR (Transaction Code: MIGO)
Step 2: Excise Invoice Capture at Depot (Transaction Code: J1IG)
At the time of Sale:
Sales Order Delivery J1IJ (always requires a delivery
number) PGI Billing

Sales From Depot

ME21N

MIGO

J1IIN

J1IG

J1IJ

Excise Invoice
Plant

Dispatch

Depot

Add up to the Excise Duty Payable A/c

Reduce the Quantity

Export Process
In the process of Exports duty under bond is not payable and the
goods move out from the factory against an ARE1.
However, goods not under bond move out of the factory by paying the
duty and refund is separately claimed on showing proof of export I.e.
shipping bill.
In case of Deemed Exports, the same procedure is followed as in
exports, However, the form used is ARE3.

What is CENVAT
Commonly used word, when ever discussing on Indian Tax.
CENVAT : Amount that is paid on the value that is added at
that time of sale to the government.

CENVAT Credit
Rs.500 ED:Rs.50

Rs.100 ED: Rs.10

RM-A
FG-C
RM-B

Rs.50 ED: Rs.5

Input Tax credit availed: Rs.15

Tax liability: OTL CENVAT credit

Rs.35: Rs.50 Rs 15

CENVAT!?
WHEN AND HOW MUCH CREDIT CAN BE TAKEN
The Cenvat Credit in respect of inputs may be taken immediately on receipt
of the inputs.
The Cenvat credit in respect of Capital Goods received in a factory at any
point of time in a given financial year shall be taken only for an amount not
exceeding fifty percent of the duty paid on such capital goods in the same
financial year and the balance of Cenvat Credit may be taken in any
subsequent financial year.
The Cenvat credit shall be allowed even if any inputs or capital goods as such
or after being partially processed are sent to a job worker for further
processing, testing, repair etc. and it is established from the records that the
goods are received back in the factory within180 days of their being sent to a
job worker.
Where any inputs are used in the final products which are cleared for export,
the Cenvat Credit in respect of the inputs so used shall be allowed to be
utilized towards payment of duty on any final product cleared for home
consumption and where for any reason such adjustment is not possible, the
manufacture shall be allowed refund of such amount.

CENVAT

Rule 1. Short title, extent and commencement.Rule 2. Definitions.Act capital goods Customs Tariff Act exempted goods final products first
stage
dealer an importer input manufacturer or producer
Rule 3. CENVAT credit.-
Rule 4. Conditions for allowing CENVAT credit.Rule 5. Refund of CENVAT credit.-
Rule 6. Obligation of manufacturer of dutiable and exempted goods.Rule 7. Documents and accounts.Rule 8. Transfer of CENVAT credit.Rule 9. Transitional provision
Rule 10. Special dispensation in respect of inputs manufactured in factories located in
specified areas of North East region and Kutch district of Gujarat.Rule 11. Power of Central Government to notify goods for deemed CENVAT credit.Rule 12. Recovery of CENVAT credit wrongly taken.-
Rule 13. Confiscation and penalty.Rule 14. Supplementary provision

CENVAT
So far
Overview of Indian Tax Structure.
What is Excise Duty and Types of
Excise duties?
What are CENVAT Rules?
What is CENVAT credit?
How and when CENVAT is availed?

Tax procedures and

Registers.
How we are going for the CENVAT credit in SAP and What
is the Base for IT.
Answer is Tax procedures and Excise registers.
What are these.
Now we will going to discuss on Tax Procedures.
SAP provides following std. tax procedure for country
India
Formula based tax procedure TAXINJ
Condition based tax procedure TAXINN
Currently From 4.7 we are using TAXINN.
Settings needed in SAP for TAXINN
First we need to Maintain TAXINN procedure as shown in the
slide.

 Menu path SPRO Logistic General

Tax on goods on movement India
Basic Settings Determination of
Excise duty Maintain Excise
defaults.

 Then we need to assign the Tax

procedure TAXINN to county India As
shown below.
Menu path SPRO Logistic General
Tax on goods on movement India
Basic Settings Determination of
Excise duty Select Tax Calculation
Procedure.

Sales and Distribution Pricing

procedure.

What is Excise register and how many are they.

How the Excise registers are using at Different Business Scenarios and How
hese are updating.
Excise register.
Excise Laws require you to maintain a number of registers in a specified
format relating to excise duty. They have to be printed out monthly and
shown to the authorities in the event of an audit. The SAP captures this
requirement.
Type of Registers:

RG23A PART I
RG23A PART II
RG23C PART I
RG23C PART II
RG I
RG23D

Excise registers.

RG23A: Raw Material

RG23C: Capital Goods

RG23CI-Part I entry: Excise stock entry at the time of GR (only quantity)

RG23CII-Part II entry: Credit entry of Capital goods (only value)

RG-I : Finished Goods (only Quantity)

The entries pertaining to quantity will go into RG 23 Part I and that of duty will go
into Part II in the appropriate duty column. i.e. Basic Excise, SED, Additional duty,
etc

The finished goods (manufactured, sub-contracted or gained) and sales or stock

transfer are entered in the RG I Register
Register RG I is updated after creation of an excise invoice while dispatching the
goods from the factory premises with reference a commercial invoice or a proforma invoice

RG23D: Depot (this indicates both the Quantity and the amount)

Factory ProcessRegisters

RG23 A Part I & Part II

Material is received in the factory as for Quality

inspection or for Direct Input.
Material after Quality Inspection or when used as
Direct Input will go into the RG 23 A Registers.
The entries pertaining to quantity will go into RG 23
Part I and that of duty will go into Part II in the
appropriate duty column. i.e. Basic Excise, SED,
Additional duty, etc.

Depot Process:
The RG 23 D register is used to update the excise entries in case of
Exciseable Depots.
The Excise duty is payable when the goods are sent from the factory.
However, it is not levied again when the goods are sent from the
DEPOT.
However, while taking sale from the DEPOT and if price escalations
happen, then the extra excise is paid using a A certificate. These
details are entered in the RG23 D register and excise recovered from
the customer.

Depot Process
Transactions can happen through two scenarios:
Scenario1: Depot receives goods from the companys factory
through stock transfer.
Scenario 2: Depot procures goods directly from external sources.

Transaction Codes relevant For

Registers.
Activity

SAP Transactions

Register Updates
RG23 A (Part I & II and RG I)

J1I5

Register Extraction

J2I5

Register Printing

J2I6

Utilization

J2IU

So Far We discussed on

Tax Procedures
Pricing Procedure Relevant to SD.
CENAVT registers
Transaction Codes.

Tax/Excise Duty set up for MM & SD

Basic Settings
Master Data
Account Determination
Business Transactions
Tools

Basic Settings

Excise Registration IDs

Company Code Settings
Plant Settings
Excise Groups
Series Groups
Excise Duty Indicators

Excise Registration IDs

A number assigned to each premises or
location that has registered as a manufacturer
with the excise authorities.

Mention whether AED, SED, CESS

applicable. If blank will not be available for
inputs

Permits deductible /
non deductible ED
at GR

Max no. of line

items in outgoing EI

Company Code Settings

User can edit
Dr account
during JV

Utilizes from
PLA in JV

First month for

excise year

Excise invoice
selection

Plant Settings
Plant defined as Depot
or not
Multiple plants to one
Excise Registration ID

GRs per EI can be set as

below
Multi GR Multi Credit
Multi GR Single credit
Single GR

Excise Groups
Excise Reg ID linked
to Excise group &
Plant

Depot definition at
Excise Grp & Plant

Series Groups

Excise Tax Indicators

Account Determination

Describe which excise accounts (for excise duty and CENVAT) are to
be posted to for the various transaction types including sub
transaction type if any

During transactions system determines which G/L accounts to post

to by looking at the:
Excise group, Company code & Chart of accounts

SD settings Relevant to India

Localization.
Assigning Billing types to Delivery
Types.

Maintain Excise Defaults.

Maintain the Excise Defaults in
order determine Excise group
and Series Group Automatically
at the time of Excise invoice
creation.

Maintain Utilization
Determination.

Maintain Scripts for

Registers.
Maintain the Excise registers Form
along with company code to get the
Print out put for Excise Registers.

CIN Master - J1ID

Maintain Chapter IDs

Excise Duty Indicators
Determination of Excise Duty
Material and Chapter ID Combination
Customer Excise Details
Excise Indicator for plant.
Excise Indicator for Plant and
Customer.

J1ID Screen.

Excise rate Determination

Get SSI
duty
Rates.

Yes

Is the
Customer
SSI?
No

Get
Excep
duty
rates

Yes

Excp rates
Maintained?

No

Get Ch ID
Of the
material

Get Customer
Excise
indicator
Get plant
Excise
indicator
Get final
Excise
indicator
Get rate
Based on
Ex Ind & CH ID

 Let us Discuss on Sap Easy Access

relevant to India Localization.
1.Creation Excise Invoice.
Updating the Registers.
Extracting Registers.
Print registers.
Utilization determination.
Pass JV by using J1IH.

Creation Of Excise invoice

We will create the Excise invoice with
reference to Commercial invoice it
may be Proforma or Normal invoice.

Register Updation By using

J1I5.
First We need to update the RG1
register by selecting the class RMA
and ROP.

Once u complete the RG1

updation with RMA and ROP we
need to do for IDH for ISSUES

Then continue the next step as

shown in Slide 55. it gives the
following result.

Extract the Excise registers.

We need select the RG1 in the initial screen and
execute.

System give the following

screen.Click on continue.

Print the Excise register.

To do this First we need to maintain the Values in
table J_2IRG1BAL as follows.

Too print Excise registers use

T.C. J2I6, System gives the all
details of RG1 Register.

CENVAT Utilization
Payment to be made to Excise Department for the Self Removals for
the last month.
Utilization to be done against the last months incoming excise duties
and CVD.
CENVAT utilization to be done before the 5th of next month.

CENVAT Availment and Utilization

On-Line Transactions
Goods
Receipt

Credit CENVAT
on-hold A/c

Sales Excise
Invoice Process

CENVAT on hold
for Capital goods

Debit ED Payable A/C

Vendor Excise
Invoice Process
CENVAT Account

Debit CENVAT A/c

Credit CENVAT A/c

Credit ED Payable A/C

Fortnightly Transactions
Deposit funds in PLA
Account

Credit PLA A/c

Excise Duty
Payable Account

Select
Register

PLA Account
Debit PLA A/c

Excise Duty Utilization

Transaction

Despatch

Do Fortnight Utilization of
cenvat.

Pass JV by using J1iH,

Use of JV is to adjust amount in RG23A and RG23C

In JV we use other adjustments to

Debit the amount from the
Registers.

Additional excise is used to

Credit the Registers through
J1IH.

Important Things to
Know
Determination of Excise Rate in Sales and Distribution
Information on Tax Procedure and Conditions
FI Entries related to Excise taking place in SD

Determination of ED Rate in Sales and

Distribution
Settings for the same done through Transaction Code J1ID
Material: Material Chapter ID
Customer Excise Details: Excise Indicator for Customer
Plant Excise Details: Excise Indicator for Plant
Excise Indicator Customer + Excise Indicator Plant = Excise Indicator Final
Material Chapter ID + Excise Indicator Final = Excise Tax Rate

Refer Slide No.27

FI Entries related to Excise in

SD to Accounting: (VF02, Release to
During the passing of Billing document
Accounting)
Dr Customer

Rs. 125/-

Cr Sale

Rs. 100/-

Cr Excise Duty Recoverable

Cr Taxes

Rs.9/-

During creation of Excise Invoice: (J1IIN)

Dr Excise Duty Recoverable
Cr Excise Duty Payable

Rs.16/Rs.16/-

During Monthly Utilization: (J2IU)

Dr Excise Duty Payable

Rs. 16/-

Cr CENVAT Clearing

Rs.16/-

Rs. 16/-

Information on Tax Procedure and

Conditions
Menu Path:
SPRO Financial Accounting Financial Accounting Global Settings Tax on
Sale and Purchase Define Procedure
Procedure: TAXINJ
The various Condition types applicable in SD are:
Excise Conditions: JMOD, JSED, JAED , JCES, etc.
Tax Conditions:JIN1, JIN2,etc.
Note:
Excise Conditions are statistical. Since, these are determined from SD pricing
procedure
Tax conditions are non-statistical. Since, these are determined from TAXINJ
While defining tax codes (using Transaction Code: FTXP), to maintain Excise
Duty (JMOD) as a changeable field, remove statistical check and maintain 100%
for JMOD. After the changes are made, one has to again put the statistical checks
in procedure TAXINJ