CIN Overview

Country India Version - CIN Indian Taxation System

June 2010

Indian Taxation - CIN

Topics

Indian Tax Structure Nature of Taxes levied on domestic sale/purchase. Nature of Taxes levied on Imports / Exports. Cenvat Credit Excise register Excise Master data Purchase processes Domestic procurement Imports Subcontracting External services procurement


Topics

Balance Credit on Capital Goods TR6 Challan Utilization of CENVAT ER1 Extraction – Monthly Returns Sales documents Billing Document Accounting at Billing Document Excise Invoice for sales Excise Invoice for other movements Excise JV Register update for RG23 Issues & RG1 Excise Registers Extraction Download and Print RG1 Download and Print RG1 Sales from RG23D

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.

Tax Structure


In India the government of India levy some form of taxes and duties on sales and purchase of

goods/ Services called Excise duty, Service Tax, Sales tax (CST & VAT) etc.

Taxes: The system covers all types of excise duty, all of which need to be calculated and reported separately. The following are the excise duties and Cess levied in India with rates.Basic excise duty (BED)

Till 29.02.2008 16%

From 01.03.2008 14%

From 27.12.2008 10%Special excise duty (SED)

This is not applicable to all materials.Additional excise duty (AED)

It is applicable for some materials like Paper, Plastic materials etc.National calamity contingency duty (NCCD)

An excise duty of one per cent on polyester filament yarn, called NCCD, has been removed

and imposed on cellular mobile phones.

Nature of Taxes levied on domestic sale/purchase


·Education Cess

This duty is levied on sum of all Excise duties as 2% ·Higher Secondary Education Cess

This duty is levied on sum of all Excise duties as 1%

Service Taxes 12% on Service Charges Education Cess

This duty is levied on Service tax as 2% ·Higher Secondary Education Cess

This duty is levied on Service tax as 1%

Sales taxesCST @2% with C-form on sum of Basic price + Excise duties (Inter state purchase / sales)

VAT (@4% with C-Form & 12.5% without C-Form) on sum of Basic price + Excise duties (sales or purchase within state)

Nature of Taxes levied on domestic sales/purchases


Nature of Taxes levied on Imports / Exports

Basic Customs Duty: This duty is levied on Landing price of the material. The rate of duty changes based on various parameters. This is non-CENVATable duty.

Special Customs Duty: This duty is applicable to some specific materials only. The rate of duty is variable. It is also non-CENVATable duty.

Countervailing duty (CVD):This duty is levied on Imports of all materials at par with Basic Excise duty (10%). It is posted into BED component of Excise registers

Education cess on CVDThis duty is levied on Basic Excise duty as 2%.

Higher Secondary Education cess on CVDThis duty is levied on Basic Excise duty as 1%·


Nature of Taxes levied on Imports / Exports

Additional Duty on customs: This duty is levied on Imports at the rate of 4%

Education Cess on all duties: This duty is levied on Imports at the rate of 4%

Higher Secondary Education cess on all duties:This duty is levied on Basic Excise duty as 1%·


CENVAT CREDIT

RAW MATERIALS / INPUTS / BOUGHTOUTS:immediately can avail the credit. That means can avail within same excise year.

CAPITAL GOODS:50% of duties can avail in the current financial / excise year. The balance 50% is posted in Onhold account. It can avail for the next year. But ADC (Additional duty on customs) on imports can be availed in the current 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.


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 PLA (This is the bank account from which you transfer any money owing to

the excise authorities.) RT12 (Replaced by ER1) RG23D (For Trading plant) ER1 & ER2

(This is a monthly report that summarizes the CENVAT and PLA information from the other registers.)


Excise Master DataIndian Taxation - CIN

1. MAINTAIN CHAPTER ID

Definition: All materials that are required for manufacturing and subsequently those which are manufactured are classified under the Central Excise Law into chapters. These chapters are further subdivided into headings and subheadings, which together form the chapter ID.

Indian Taxation - CINExcise Master Data



Maintain Material and Chapter ID Combination

Excise Master Data


Excise Master Data


Assessable Value

This is applicable for sales and subcontracting purpose only. Not applicable to purchase process.

Excise Master Data

CENVAT Determination It is assigning of input material to output material. it is mandatory for Capturing excise duties and CENVAT utilization.


Vendor Excise Details:

Supplier Excise Registration Information and nature of supplier (Manufacturer, I stage dealer, II stage dealer, Imports trader etc).


S No. Field Name Explanation

1 Vendor Vendor Number / Code

2 ECC number ECC number of Vendor

3 Exc.reg.no Excise Registration number of Vendor (same as ECC no.)

4 Exc. range Excise Range of Vendor

5 Exc. div. Excise Division

6 Exc. coll. Excise Commissionerate / Collectorate

7 CST no.

8 LST no.

9 PAN

10 Exc.Ind.Ve Excise Indicator for Vendor (Select 1 for 100% tax, 2 for 50% tax or 3 for Nil tax). Generally it is 100%

11 SSI status If the Vendor is Small Scale Industry, enter the status. Otherwise not required

12 Type Type of vendor means that manufacturer, Manufacturer’s depot or consignment agent etc. select from the dropdown list.

13 CENVAT Indicates whether or not the vendor deducts excise duty on inputs from excise duty on outputs. This is relevant to vendors that qualify as small-scale industries only.

14 Changed on Date of Change or create

15 Changed By User ID, who created or changed

16 Ser.Reg.No Service Tax Registration Number.

17 PAN Ref. PAN reference number of Vendor

Input the details as shown in the table and save the data.

Vendor Excise Details:


Customer Excise Details

Similar to Vendor details we have to maintain for customer also.

For entering data select either “New Entries” Tab and enter the relevant data and save .


SSI Rates Maintenance

In this node, you have to maintain the SSI rates as per Excise Rules. When you are procuring any material from SSI Vendor, you have to assign this rate while maintaining the vendor excise details as shown in the earlier steps.

Refer the excise rules for SSI rates.


Plant Excise Details

You have to maintain the plant excise details for all the plants which are registered as excisable plants.



Excise Indicator for plant & Vendor

Excise indicator for plant & customer

Excise Master Data


Maintain Excise Tax Rate

In this node, you have to maintain the tax rates chapter ID wise.

Excise Master Data


Maintain Exceptional Excise Rate

Excise Master Data


Purchase processes:

1. Procurement of raw material

Domestic Procurement Imports

Procurement from manufacturer Procurement from foreign Vendor

procurement from Dealer / Trader procurement from local trader

2. Procurement of Capital Goods

Domestic Procurement

Imports

3. Subcontracting Process

Product subcontracting

Process subcontracting (External processing)

4. Procurement of External Services

Incoming Excise process


Incoming Excise Invoice

A business document, in India, that your vendor sends you when it delivers excisable goods. It lists the goods and states how much excise duty applies on them. You use the excise invoice to claim back the excise that you have paid from the excise authorities.

When you procure goods externally, an excise invoice accompanies each delivery that your vendors make. You have to post these in the system. This document is required as proof of the excise duty that you have paid, so that you can then offset the duty against the excise duty that you levy on outputs.


Procurement of Raw Material from Domestic Vendor

What to do in Purchase order (TC: ME21N)

Select the appropriate tax code based on the taxes applicable

Click the tab.The tax structure displays as mentioned in the next slide

Indian Taxation - CINProcurement of Raw Material from Domestic Vendor

What to do in Purchase order (TC: ME21N)


What to do in Goods Receipt (TC: MIGO)

Once you enter the purchase order to do goods receipt with reference to vendor invoice / Delivery note, the incoming excise invoice sub-screen will pop-up. If the material is subjected to taxes. Click on tab “Create excise entry”. This will allow you to post into RG23A Part 1 Register.


How to Capture incoming Excise Invoice (TC: J1IEX)


This activity allows you to capture the vendor excise invoice data into an internal document, which leads the excise department to post into RG23A Part II Register, which is shown in subsequent screens.

You can correct the excise values if required.




Header level Data:

Input by User:

Vendor Exc Inv No

Inv Date

Default data:

Vendor No

Exc Group

Posting date

Vendor Excise Dtls




Item Level details




Item Level details


Check:

For data correctness.

Simulate:

To Verify the G/L Accounts and value flow. Before posting you have to ensure that the correct values are flowing to correct G/L Accounts.



After verification of all parameters, save the document. Once you click on save icon, the following two sub screens will be displayed. The system generates internal excise invoice number.

This number is reference for all further processes.

Just click on “Continue button”, which saves the data.


How to Post Captured Excise Invoice (TC: J1IEX)

This activity is allows you to post into CENVAT Registers. Once you post the data you cannot reverse the data. Hence you have to ensure that the data is correct.





Once the document is posted, the accounting document is created with account entries


How can I display the posted Excise Invoice (TC: J1IEX)



What to do in PO (TC: ME21N)

Imports – Direct or Indirect Materials.


Initially the foreign Vendor is displayed. Replace with Customs Vendor of relevant port

What to do in PO (TC: ME21N)



Select the relevant company code

What to do in Invoice Verification (TC: MIRO)Before goods receipt, do LIV for customs vendor w r t BOE. This will create one commercial invoice which is base for capturing the CENVAT portion of Customs duties.


Indian Taxation - CINImports – Direct or Indirect Materials.

What to do in Invoice Verification (TC: MIRO)

Enter the purchase order as reference document and select “Planned delivery costs” from dropdown list.

Enter the values as per the BOE issued by customs dept


How to Capture excise Invoice? (TC: J1IEX)

The pop-up expect the user to enter the Inv No created in earlier transaction






What You have to do in goods receipt (TC: MIGO)


What You have to do in goods receipt (TC: MIGO)

Select the Excise invoice captured in earlier transaction.

Select “Create excise entry” tab.

Save the goods receipt.


How to post the excise invoice (TC: J1IEX)









CENVAT On hold

RG23C BED


How to check the account postings for excise invoice (TC: J1IEX)

Accounting document entry can be checked.

Subcontracting Process


Create SC Challan (TC: J1IF01)

Subcontracting Process


Check the data and save the Challan.

It will create Challan and print the same.

FI


Indian Taxation overview

You use this report to display a list of the vendor excise invoices where the vendor haslevied excise duty but you have not posted it (in full) to your CENVAT account. This isparticularly used in the case of capital items, in order to find out how much creditremains from previous years.

Indirect Taxes Procurement Excise Invoice Reports Balance credit for capital goodsTr. Code: J2I8

User has to choose the Company Code, Plant and Excise Group.

Click on the Execute icon

Balance Credit on Capital Goods:

Indian Taxation overviewBalance Credit on Capital Goods:

After clicking the execute icon, system shall show new screen as Capital Goods transfer of Credit

Select the invoice number you want to transfer credit by putting tick on the check box and then click “Transfer Credit” push button.

Indian Taxation overviewBalance Credit on Capital Goods:

User can see the report, system shows excise invoice wise list of capital items received and Total BED, ECess & SECess; and the Available BED, ECess & SECess is also shown. Before utilizing the balance 50% credit ensure that you are doing this transaction only for the earlier year’s balance of capital goods purchased.If user wants to utilize balance 50% credit, select the check box left side of the line item and choose the Transfer Credit icon to avail 50% balance credit.The system will create Accounting Documents and Part 2 entries.

Indian Taxation overviewTR6 Challan:

You follow this procedure to make a posting when you transfer money to your personal ledger account (PLA) and to update the PLA Register. When you post financial accounting document system will not update the PLA Register.Hence while posting financial accounting entry user will post to a PLA clearing account (which could be “PLA On-hold Account”.When user updates the TR6 Challan the update process of the system will update the PLA Register and it will also reverse the PLA On-hold Account.User has to post a financial entry for payment on account of PLA by crediting the Bank payment account and by debiting the PLA On-hold Account. User can use the FB50 / F-02 transaction code for making such payments. User has to note down the PLA payment document number and the amount of PLA deposited.


For posting the TR6 Challan entry:Country India User menu Indirect Taxes Excise JV CreateTr. Code: J1IH

Click on TR6 challan

Give the PLA payment document number, Document year, Company code, Plant and Excise Group.

Press Enter to continue.


System will check the total debit amount and must be equal to the total of the credit amount. User has to input the value manually for PLA BED, PLA ECess and PLA SECess.

User has to check and confirm that the values are proper and that bifurcation of PLA On-hold is correct.

Click on Save icon

Or press Ctrl+S to post the entry

Indian Taxation overviewUtilization of CENVAT:

Utilization of CENVAT scenario is used to calculate how much excise duty you must remit to the authorities. Once the report has determined how much you have to pay, it allows you to specify where the money should be paid from – whether it should be deducted from the CENVAT credits that you have accumulated in RG23A Register or RG23C Register, or whether it should bededucted from the personal ledger account (PLA). You have an option to select the appropriation amounts as required.

Excise Invoices must be posted in the system to arrive the CENVAT Payable for deliveries made from the factory. The CENVAT payable amount shall be captured to a clearing account as a liability i.e. Credit At the time of utilization of CENVAT system will post the Debit entry to the same account based on the account assignments in the Customization.


Tr. Code: J2IUN

Check when last utilization was made

Check list of pending invoices of excise liability



Tr. Code: J2IUN > User has to select Each of the Cenvat Payable Account and choose from where the Utilization will be made from.

User can Simulate the entry, check the data and then post the transaction.


After input of necessary values and matching the input credit and cenvat payable the user can Simulate and check the entries before posting the same.

Indian Taxation overviewER1 Extraction – Monthly Returns

Tr. Code: J2IER1


Tr. Code: J2IER1 > Header Details


Tr. Code: J2IER1 > Details of manufacture, clearance and duty payable


Tr. Code: J2IER1 > Details of duty paid on excisable goods


Tr. Code: J2IER1 > Details of CENVAT credit Availed and Utilized


Tr. Code: J2IER1 > Self Assessment Memorandum

SD


Sales Document > Item Conditions – VA02/VA03

Sales Document > Item Conditions

Condition TypesUTXJ – Stores the Duty and Tax calculation records as per the country, region of the customer, region of the plant, tax classifications of customer and materialJMOD – Determines the % of BED based on material and chapter IDJEX2 – Posts the BED amount in the sale order to a pre-configured GL accountJECS – Determines the % ECS based on material and chapter IDJECX – Posts the ECS amount in the sale order to a pre-configured GL accountJA1X – Determines the % of SECS based on material and chapter IDJA1Y – Posts the SES amount in the sale order to a pre-configured GL account

Billing Document > Item Conditions – VF02/VF03

All condition values become basis values to be posted to Excise Invoice in the further step of creating excise invoice

Condition values which will be posted to excise invoice:

JEX2 – Posts the BED amount in the sale order to a pre-configured GL accountJECX – Posts the ECS amount in the sale order to a pre-configured GL accountJA1Y – Posts the SES amount in the sale order to a pre-configured GL account

Country India Version

Accounting at Billing Document

Country India Version

Excise Invoice

Excise Invoice – J1IIN

BED, ECS and SECS values get posted from the condition values of the billing document

Excise Invoice for other movements– J1IS

DLFC -Factory sale and stock transferGRPO -Goods receiptMATD -Material documentOTHR -Other

Internal for DLFC, GRPO and MATDExternal for OTHR

X1 DOMESTIC SALESX2 EXPORT SALESX3 STOCK TRANSFERS AND RETURNSX4 MM - SUB CONTRACTINGX5 DOMESTIC SALESX6 EXPORT SALESX7 STOCK TRANSFERS AND RETURNSX8 MM - SUB CONTRACTINGY1 DOMESTIC SALESY2 EXPORT SALES

X1 Ahmedabad Manufacturing UnitX2 Bangalore Manufacturing UnitX3 Bangalore DepotX4 Jamshedpur Depot


Subcontracting:It determines the subcontracting attributes and determines the accounts for the posting while doing a sub contracting transaction.

Excise removalsSub transaction type is also used for determining the accounts while doing excise removals.

Values to be entered manually, master data is a pre-requisite



Press the insert push button to add a row

Enter the material number, quantity, unit, chapter ID, Net assessable value, BED %, ECS % and SECS %

System calculates the entered % on the Net assessable value and displays the BED, ECS & SECS values



Post Excise Invoice for other movements– J1IV

Enter or select the document number saved during the creation of excise invoice through J1IS

System takes the document year automatically from the document

Press enter

Post Excise Invoice for other movements– J1IV

Excise JV – J1IH

Enter the document number or select from the system

Enter the document year

Enter or select from the system the company code value

Enter or select the correct plant code

Enter or select the excise group of the plant

Enter or select the sub transaction type

Select the relevant register for which posting should happen

Excise JV – J1IH

To enter item details

To enter header details

Allows the user to simulate the accounting entry before saving the document

Excise JV – J1IH

If this simulated accounting entry right, user can save the document

Register update for RG23 Issues & RG1 - J1I5



X1 Ahmedabad Manufacturing UnitX2 Bangalore Manufacturing Unit

INXA Ahmedabad Manufacturing UnitINXB Bangalore Manufacturing Unit

Please run RG1 daily, otherwise inconsistencies occur

Ensure that always the report will be run on the basis of document posting date


Select the line item(s) for which an RG1 entry is to be created

Click the create icon

If the register balances of incoming and outgoing are correct in the system, the entry will be updated

Excise Registers Extraction – J2I5

X1 Ahmedabad Manufacturing UnitX2 Bangalore Manufacturing Unit

Select RG1 register

Check the last extraced date before extracting data again

Excise Registers Extraction – J2I5

Expected result after executing the report

Download and Print RG1 – J2I6

Select RG1 register and press execute

Select the excise group, start and end dates and press

System gives a provision to download to excel and align with Macros

Enter the excise group of the receiving depot, either Bangalore or Jamshedpur

Enter the material document of the Goods Receipt at the receiving depot, either Bangalore or Jamshedpur

Input to RG23D – J1IG

Enter the excise internal number and the year from the sending plant invoice

System copes the excise duty details from the material document and posts the same to RG23D input



Sales from RG23D – J1IJ

Create RG23D Invoice with reference to the Outbound Delivery document, from Bangalore or Jamshedpur


Enter or select the Outbound Delivery document, from Bangalore or Jamshedpur

Enter or select the relevant excise group, either for Bangalore or Jamshedpur

Enter or select the correct series group, either for Bangalore or Jamshedpur


Select the line item and click the push button titled Detail to get the listing of vendor excise details


Select the vendor invoice and press continue


Enter the quantity and press the back button

System copies the details of vendor invoice – quantity, duty values and creates an RG23D Invoice

Any Qs

ThanQ for your attention…..
