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India Localization with respect to SDSudhakar Reddy

Topics Introduction to Indian Taxes Different Sales processes. CENVAT Concept CENVAT Rules and Terminology 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. Q&A. Conclusion.

May 3, 20232

Introduction 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.

May 3, 20233

What is CENVAT…!?Hi… Let us Discuss, What are Indian Taxes and how they are differentiated

May 3, 20234

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.

May 3, 20235

CENVAT What is Excise Duty and Types of Excise duties?

What are CENVAT Rules?

What is CENVAT credit?

How and when CENVAT is availed?

May 3, 20236

Types of Excise dutiesUnder 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.

May 3, 20237

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.

May 3, 20238

…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

May 3, 20239

Cenvat Credit

May 3, 202310

RM-A

RM-B

FG-C

Rs.100 ED: Rs.10

Rs.50 ED: Rs.5 Input Tax credit availed: Rs.15

Rs.500 ED:Rs.50

Tax liability: OTL – CENVAT credit

Rs.35: Rs.50 – Rs 15

May 3, 202311

Sales From Factory.

Stock transfers.

Sales From Depot.

Scrap Sales.

Auction Sales especially for Scrap.

Job works.

Exports.

Different Sales Process

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.

May 3, 202312

May 3, 202313

Supplying Plant DispatchExcise Invoice

J1IIN

Add up to Excise Duty Payable A/c

J1IEX

Capture EI

Sales from Factory

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.

May 3, 202314

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 company’s factory through stock transfer.

Scenario 2: Depot procures goods directly from external sources.

May 3, 202315

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

May 3, 202316

May 3, 202317

Sales From Depot

Depot DispatchExcise Invoice

Add up to the Excise Duty Payable A/c

Reduce the Quantity

MIGO

J1IG

J1IJ

Plant

ME21N

J1IIN

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.

May 3, 202318

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 TAXINNCurrently From 4.7 we are using TAXINN.

Settings needed in SAP for TAXINNFirst we need to Maintain TAXINN procedure as shown in the slide.

May 3, 202319

Determination of excise duties Menu path – SPRO – Logistic General – Tax on goods on movement – India – Basic Settings –

Determination of Excise duty – Maintain Excise defaults.

May 3, 202320

Assign Tax procedure to India 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.

May 3, 202321

Pricing Procedure

May 3, 202322

May 3, 202323

Pricing procedure

May 3, 202324

May 3, 202325

Excise Register 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

May 3, 202326

Excise registers RG23A: Raw Material

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

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 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 pro-forma invoice

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

May 3, 202327

Factory process-Register 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.

May 3, 202328

Depot Process: The RG 23 D register is used to update the excise entries in case of

Excisable 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.

May 3, 202329

Depot Process Transactions can happen through two scenarios:

Scenario1: Depot receives goods from the company’s factory through stock transfer.

Scenario 2: Depot procures goods directly from external sources.

May 3, 202330

Transaction Codes relevant For Registers. Activity SAP Transactions

Register Updates J1I5 RG23 A (Part I & II and RG I)

Register Extraction J2I5

Register Printing J2I6

Utilization J2IU

May 3, 202331

Tax/Excise Duty set up for MM & SD

Basic Settings

Master Data

Account Determination

Business Transactions

Tools

May 3, 202332

Basic Settings Excise Registration ID’s

Company Code Settings

Plant Settings

Excise Groups

Series Groups

Excise Duty Indicators

May 3, 202333

Excise Registration ID’s

May 3, 202334

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

Max no. of line items in outgoing EIPermits deductible /

non deductible ED at GR

Company Code Settings

May 3, 202335

User can edit Dr account during JV

Utilizes from PLA in JV

First month for excise year

Excise invoice selection

Plant Settings

May 3, 202336

Plant defined as Depot or not

Multiple plants to one Excise Registration ID

GRs per EI can be set as belowMulti GR – Multi CreditMulti GR – Single creditSingle GR

Excise Groups

May 3, 202337

Excise Reg ID linked to Excise group &

Plant

Depot definition at Excise Grp & Plant

Series Group

May 3, 202338

Excise indicator

May 3, 202339

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

May 3, 202340

During transactions system determines which G/L accounts to post to by looking at the: Excise group, Company code & Chart of accounts

May 3, 202341

SD settings Relevant to India Localization.

Assigning Billing types to Delivery Types.

May 3, 202342

Maintain Excise Defaults. Maintain the Excise Defaults in order determine Excise group and Series Group

Automatically at the time of Excise invoice creation.

May 3, 202343

Maintain Utilization Determination.

May 3, 202344

CIN – Master - J1ID Maintain Chapter ID’s

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

May 3, 202345

J1ID Screen

May 3, 202346

Excise Rate Determination

May 3, 202347

Is the Customer

SSI?

Get SSI duty

Rates.

Yes

No

Excp ratesMaintained?

Yes

No

Get Excep duty rates

Get Ch IDOf the material

Get CustomerExcise indicator

Get plant Excise

indicator

Get finalExcise

indicator

Get rateBased on

Ex Ind & CH ID

SAP Easy AccessSap Easy Access relevant to India Localization.

Creation Excise Invoice.

Updating the Registers.

Extracting Registers.

Print registers.

Utilization determination.

Pass JV by using J1IH.

May 3, 202348

Creation Of Excise invoice We will create the Excise invoice with reference to Commercial invoice it may be Proforma

or Normal invoice.

May 3, 202349

Creation Of Excise invoice

May 3, 202350

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

May 3, 202351

Register Updating By using J1I5

May 3, 202352

Once u complete the RG1 updating with RMA and ROP we need to do for IDH for ISSUES

May 3, 202353

Then continue the next step as shown in Slide 54. it gives the following result.

May 3, 202354

Extract the Excise registers.We need select the RG1 in the initial screen and execute.

May 3, 202355

System give the following screen.Click on continue

May 3, 202356

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

May 3, 202357

Too print Excise registers use T.C. J2I6, System gives the all details of RG1 Register.

May 3, 202358

CENVAT Utilization Payment to be made to Excise Department for the Self –Removals for the last month.

Utilization to be done against the last month’s incoming excise duties and CVD.

CENVAT utilization to be done before the 5th of next month.

May 3, 202359

On- Line Transactions

CENVAT Availment and Utilization

Fortnightly Transactions

Excise Duty Utilization Transaction

DespatchSales Excise Invoice Process

Excise Duty Payable Account

Goods Receipt

Vendor Excise Invoice Process

CENVAT on hold for Capital goods

CENVAT Account

Select Register

PLA Account

Deposit funds in PLA Account

Credit CENVAT on-hold A/c

Credit CENVAT A/c

Debit ED Payable A/C

Debit CENVAT A/c

Debit PLA A/c

Credit PLA A/c

Credit ED Payable A/C

Do Fortnight Utilization of cenvat.

May 3, 202361

CENVAT Availment and Utilization

May 3, 202362

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.

May 3, 202363

Pass JV by using J1iH

May 3, 202364

Pass JV by using J1iH

May 3, 202365

Additional excise is used to Credit the Registers through J1IH.

May 3, 202366

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

May 3, 202367

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

May 3, 202368

FI Entries related to Excise in SD During the passing of Billing document to Accounting: (VF02, Release to Accounting)

Dr Customer Rs. 125/-

Cr Sale Rs. 100/-

Cr Excise Duty Recoverable Rs. 16/-

Cr Taxes Rs.9/-

During creation of Excise Invoice: (J1IIN)

Dr Excise Duty Recoverable Rs.16/-

Cr Excise Duty Payable Rs.16/-

During Monthly Utilization: (J2IU)

Dr Excise Duty Payable Rs. 16/-

Cr CENVAT Clearing Rs.16/-

May 3, 202369

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

May 3, 202370

Lets Clarify our Doubts…

May 3, 202371

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