India Localization with respect to MM & SD

What is CENVAT!?

In India, excise duty is a tax on the manufacture of goods that is levied when goods leave the place of manufacture. Manufacturers can set off the duty paid on input materials against their output duty, a procedure known as CENTRAL VALUE ADDED TAX (CENVAT)

CENVAT?
Excise duty is a duty, levied 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. CENVAT Credit

CENVAT Credit
Rs.100 ED: Rs.10

Rs.500 ED:Rs.50

Raw Material A FG-C Raw Material B Rs.50 ED: Rs.5 Input Tax credit availed: Rs.15

Tax liability: OTL CENVAT credit Rs.35: Rs.50 Rs 15

CENVAT!?
Types of excise duties Under the excise laws, the following are the various types of duties, which are levied: Basic duty: This is the basic duty levied under the Central Excise Act. Special excise duty: This special duty is levied under special circumstances where the levy of such additional duty is justifiable or found necessary to protect other industries. Additional Duty in lieu of Sales Tax : It can be charged on all goods by the central government to counter balance exemptions from sales tax granted by various State Governments to the detriment of industries in other States. 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.

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 utilised 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.

SAP R/3 and CENVAT

CIN Country India Version India localization (earlier CIN) is no longer add-on component in version SAP 4.7EE SAP provides following std. tax procedure for country india Formula based tax procedure TAXINJ (discontinued) Condition based tax procedure TAXINN CIN data updation directly possible from Material master Vendor master Customer master Tax/Excise Duty set up for MM & SD Tax Procedures Pricing Procedures CENVAT registers Transaction Codes

Tax/Excise Duty set up for MM & SD

Basic Settings Master Data Account Determination Business Transactions

Basic Requirements
Excise Registration IDs Company Code Settings Plant Settings Excise Groups Series Groups Excise Duty Indicators

Excise Registers
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 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)

CIN Master
Maintain Chapter IDs Excise Duty Indicators Determination of Excise Duty
CIN Details can also be maintained in Material Master, Vendor Master & Customer Master.

CENVAT Availment and Utilization

On-Line Transactions
Goods Receipt
Credit CENVAT on-hold A/c

CENVAT on hold for Capital goods

Sales Excise Invoice Process

Debit ED Payable A/C

Despatch

Vendor Excise Invoice Process CENVAT Account

Credit CENVAT A/c Debit CENVAT A/c

Excise Duty Payable Account

Fortnightly Transactions
Deposit funds in PLA Account Select Register

Credit ED Payable A/C

Excise Duty Utilization Transaction

Credit PLA A/c

PLA Account
Debit PLA A/c

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.

India Localization: Materials Management

Features: It covers the following Capture details on the Vendors Excise invoice Linkage of Excise Invoice to GRs Identifying materials into raw materials and capital goods CENVAT credit availment Updation of part I and part II registers Material valuation excluding CENVAT component during the good receipt

Partial CENVAT Credit Feature

CENVAT for CVD

Factory Process - Materials

In the Process of Manufacturing the Factory uses materials. two kinds of

Input Material: Is defined as the one which loses its own identity finished product.

in the

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

Purchase from Vendor

PO Creation Goods Receipt MIGO Duty/Taxes in PO taken from Condition Records / Excise Master Data maintained.

Vendor

Dispatch

Capture & Posting of Excise Invoice (J1IEX)

Exc. Inv.

RG23 A/C Registers update

Factory Process- Registers

The Factory uses the following Excise Registers RG23 A - Part I (Captures the material A/c) RG23 A - Part II ( Captures the Duty A/c) RG23 C - (Captures Capital Goods Duty A/c)

RG 1

- Is a finished Goods Register

Factory Process- Registers

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.

Factory Process- Registers

RG23 C Purchase of Capital Goods by the factory for manufacturing purpose are only passed in RG23 C Register. The excise law permits claiming 50% MODVAT Credit in the current year and 50% in the next year for Capital Goods.

Factory Process- Registers

RG I 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.

Import Process
In the process of Imports all kind of Customs Duties and taxes are
maintained in the Purchasing Pricing Procedure. a) b) c) d) Cenvat can be claimed for Counter Veiling Duty (CVD) and Ecess on CVD. Import of Material involves the following processes sequentially : Creation of PO Payment of Duties & Taxes Receipt of Material Invoice Verification for the Materials procured.

Important Things to Know

Determination of Excise Rate in Purchasing Information on Tax Procedure and Conditions FI Entries related to Excise taking place in MM

India Localization: Sales & Distribution

Features: It covers the following Sales from Factories Sales from Depots Stock Transfer Export Sales

Excise rate Determination

Get SSI duty Rates. Yes Is the Customer SSI? No Get Excep duty rates Yes Excp rates Maintained? Get Ch ID Of the material Get Customer Excise indicator Get plant Excise indicator

No

Get final Excise indicator

Get rate Based on Ex Ind & CH ID

Sales from Factory

Purchases Capture EI Supplying Plant Excise Invoice Dispatch

Add up to Excise Duty Payable A/c

Sales From Depot

Excise Invoice

Plant

Depot

Dispatch

Add up to the Excise Duty Payable A/c Reduce the Quantity

Export Process
In the process of Exports under bond duty 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.

Determination of ED Rate in Sales and Distribution

Settings for the same done through configuration & Master Data 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

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