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Document Control
Change Record
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Reviewers
Name Position
Rajnish Kumar Director, Tax Development
V S Baburaj Product Strategy Director
Audience
Name Position
12.1.X Implementation team
12.1.X Customers
12.2.X Implementation team
12.2.X Customers
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Contents
Document Control ..................................................................................................................................................................................................................... 2
1 - Introduction .............................................................................................................................................................................................................................. 4
2 - Scope ......................................................................................................................................................................................................................................... 4
3 - Setup .......................................................................................................................................................................................................................................... 5
4 – Transaction Flow of Intercompany & IRISO......................................................................................................................................................................... 9
4.1 Flow Diagram for Internal Requisition-Internal Sales Order (IR-ISO) Transaction .................................................................................................................... 9
4.2 Transaction Flow of Inter Organization Transfer (IOT) .......................................................................................................................................................... 19
5 – Accounting Entries ............................................................................................................................................................................................................... 24
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1 - Introduction
Internal Requisition – Internal Sales Order (IR-ISO) or Inter Organization (Inter Org) transfer refers to the business process where in there will be requirement of
material from one department/division of an enterprise from another department/division for either using the material in further manufacturing or trading of material.
In this business process, the division, which dispatches the goods, will be called a “Source Organization” and the one, which receives, will be called “Destination
Organization”.
An enterprise may have multiple business divisions. There are scenarios where in one-division uses the material produced in another division. The usage could be
further production of goods or trading of the goods manufactured.
Intercompany invoicing - is done when one organization offers products / services to another operating unit. For example, when a customer order is processed
through the order cycle and then invoiced, the selling organization records journal entries to accounts receivable, revenue, and as applicable tax and freight. The
shipping warehouse records journal entries to its inventory asset and cost of goods sold accounts. When this scenario involves a selling organization in one business
unit but a shipping warehouse in a different business unit, additional accounting must take place. The shipping organization needs to bill the selling organization at
transfer price, and the selling organization needs to make the corresponding payment.
Note that intercompany invoicing is possible only between two operating units. You cannot invoice between two inventory orgs if they belong to the
same operating unit.
The intercompany AR invoice is the transaction used to record intercompany receivable accounting for the shipping organization: debiting intercompany AR (at
transfer price), tax, and freight and crediting intercompany revenue.
The intercompany AP invoice is the transaction used by Oracle to record the payable accounting for the selling organization: debiting intercompany COGS (at transfer
price) and freight and crediting the intercompany payable account. Ideally, these transactions should happen automatically and as soon as possible after the shipment
takes place. This can be done using the intercompany invoicing process within Oracle applications.
2 - Scope
Goods & Service Tax Act Scope in IR-ISO & Inter Org transfers
Post GST there will be impact on existing IR-ISO and Inter Org transfers. In the current regimes whenever material is moved out one must need to issue a Document
sequencing number and charge the tax liability. Like in case of Excise & VAT at the time of shipment, there is requirement to update respective liability in case of
transfers also.
However, with the implementation of GST the same is simplified. Now whenever there is transfer between 2 different registration numbers only then the taxes are
applicable.
As per the current GST rules each state will have one GST Registration number. Hence, whenever there is transfer across states the GST will be applicable.
Before exploring further, first we also need to understand the type of taxes applicable under GST Regime. Following will be the taxes, which will be applicable under
GST:
Central GST (CGST): This will be applicable for all the transactions.
State GST (SGST): This will be applicable on all the transactions within state except interstate transactions. This will be charged along with CGST.
Inter State GST (IGST): This will be for stock transfers across state. This will be charged along with CGST.
So based on the above following will be tax combinations under GST Regime:
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Vision India Limited (Legal
Entity)
3 - Setup
Define AR Transaction Type & Import Source Oracle Receivable Required Optional
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B. Following is the check list for OFI-GST setups:
Sl No Setup Name Source Destination
Organization Organization
** For IR-ISO & Inter Org Transfer Transactions the Tax type will always have Tax Point Basis (TPB) as “Delivery”.
Profile Options:
Receiving Inventory Org: IL2 - IL Manufacturing with Standard Cost (OU1: Vision India Operating Unit)
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Shipping Inventory-Org: IN6 - IL Average_Costing_Inventory - OU2 (OU2: Vision India Operating unit2)
Intercompany Relations
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Click on Intercompany Relations
At Shipping network we need to do setup for transaction held between which inventory organizations
Here we can associate which is receiving org(To) and which is shipping org(From)
Also we need to mention the FOB point whether it can SHIPMENT or RECEIPT
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Here we need to define the default accounting code combination for inter-company/IRISO/Inter-Org transfer transactions
These account will get generate when the intercompany/IRISO transactions happened
4.1 Flow Diagram for Internal Requisition-Internal Sales Order (IR-ISO) Transaction
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At requisition need to mention the source organization as shipping organization based on location tag
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View log
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Shipping Transaction/Pick Release in Sending Organization
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Post pick release and before ship confirm we can verify the tax details and amount from India Tax Details form
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Create Internal Receipt at Receiving Organization
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Close the form and click on Header button to get the Receipt Number
Note: We can create Intercompany AR invoice at shipping organization once the material received/delivered into receiving organization
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Navigate to India Local Receivables
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Distributions
Note: Intercompany AP invoice will be eligible to create after intercompany AR invoice created
View Output
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Distributions
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4.2 Transaction Flow of Inter Organization Transfer (IOT)
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Click on Transaction Lines
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Select the record and enter the Location where you are receiving the material
Navigate to Tools > India Tax Details and verify the tax details and amount
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Close the form
Click on Header button to get the Receipt Number
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5 – Accounting Entries
Intercompany Invoicing, IR-ISO and Inter- Org Transfer(IOT) accounting depends on the FOB point selected in the shipping network. There are 2 type of FOB:
- Shipping
- Receipt
ISO Receipt
Receiving Inventory Account (Non
Recoverable Tax) Receiving Org Debit
Intransit Inventory Account Receiving Org Credit
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