Deeper: India Statutory Requirements and SAP Functionalities

IBM Business Consulting Services
India Statutory Requirements

and SAP Functionalities
Country India version Overview
deeper
Copyright IBM Corporation 2003
Introduction to India Statutory Requirements

The modules affected by India statutory requirements are FI, MM & SD
FI
SD
MM
Financial reporting is supported by the standard SAP package
Introduction to India Statutory Requirements

The following process gets affected due to India Statutory
requirements
Purchasing
Sub contracting
Stock transfer of goods
Payment to service vendors
Sales
Any Movement of goods between legal entities or

payments made or received to/from business partners are
affected by India statutory requirements
The MM Module
FI
SD
*
*
MM
The process affected by India statutory requirements are

the Purchase, Subcontracting & Stock transfer in MM.
Tax settings are common in nature.
Account Determination is handled in FI.
The Purchasing Cycle

Purchase Order
Excise Invoice
Capture
Excise duty is a type of manufacturing tax

Excise duty rate depends upon on the material
type as defined by the authorities
CENVAT stands for Central Value added tax
Goods Receipt
CENVAT Credit
Country India version related transactions

are depicted in a different font
Invoice Verification
Introduction to Excise Duty
is
Fin
he
ood
dg
le
sab
i
c
x
ot E
Component
Inventory value Rs. 6600
Credit Available :Rs. 0
Component
Basic Price Excise Duty LST/CST Total Price -
Rs.
5000
1000
600
6600
Fin
is h
ed
go
od
E
xc
i sa
ble
If the item purchased is part of a

manufactured product that is excisable then
the Excise duty paid for this purchase order
can be availed as CENVAT credit
Component
Inventory value Rs. 5600
The Purchasing Cycle - Domestic

Purchase Order
Vendor Excise
Invoice
Goods receipt
CENVAT credit
Local / Central sales tax is determined upon the location

of the sale & the Ship-to-party region
Sample Pricing is as below :
A
B
C
D
E
F
sales
Description
Basic Price
Excise Duty (20% of A)
Total Excise Duty
Sub Total (A + C)
Local Sales Tax (10% of D)
Grand Total
INR
5000.00
1000.00
1000.00
6000.00
600.00
6600.00
Either Local sales tax or central

tax is applicable on any one item.
The Purchasing Cycle

Purchase Order
Vendor Excise
Invoice
Goods receipt
CENVAT credit
The following data is captured referring to the Vendors

excise invoice
Purchase order number
Material number
Quantity
Excise rate
Excise amount
The information captured in this transaction

forms the basis for availing the CENVAT
Credit as well as for maintaining statutory
registers

Purchase Order
Vendor Excise
Invoice
Goods receipt
CENVAT credit
Goods receipt transaction captures the following data,

referring to the vendor excise number
Material number
Quantity
Inventory Valuation is carried out in this transaction
based on purchase order
The information captured in this transaction

forms the basis for updating the statutory
records regarding quantity related information

Purchase Order
Vendor Excise
Invoice
Data captured referring to the Vendors excise invoice

are posted
No Inventory Valuation is carried out in this transaction
Accounting entries are made in the clearing account for
excise
Goods receipt
CENVAT credit
The information captured in this transaction forms

the basis for updating the statutory records
regarding value related information

Purchase Order
Vendor Excise
Invoice
Corrections to Inventory Valuation is carried out in case

of corrections to excise invoice
Accounting entries in the clearing account for excise are
nullified by making the payment to the vendor
Goods receipt
CENVAT credit
Inventory re-valuation takes place in

case of corrections to excise invoice amount
Purchasing from Overseas Sources

Create purchase
requisition
Purchase
requisition
Analysis of
purchase order
values
Enter invoice
Request
for
quotation
Invoice
verification
Quotation
Goods
receipt
Goods receipt for
purchase order
Clearance from
Port, LC Activities,
Customs
Assessment
Shipping
notification
Create shipping
notification
Purchase
order
Order
Acknowledge
ment
Create Request
for quotation
Maintain
quotation
Create purchase
order reference
to request for
quotation
Create order
acknowledgement
The Purchasing Cycle - Imported

Purchase Order
Vendor Excise
Invoice
Counter veiling duty depends upon on the material type as

defined by the authorities
All other steps are similar to domestic procurement
A
Goods receipt
CENVAT credit
B
C
D
E
F
G
H
Description
Basic Price
Customs Duty
Basic (20% of A)
Special Customs (5% of A)
Total Customs
Sub Total (A + D)
Counter Vailing Duty CVD (13% of E)
Sub Total (E + F)
Special Additional Duty (4% of G)
Grand Total
INR
5000.00
1000.00
250.00
1250.00
6250.00
812.50
7062.50
282.50
7345.00
In an imported purchase order, the CVD
component is used for availing CENVAT

credit.
The other components vary based on prevailing

.
rates.
The Purchasing Cycle - Capital Goods

CENVAT credit availment is possible on Capital goods procured for
manufacturing or for enhancing existing capacities. Some of the Types for
which credit can be availed are :
Consumables
Tools
Assets
CENVAT credit for capital goods are applicable for

manufacturing companies only & not for a trading company
The Purchasing Cycle - Consumables

Purchase Order
Intimation
Excise Invoice
Capture
CENVAT Credit
Availment
Goods Receipt
CENVAT Credit
on hold
The Purchasing Cycle - Tools

Purchase Order
Intimation
Excise Invoice
Capture
Goods Issue
Goods Receipt
CENVAT Credit
Availment
CENVAT Credit
on hold
External Sub Contract Cycle

Purchase Order

A
Transfer Posting
Description
Processing Charges
Grand Total
INR
5000.00
5000.00
57f4 Document
Generation
Goods Receipt
57f4 Completion
Purchase order is generated for the Processed Item, to

be received from the sub contractor. It also contains
information about the input components required for
processing.

Purchase Order
Based on the component requirement and availability,

the same are transferred to the sub contractors site.
Transfer Posting
57f4 Document
Generation
Goods Receipt
The transferred stock are shown as part of the

valuated stock of the enterprise, but lying with the
sub contractor
57f4 Completion

Purchase Order
Transfer Posting
57f4 Document
Generation
Goods Receipt
A statutory document called 57f4 is generated which captures

the following details Sub contractor details
Material description
Batch details
Quantity
Value
Expected date of return (within 180 days)
On generation of the document, CENVAT account

needs to be debited by 10% of the value of components
sent for processing, the same can be reversed only if the
processed components are received with in 180 days
57f4 Completion

Purchase Order
Transfer Posting
57f4 Document
Generation
Goods Receipt
57f4 Completion
Goods receipt transaction captures the following data,

referring to the 57f4 document number
Material number
Quantity
Statutory register related data
Inventory Valuation is carried out in this transaction based on
confirmation of components consumed during processing
CENVAT account can be credited only after

complete receipt of the purchase order items
(processed items)

Purchase Order
Transfer Posting
On complete receipt of goods from the sub contractor, the 57f4

document is closed
In case of short closure of purchase order, CENVAT credit can
be taken only for those items that have been received, and rest
needs to be forfeited
57f4 Document
Generation
Goods Receipt
Receipt of processed goods within 180

days is crucial
57f4 Completion

Inventory valuation
Component
Credit reversed : Rs.500
ed days
v
i
80
ce
Re hin 1
t
Wi
Component
Rs.
Basic Price 5000
Excise Duty 500
Total Price 5500

Credit Debited :Rs. 500
(when the component is sent
to the job worker)
Re
c
t ha e i ve d
n1
80 L a t e r
day
s
Component
CENVAT debited : Rs.1000
The FI Module
FI
SD
MM
The process affected by India statutory

requirements is the Withholding tax known as
the tax deducted at source
Tax Deductions at Source

Down Payment
to Vendor
TDS Payments
Challan Updation
Down Payment
Clearing
TDS Certificate
Printing
TDS Entry on
balance amount
Annual Returns
Vendor payment
TDS liability is set up at the

time of provision or payment
whichever is earlier
Vendor Down Payment

Down Payment
to Vendor
Down Payment
Clearing
TDS Entry on
balance amount
TDS Rates are maintained for various sections under the

Income Tax Act. The rates are attached to vendor master
and transactions (down payments and invoices)
(e.g.) A contractor is classified under the relevant section
& is subject to say 20% TDS.
An amount of Rs.40,000 is paid as advance & the entries
passed are
Dr. Vendor Advance 40000
Cr. Bank
32000
Cr. TDS Payable
8000
Vendor payment
Down Payment
to Vendor
For Example : A contractor is classified under the

relevant section & is subject to 20% TDS.
An invoice of Rs 70000 is verified, and the entries
passed are
Dr. Expense / Stock 70000
Cr. Vendor
70000
Down Payment
Clearing
TDS Entry on
balance amount
Vendor payment
Down Payment Clearing

Down Payment
to Vendor

The down payment of Rs 40000 was fully cleared
against the invoice
Dr. Vendor
40000
Cr. Vendor Advance
40000
Down Payment
Clearing
TDS Entry on
balance amount
Vendor payment
TDS Entry
Down Payment
to Vendor
Down Payment
Clearing

TDS is computed on the invoice, after clearing the down
payment with the invoice
Dr. Vendor
6000
Cr. TDS payable
6000
(20% on Rs. 30000)
TDS Entry on
balance amount
Vendor payment
Vendor Payment
Down Payment
to Vendor

Vendor is paid the amount net of TDS
Dr. Vendor 24000
Cr. Bank
24000
Down Payment
Clearing
TDS Entry on
balance amount
Vendor payment
TDS payments
TDS Payments
Challan Updation
TDS Certificate
Printing

At the period end the TDS is paid to the government
against the liability
Dr. TDS payable
14000
Cr. Bank
14000
(Rs.14000 composed of Rs. 8000 provided during
advance and Rs. 6000 provided during the invoice)
Annual Returns
Other TDS Activities

TDS Payments
Challan Updation
TDS Certificate
Printing
On payment to government, a document called Challan

is filled up, this Challan number is updated in the system
The vendors are issued TDS certificates at the period
end
The company has to file annual returns to the
government which gives details of TDS deducted by
various tax sections
Annual Returns
Tax Deductions at Source

CIN uses SAPs standard withholding tax functionalities to address TDS requirements.
Extended withholding functionality is currently followed.
CIN supports TDS payments on invoice or payment which ever is earlier
The SD Module
FI
SD
MM
The process affected by India statutory

requirements is the pricing procedure for Sales
tax & CENVAT credit utilization
The Sales Cycle

Sales Order
Creation of Delivery
The pricing elements of a sales order should contain the

following
Basic price less all discounts
Excise duty
Sales tax
Entry tax
CENVAT Utilization
Excise Invoice
Commercial Invoice
The pricing structure is similar to that of the

vendor pricing.
Tax Element in Sales Cycle

Sales Tax
ax
sT
e
l
l Sa
a
c
Lo
Manufacturing Plant / Sales Depot
Ce
nt r
al S
ale
sT
ax
Customer within the same

state as the delivering plant
Customer outside the state

of the delivering plant
Sales tax is calculated on (Base Price + Excise duty)

The Sales Cycle

Sales Order
The delivery of a sales order includes Picking &

Packing of goods as per the Sales order
CENVAT Utilization
Excise Invoice
There is no change in functionality of

Delivery due to India statutory requirements
Commercial Invoice
The Sales Cycle

Sales Order
The excise duty payable is to be paid before the goods

leave the factory premises
The credit available in the statutory records can be
utilized for paying the excise duty.
The amount payable can be netted off from these
records
CENVAT Utilization
Excise Invoice
If credit is not available, then duty amount is

to be deposited to the government
Commercial Invoice
The Sales Cycle

Sales Order
CENVAT Utilization
Excise Invoice
An excise invoice needs to be generated which would be

audited by Excise authorities
The invoice should contain the following details
The Excise duty percentage
The Excise duty amount
The Excise duty payment details
The sales order details
An excise invoice can be combined with

the commercial invoice if required
Commercial Invoice
The Sales Cycle

Sales Order
The commercial invoice is sent to the customer with the

amount payable to the organization with the break up of
the pricing components
If the excise & commercial invoice is combined then the
details required are still the same
CENVAT Utilization
Excise Invoice
* The invoice needs to move along with the goods
Commercial Invoice
Summary of the India statutory requirements

The main statutory requirements of India are
CENVAT credit availment & utilization
Tax deducted on source
Sales tax
All records maintained for statutory requirements are subject

to audit by the authorities
Introduction of VAT
All States in India are yet to move towards VAT regime.
VAT has come into force in many States already.
Excise, CST and Service tax to remain and other taxes to go.
All declared goods to come under VAT and VAT credit available to both
manufactures and traders.
Tax credit can be carried forward every month till the end of next fiscal
year.
Export / SEZ input tax paid will be refunded in full.
Capital goods credit number of installments to be decided by each state.
Implication of VAT in SAP

Jurisdiction codes would be scrapped.
One business place needs to be defined for each TIN no.
Each plant would be assigned to a business place.
While more than one plant can exist in one registration, one plant cannot
have two registrations.
Alternate GL accounts can be assigned for Tax code at business place.
Master Note 818732 to be followed closely to monitor various changes.
Question & Answers
deeper
Thank You
deeper

Deeper: India Statutory Requirements and SAP Functionalities

Загружено:

Сведения о документе

Оригинальное название

Авторское право

Доступные форматы

Поделиться этим документом

Поделиться или встроить документ

Параметры публикации

Этот документ был вам полезен?

Это неприемлемый материал?

Авторское право:

Доступные форматы

Deeper: India Statutory Requirements and SAP Functionalities

Загружено:

Авторское право:

Доступные форматы

IBM Business Consulting Services

India Statutory Requirements

Country India version Overview

Copyright IBM Corporation 2003

IBM Business Consulting Services

Introduction to India Statutory Requirements

Financial reporting is supported by the standard SAP package

Copyright IBM Corporation 2002

IBM Business Consulting Services

Introduction to India Statutory Requirements

Any Movement of goods between legal entities or

Copyright IBM Corporation 2002

IBM Business Consulting Services

The process affected by India statutory requirements are

Copyright IBM Corporation 2002

IBM Business Consulting Services

The Purchasing Cycle

Excise duty is a type of manufacturing tax

Country India version related transactions

Copyright IBM Corporation 2002

IBM Business Consulting Services

Introduction to Excise Duty

If the item purchased is part of a

Copyright IBM Corporation 2002

IBM Business Consulting Services

The Purchasing Cycle - Domestic

Local / Central sales tax is determined upon the location

Either Local sales tax or central

Copyright IBM Corporation 2002

IBM Business Consulting Services

The Purchasing Cycle

The following data is captured referring to the Vendors

The information captured in this transaction

Copyright IBM Corporation 2002

IBM Business Consulting Services

The Purchasing Cycle - Domestic

Goods receipt transaction captures the following data,

The information captured in this transaction

Copyright IBM Corporation 2002

IBM Business Consulting Services

The Purchasing Cycle - Domestic

Data captured referring to the Vendors excise invoice

The information captured in this transaction forms

Copyright IBM Corporation 2002

IBM Business Consulting Services

The Purchasing Cycle - Domestic

Corrections to Inventory Valuation is carried out in case

Inventory re-valuation takes place in

Copyright IBM Corporation 2002

IBM Business Consulting Services

Purchasing from Overseas Sources

Copyright IBM Corporation 2002

IBM Business Consulting Services

The Purchasing Cycle - Imported

Counter veiling duty depends upon on the material type as

In an imported purchase order, the CVD

component is used for availing CENVAT

The other components vary based on prevailing

IBM Business Consulting Services

The Purchasing Cycle - Capital Goods

CENVAT credit for capital goods are applicable for

Copyright IBM Corporation 2002

IBM Business Consulting Services