Proposal for SAP Upgrade

at Hindustan Motors
CIN

Deloitte & Touche Consulting India Pvt. Ltd

Table of Contents
Introduction
Organizational Elements
Master Data
Procurement
Sales
CENVAT Utilization
Depot
Sales Tax
VAT
Subcontracting
TDS
Adjustments and Reversal
Register Printing and reporting

CIN developments

Country Version India (CIN)

Till SAP R/3 4.6C (CIN 4.0A), India Localization was available as an add-on solution complementing R/3
with functionality for India-specific statutory requirements
As of SAP R/3 Enterprise Core 4.70 (CIN4.0A), India Localization is delivered as a part of the standard
R/3 System. This solution is well harmonized with the Industry Solutions offered having taken care of all
technical conflicts

What Country Version India Consists of?

Most of the country-specific functions for India relate to Financials and Logistics, and center around
taxes, including:

Excise duty and the central value-added tax (CENVAT)

Service Tax
Tax deducted at source (TDS)

Sales tax

Definition for Excise / 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).

Organizational Elements

Company Code

Plant 1

Plant 2

Depot

Excise Group

Excise Group

Excise Group

Series Group

Series Group

Series Group

EXCISE GROUP - Maintain Excise Registers

SERIES GROUP - Number Ranges for Out Bound Excise Documents

CIN Master data

Chapter ID.
Material and Chapter ID combination.
Cenvat Determination.
Vendor excise details.
Excise indicator for Plant.
Excise indicator for plant and vendor.
Excise tax rates.

CIN Master Data

CIN Master Data Chapter ID

CIN Master Data Material Chapter ID Combination

CIN Master Data MODVAT (CENVAT) Determination

CIN Master Data MODVAT (CENVAT) Determination

CIN Master Data MODVAT (CENVAT) Determination

Procurement
India Localization provides for integration of excise processes with the goods movement functionality.
Incoming excise invoices can be entered and posted instantly in the R/3 System for goods receipts
arising from external procurement, subcontracting and stock transfer. The posting of excise invoices
generates the appropriate accounting entries for CENVAT credit, where applicable. The amount posted
to these accounts is available for CENVAT utilization.
Current excise rules allows for availing immediate CENVAT credit to the extent of only fifty percent for
capital goods. The balance can be availed in subsequent financial years. India Localization supports the
same. Entries in CENVAT registers are maintained in the system with reference to source transaction
data, thus ensuring traceability

Legal View: Procurement from Factory

Excise Invoice
Domestic Vendor

Price: 1000
Qty : 10 PC
Duty 16%
- 160

Excise Stock/
Part I Register
Deposit Rs. 160
as Duty to the
Govt.

Receipt
Qty : 10 PC
GR at Factory Gate

Excise Invoice
Capture and Post

Procurement Cycle for Raw materials in SAP

Transaction ME21N
Transaction J1IEX
Transaction MIGO

Transaction J1IEX
Transaction MIRO

Purchase Order

Excise Invoice
Capture

Goods Receipt

CENVAT Credit
Availment

Invoice Verification

100% duty amount posted

to CENVAT account

Procurement Cycle for Capital Goods in SAP

Transaction ME21N
Transaction J1IEX
Transaction MIGO

Transaction J1IEX
Transaction MIRO

Purchase Order

Excise Invoice
Capture

Material type indicator to be

mentioned

Goods Receipt

CENVAT Credit
Availment

Invoice Verification

50% duty amount posted to

CENVAT account
Balance 50% duty amount
posted to CENVAT on hold
account

Subsequent availment of credit

Subsequent availment of CENVAT credit possible through transaction J2I8
CENVAT amount transferred from CENVAT ON HOLD account to RG23C account

Procurement Cycle for Services

Transaction ME21N
Transaction ML81N
Transaction MIRO

Purchase Order

Service Entry
Sheet

Invoice Verification

Service tax capture in

onhold account

Service tax credit thru manual FI JV

Factory Sales
The excise invoice can be separately created or combined with the commercial invoice during the billing
cycle. There is a provision for automatic creation of excise invoices in the background as well as batch
creation of excise invoices.

Legal Overview :Sale from Factory

Supplying Plant

Excise Invoice

Price: 1000
Qty : 10 PC
Duty 16%
+ 160

Dispatch

Debit:
Rs. 160
Excise Duty
Payable A/C

Monthly utilization
CENVAT/Part II Register

PLA Register

Domestic Sales flow in SAP

Transaction VA01

Sales Order

Transaction VLO2N

Delivery

Transaction VF01

Transaction J1IIN

Commercial Invoice

Excise Invoice

Export
Country Version India allows you to process exports and deemed exports under excise regulations. Under
exports, India Localization provides for maintenance and processing of Excise Bonds (B1 Bonds,
Running Bonds, Letter of Undertaking), creation and processing of ARE-1s. Under deemed exports,
maintenance of licenses and creation and processing of ARE-3s are provided. Reporting in terms of
ARE document ageing, the running bond report, the export report and bond summary report provide for
tracking their status.

Legal Overview: Export Sale

Supplying Plant
Under Bond
Price: 1000
Qty : 10 PC
Duty 16%
+ 160

Update
Excise
database

Invoice/ARE1

No Bond

Dispatch

Debit:
Rs. 160
Excise
Duty
Payable
A/C

Monthly utilization
CENVAT/Part II Register

PLA Register

Export Sales flow in SAP

Transaction VA01

Sales Order

Transaction VLO2N

Delivery

Transaction VF01

Commercial Invoice

Transaction J1IIN

Excise Invoice

Transaction J1IA101

ARE1 Creation

Deemed Export(100%EOU) Sales flow

Transaction VA01

Transaction VL02N

Transaction VF01

Transaction J1IIN

Sales Order

Delivery
Commercial Invoice

Excise Invoice

ARE3 Creation
Transaction J1IA301

Cenvat Utilization
India Localization provides for both immediate and Monthly Payment duty. The system displays
information on excise duty and proposes which CENVAT accounts it is to be debited to Immediate
CENVAT utilization provides for online updation of CENVAT credit in the relevant registers during the
goods movement transaction. Monthly CENVAT utilization functionality allows you toutilize CENVAT
accumulated during a period and debit balance to your personal ledger account. The system posts a
consolidated entry in Part II after providing a link to individual outgoing excise

CENVAT Availment & Utilization

Monthly Utilization
T-Code J2IUN

Monthly Utilization

Monthly Utilization

Monthly Utilization

Excise for Depot Operations

Materials can be received from manufacturing facilities, other depots and dealers. Stock is maintained in
the RG23D register for incoming as well as outgoing movements. The invoice contains references from
incoming excise documents. India Localization provides for supplementary invoice functionality in depot
operations. Here, the system facilitates additional excise entry and A certificate number, date and
additional BED, AED, SED and CESS can be maintained for a given RG23D Folio

Legal Overview :Sale from Depot

Depot

Price: 1000
Qty : 10 PC
Duty 16%
+ 160

Invoice
Dispatch

Debit: Rs. 160

Reduce qty by 10

RG23D Register

Depot receipt and Sales in SAP

Sales Tax
India Localization offers functions for calculating sales tax base values, setting off tax and determining
central sales tax and local sales tax rates

Interstate Procurement of Material

VAT
VAT is a form of sales tax only.
It is multi point tax as against normal single point sales tax.
Collected in stages (installments) rather than at one point (1st /last) from the transactions.
Multipoint & multistage tax.
To be levied only on the value addition to a product or service at each stage of manufacture/distribution.

Intrastate Procurement of Raw Material (Creditable)

Intrastate Procurement of Capital Goods (Creditable)

Intrastate Procurement of RM (Non-creditable)

Subcontracting
The India Localization provides for monitoring materials issued to a subcontractor under the Excise Law
57AC. Features such as challan creation and tracking, quantity reconciliation and CENVAT reversal on
non-receipt of material within prescribed timeframe are provided for. Further the R/3 System can be
used to send materials to subcontractors for processing using normal excise invoices.

Legal Overview Subcontracting

Subcontracting Flow in Sap

Full-Cycle Monitoring of 57F4 Process Status
Annexure IV Report
57F2/F3 Process

Closed-Loop
Closed-Loop Control
Control of
of
Subcontracting
Subcontracting Process
Process
P u rc h a s e O rd e r
T r a n s f e r P o s t in g
C h a lla n C r e a t io n

Multiple Challans for a Transfer Posting

One-step Challan Creation and Printing

G o o d s R e c e ip t
Multiple Challan References per GR

Q u a n t it y R e c o n c ilia t io n
Reconciliation Workbench

C h a lla n C o m p le t io n

CENVAT Reversal for Non-receipts

CENVAT Re-credit

Tax Deduction at Source (TDS)

India Localization is integrated with R/3 to help achieve compliance with TDS requirements. Provision
exists for the deduction of TDS from vendor payments or provisions or at invoice posting whichever is
earlier. TDS Challans are linked with individual transactions. TDS certificates and annual returns can be
generated using the system. India Localization supports use of Extended Withholding Tax functionality
for TDS. TDS deducted by customers can also be tracked.

Tax Deduction at Source (TDS)

Vendor

Vendor

Income tax office

Deduct Tax
from Vendor

Issue
Certificates

Pay Tax to
Government
Bank

Adjustments and Reversals - Highlights

C E N V A T A d ju s tm e n t
S c rap
N o n -p r o d u c tio n u s e
A d d it io n a l E x c is e P a i d b y V e n d o r

Flexibility for 100% Compliance

D e p o s it in to P L A th r o u g h T R 6
C a n c e l E x c is e In v o ic e

Management of CENVAT Credit for Capital

Goods
CENVAT Reversals and Adjustments
One-Step Reversal of Excise Invoice

W ith R e fe r e n c e to E x te r n a l D o c u m e n t

Register Printing and reporting

Reporting and Printing options
RG 23 A Part I
RG 23 A Part II (CENVAT Register)
RG 23 C Part I
RG 23 C Part II
RG 23 D
RG 1,

PLA

57AE monthly returns

Annexure IV (Subcontracting)
Sales Tax register
ER1 returns
TDS Annual Returns & Certificate Printing