India localization with respect to india


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Country India Version for Sales & Distribution. from Anand Kumar KS, SD Consultant,

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India localization with respect to india

  1. 1. India Localization with respect to INDIA Modus Operandi Session I  Introduction to Indian Taxes.  Different Sales Process.  CENVAT concept.  CENVAT rules and terminologies.  CENVAT and sales process.  Base for the CENVAT credit.  Tax Procedures.  Registers.  India Localization Configuration in SD.  Master Data.  SAP Easy access settings relevant for India Localization.  Q&A.  Conclusion. Introduction Let us discuss, what are India taxes and how they are differentiated. Indian Tax Procedure 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: + Excise Duty must be a duty on the goods;
  2. 2. a. The goods must be excisable; b. The goods must be manufactured or produced; c. The Manufacture or Production has to be within India; + Excise Duty is Mainly based on 4M's a. It must be mentioned in Excise Laws b. It must be movable c. It must be manufactured d. It is valuable to money + Excise duty is a duty 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. Sales Tax: Sales Tax is a tax on Sales and can be imposed only when there is a sale. Difference between Excise duty and Sales Tax. Central Excise duty has to be distinguished from sales Tax. Sales Tax is a tax on sales and can be imposed only when there is a sale. On the other hand, Excise duty is a duty on the manufacture of the goods. So, duty can be imposed immediately after goods are manufactured. Whether these goods are sold are not is immaterial. For Example: If a company manufactures soap within the factory for its own use, there will be no sales tax on the soap. However, the soap will be liable to pay excise duty as it has been manufactured. Types of Excise Duties:
  3. 3. Under 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 to 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. Different Sales Process A. Sales from Factory B. Stock Transfers C. Sales from Depot D. Scrap Sales E. Auction sales especially for scrap F. Job Works G. Exports A. Sales from Factory 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:
  4. 4. Is defined as the one which does NOT lose its own identity in the finished goods. B. 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 into the stock is not an input, it is just a transfer from one place to other.  There is no price escalations here. C. Depot Process(Sales from Depot) For doing goods receipt: Scenario 1: Stock Transfer  Step 1: Do GR (Transaction code: MB01)  Step 2: Excise Invoice Capture at Depot (Transaction code: J1IG) Scenario 2:  Step 1: Do GR (Transaction code: MIGO)
  5. 5.  Step 2: Excise Invoice Capture at Depot (Transaction code: J1IG) At the time of sale: => Sales Order -> Delivery -> J1IJ (Always require a delivery number) -> PGI -> Billing D. 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.  Incase of deemed Exports, the same procedure is followed as in exports, however, the form used is ARE3. What is CENVAT........!? Commonly used word, whenever discussing on India Tax. CENVAT: Amount that is paid on the value that is added at that time of sale to the government. For Example:
  6. 6. .....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 50% 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 within 180 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 each amount. .....CENVAT  Rule 1. Short title, extent and commencement.-  Rule 2. Definitions.-
  7. 7. "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. CENVAT So far.....  Overview of Indian Tax Structure.  What is Excise Duty and Types of Excise duties?  What are CENVAT rules?  What is CENVAT credit?  How and when CENVAT credit is availed? 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 Registers.  What are these.  Now we will going to discuss on Tax Procedures.
  8. 8. SAP Provides following std. Tax procedure for country India  Formula based Tax Procedure TAXINJ  Condition based Tax Procedure TAXINN Currently from 4.7 we are using TAXINN. Settings needed in SAP for TAXINN First we need to maintain TAXINN procedure as shown in the slide.  Menu Path: SPRO -> Logistics General -> Tax on Goods Movement -> India -> Basic Settings -> Determination of Excise Duty -> Maintain Excise Defaults.  Then we need to assign the Tax procedure TAXINN to country India as shown below.  Menu Path: SPRO -> Logistics General -> Tax on Goods Movement -> India -> Basic Settings -> Determination of Excise Duty -> Select Tax Calculation Procedure.
  9. 9. Sales and Distribution Pricing Procedure
  10. 10.  What is Excise Register and how many are they?  How the Excise registers are using at Different Business Scenarios and How these are updating? Excise Register Excise Laws require you to maintain a number of registers in a specified format relating to a 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. Types of Registers:  RG23A PART I  RG23A PART II  RG23C PART I  RG23C PART II  RG I  RG23D Excise Registers  RG23A: Raw Material
  11. 11. 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 amount and the quantity) 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 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.
  12. 12.  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. DEPOT Process Transactions can happen through two scenarios:  Scenario 1: Depot receives goods from the company's factory through stock transfer.  Scenario 2: Depot procures goods directly from external resources. Transaction codes relevant For Registers. Activity SAP Transactions Register updates RG 23 A(Part I & II and RG I) J1I5 Register Extraction J2I5 Register Printing J2I6 Utilization J2IU So far we discussed on  Tax Procedure  Pricing Procedure relevant to SD  CENVAT registers  Transaction codes Tax/Excise Duty set up for MM & SD  Basic Settings  Master Data  Account Determination  Business Transactions  Tools
  13. 13. Basic Settings  Excise Registration ID's  Company Code Settings  Plant settings  Excise Groups  Series Groups  Excise Duty indicators Excise Registration ID's
  14. 14. Company Code Settings Plant Settings
  15. 15. Excise Groups Series Groups
  16. 16. Excise Tax Indicators Account Determination Describe which excise accounts (for excise duty and CENVAT) are to be posted for the various transaction types including sub transaction types if any
  17. 17. During transactions system determines which G/L account to post to by looking at the Excise Group, Company code & Chart of accounts SD Settings relevant to India Localization  Assigning Billing types to Delivery types
  18. 18. Maintain Excise Defaults Maintain the Excise Defaults in order determine Excise Group and series Group automatically at the time of Excise Invoice creation. Maintain Utilization Determination
  19. 19. Excise Rate Determination
  20. 20. Print the Excise Reister
  21. 21. Conclusion