The document discusses India localization requirements for an SCM implementation in India. It covers key topics like India taxes, localization setups, defining additional information for inventory organizations, items, suppliers and customers to comply with India tax requirements. Localization provides functionality for defining, recording, calculating and reporting taxes according to India tax laws.

1. India Localizations for SCM Ravi Sagaram, PMP Motorola

2. Agenda Introduction to India Localization India Taxes Localization Setups Localization in Purchasing Localization in Order Management Question and Answers

3. Introduction India Localization is complying with the India Specific Tax Requirements. India Localization Patch set has to be applied for India Localization over and above the standard R12 implementation. India Localization Provides some seeded responsibilities like India Local Purchasing, India Local Inventory, India Local Order Management, India Local Payables, India Local Receivables etc. Also it provides India related menus, functions, reports etc. Localization provides provision for defining of taxes, defaulting of taxes, recording of taxes, calculation of taxes, and reporting of taxes.

4. Taxes Central Excise Sales Tax Income Tax VAT Customs Duty Service Tax

5. Central Excise Applied to both manufacturing and trading Orgs when the organization is excise registered. It is a federal tax controlled by the central excise department. A CE registration called ECC# is required for each physical location. If there are two inventory orgs at the same location, they will share a common ECC#

6. Sales Tax Sales Tax is administered by States The Tax is applied at the time the product is sold to the end customer There are 2 components for Sales tax– Central Sales Tax and Local Sales Tax. Different tax registration is required for both of them The head office would be responsible for tax settlement and accounting for all the tax registered orgs. Each state will have a separate LST and CST registration numbers. These are defined at each inventory Org. If multiple Inventory orgs fall under one state, they all will use the same CST and LST registrations.

7. Income Tax Head office is normally registered with the Income Tax at the LE level. PAN (Permanent account number) will be allocated for the head office, defined at the LE. TAN (Tax Deduction Account Number) is allocated by the local Income Tax jurisdiction office for the income tax under local jurisdiction at the OU level. A separate TAN Number is required for each OU that fall under different states A common TAN can be used for multiple OUs if they are all under the same State

8. VAT Value Added Tax (VAT) is a tax levied on the value added to a product at different stages. VAT is a tax levied at each of the stages in a multi point entry in the supply chain with the facility of set-off of input tax. It is levied by States in the place of Sales Tax. A manufacturer may pay VAT on input raw materials and recovers that tax when he sells the finished goods to a dealer. The difference of tax collected from the dealer and the tax paid for the raw materials is paid to the tax authority. Similarly, a dealer may pay VAT on the finished Goods and recovers that tax when he sells it to a retailer. The tax after recovery is paid to the tax authority. Finally the end customer pays the VAT to the retailer. The retailer recovers his portion of the tax he paid and pays the balance to the tax authorities. CENVAT is a Central VAT. You have the provision to claim this tax at the time of receipt. The RG registers are updated with the CENVAT entries at the time of receipt.

9. Customs Duty Customs Duty is paid on goods when goods are imported into India It is paid in INR as a % of the duty over the value of goods received in foreign Currency. In Oracle, provision is made to pay this duty as a prepayment before receiving the materials and it is adjusted against BOE given by Customs. When goods are received into the inventory org, they should be associated with the BOE Tax amount paid on them at the time of import. These Entries are registered in a Tax Register called RG23D While Shipping the goods on a sales order, the deliveries are associated with these registry entries.

10. Service Tax Service tax is paid for the services rendered. Examples are telecom service, tax services, consulting services Etc. You can define Tax regime for Service tax and have service tax registration.

11. SETUPS

12. Setups Localization Setups Inventory Orgs Sub Inventories Items Tax Regimes VAT Service Tax Bond Register

13. Define Addl. Info for Inv Orgs The information that you provide in the organization additional information using India Localization would become the basis for the recording, reporting and accounting for the tax Setup Inventory Orgs in the regular way Setup records for each inventory Org and inventory location in the Organization additional information Each organization should have a record with Null location first. The other records for each location should be defined there after Each organization has tabs for providing Tax Info, Accounting Info and Trading Info. In the Tax info, Provide the Excise Registration Information, Sales Tax registration Information. In the Accounting Info tab, provide all the accounting related information. In the Trading Info, provide the trading excise registration information related to the trading orgs.

14. Define Addl. Info for Inv Orgs (Contd..) Each organization should have a record with Null location first. Each organization has tabs for providing Tax Info, Acct Info and Trading Info Provide the Excise Information, Sales Tax information, Income tax information,and VAT registration info under this tab Once you enter the excise info, the org will be treated as Manufacturing Org Create separate records for each location You can set up one of those records as Master and the other as Child Orgs for Excise. Then Excise will be consolidated at the Master org level Most of the excise info that you specify here will print on the excise related documents. Most of the Sales Tax info that you provide here would print on the sales tax documents. If you enter excise info in the Tax Info tab, then you will not be able to enter the excise info under the trading tab. An Organization is either a manufacturing org or a trading org but not both. .

15. Define Addl. Info for Inv Orgs (Contd..)

16. Define Addl. Info for Inv Orgs (Contd..) Provide the Excise information under trading info tab for the trading organization Checking Excise in RG23D option will create entries in the RG23D register. If this is not selected, then the excise amount will be added to the inventory cost on receipt Order Price Inclusive Option includes the Excise tax in the order price. If the option is checked, then excise duty is not added to the receivables account. If it is unchecked, then the excise tax is added to the receivables account

17. Associate Sub Inventories with India Localization Associate sub inventories for India Localization Check the Bonded flag for the Excise related Sub Inventories. Then only Excise related transactions will be recorded. Check the trading flag for trading Organizations.

18. Setup item templates for India Localization and apply the templates to Items Apply these Item templates to Items for each Inventory Org You can override the attribute values derived from the template You can define Item Templates for Excise and VAT and apply the template attributes to the items. Template Attributes

19. Template attributes for items under VAT and Excise Yes RECOVERABLE Finished Goods ITEM CLASS Yes APPLICABLE Value Added Tax No RECOVERABLE Finished Goods ITEM CLASS Yes APPLICABLE Vat Not Recoverable VAT Attribute Value Attributes Template Name Type Yes EXCISABLE No MODVATABLE Finished Goods India ITEM CLASS Yes TRADABLE Excise Tradable EXCISE

20. Setup Tax Calendar Tax Year in India is from 1 st April to 31 st March This task needs to be done every tax year. Do not open the tax year for the next year by mistake as it will become current and cannot be changed. If Excise invoice has to be generated with a specific prefix, then complete the setups under Excise Generation

21. Define Tax Authorities as Vendors Define Customs, Excise, VAT and Service Tax authorities as Vendors in the Payables. Appropriate Vendor Type has to be selected while defining these vendors. For example while defining the Customs Authority, select the vendor type India Customs Authority Some of the types are India Custom Authority, India Excise Authority, India VAT authority etc. You will cut Payables Invoices to these authorities for the taxes to be paid.

22. Regimes Registration Setup VAT and Service Tax Regime Registrations You specify the registration numbers, Tax Types and the inventory Orgs for which it is applicable Also you specify the tax account details like Liability Account, Recovery Account etc. The Regime would be used to define the rules that are applicable to all the taxes assigned to it. Taxes defined under the regime would default only for those organizations assigned to it. You can over ride them at the org level.

23. Define Bond Register Setups in Bond Register are required to generate Excise Invoice numbers and Updation of excise registers. You specify the Order type from OM in bond register to associate the related excise transactions The excise transactions related to manufacturing and trading need to be associated with the bond register. By associating the order types to the excise transactions for an inventory org and location, excise records will be passed based on the nature of goods cleared. Some of the register types are Trading Domestic with Excise; Trading Export with Excise; Export with Excise etc.

24. Defaulting of Taxes The item category will list items and associated tax category When POs are created, taxes are defaulted from Item category specified on the supplier and supplier sites in the additional supplier information. In PO Receipts, taxes are defaulted from the PO Lines. When Sales orders are created, taxes are defaulted on the sales orders from Item Category Specified on the customers and customer site in the additional customer information. When lines are shipped, the lines will have taxes defaulted from sales orders

25. Define Additional Info for Supplier and Customers VAT, Excise and Service tax registrations can be defined for each supplier, supplier site, customer and customer site. The information that you setup here would be the basis for tax defaults on PO and SO. These can be setup in the additional Supplier or customer information VAT info on customer is mandatory for VAT Invoice Generation Assessable Price List is used where excise or VAT has to be calculated based on assessed amount rather than line price.

26. Localization in PO for a trading org

27. Flow of Customs Duty on a PO in a trading Org Create a Tax Category Create PO and Apply Tax Category to PO and submit PO for approval Enter BOE Invoice Interface BOE with AP And generate AP Invoice Create a Receipt Apply the BOE amount to the receipt Verify the Registry Entry And accounting

28. Setup Taxes and Tax Categories for India Define Taxes separately and group them together into tax categories Taxes are OU specific. When you define tax category, you can define tax over tax, or tax over basic amount etc. When You create Purchase orders and sales orders, it is easy to apply these tax categories on each PO and SO line than several individual taxes Credit % indicates the credit that can be claimed Tax % Tax Category Taxes Tax

29. Setup of Precedence in Tax Category Tax Precedence indicates whether the tax is on base amount or tax on tax CVD is Counter Vailing Duty (Excise Duty) imposed on value of goods + customs duty. Precedence

30. Application of Taxes on PO lines Create PO the regular way Before the PO is submitted for approval, query the PO using the India Localization Menu. For each PO line, specify a Tax category. All the taxes under the tax category will apply to the PO line If tax category is not specified, then specify all the taxes for each PO line Save the records. Open the PO through the regular PO screens and submit it for approval. You can specify the default tax category and it will default to all the PO lines

31. Enter a BOE Invoice Enter a BOE Invoice for the customs duty to be paid. Go to BOE Details to enter the Tax details The total tax amount will reflect on the BOE Invoice header. The BOE Invoice will interface with Payables and will create an AP Invoice. 1 2 3 4

32. PO Receipts PO Receipts should be created using India Localization Menus. Create the receipt. Enter the Excise Invoice # Apply the BOE. The Apply BOE button is enabled only for those receipts which have customs duty tax component. Look at the Registers and verify whether they are populated with the registry entries. Also the accounting should be populated. If the receipt routing is Standard and claim CENVAT on receipts is set to Y, Excise Quantity and the Duty registers are updated and accounting entries are passed. Registers RG23A is updated for CENVAT on input, RG23C is updated by CENVAT on capital goods, RG23d is updated by dealers register. These are decided by the values for items defined in the Item Class If CENVAT is not claimed, then the tax amount should be added to the item cost for inventory valuation PO Receipt RG23D Register Entries

33. Localization in SO for a trading org

34. Flow of transactions on a SO in a trading Org Create a Tax Category for SO Enter SO and Apply Tax Category to a SO and Book Pick Release Match the delivery with Receipt Ship Confirm Generate Excise Invoice

35. Application of Taxes on SO lines Create SO the regular way Before the SO is booked, query the SO using the India Localization Menu. For each SO line, specify a Tax category. All the taxes under the tax category will apply to the SO line If tax category is not specified, then specify all the taxes for each SO line Save the records. Open the SO through the regular OM screens and book the SO. Specify the default tax category which will default to all the SO lines

36. Application of Taxes on SO lines Tax is calculated based on the tax category and the line amount. If the tax is based on a different price than the line price, a separate assessable price list can be created and attached at the customer or customer site level. System will use the price on the assessable price list instead of the line price. You can choose excise exemptions and vat exemptions on the header on a sales order. Changes made to the base order line quantities, cancellations and splitting of the lines are automatically reflected on the localization lines. Taxes are automatically copied when new sales orders are created using the copy functionality RMAs can be created and taxes will be copied from the original sales order that is referred.

37. Match the delivery with the receipt and Ship Confirm Pick Release the Sales order Match the delivery with the receipt The Match Receipts functionality allows to pass on excise credit to your customers. The excise duty is tracked while receiving the goods in a trading organization and it can be allowed as CENVAT credit to customers. Before confirming the shipment, the organization needs to allocate the excise duty involved during receipt of the excisable goods. While shipping from the trading org, you are required to track the exact amount of the duty paid by the original manufacturer for passing down the credit under CENVAT procedures You can see the tax details from the ship confirm screen Ship Confirm the sales order RG23D will be updated with the quantity matched 1 2 3

38. Generate Excise / VAT Invoice Generate Excise Invoice using the concurrent Program ‘India – Excise Invoice Generation’ This can be generated by running Excise Invoice Concurrent Program. The program will generate Invoice number for each delivery ID and hits the excise registers and accounting. This needs to be run every day a few times atleast to take care of the deliveries created in a day This needs to be run after the inventory interface. This needs to be run before the auto invoice if the excise invoice information is required in AR The program will not generate any report. Generate VAT invoice using the concurrent program ‘India – VAT Invoice Generation / Accounting’. This can be run from Order Management. The Program captures the VAT localization taxes in shipments and inserts VAT invoice number in India localization shipment table. This Program needs to be scheduled and needs to be run as a mandatory program.

39. Reports RG23D report register will give the complete details of the register as per central excise act. This can run as a concurrent report. India Excise/VAT Invoice Template report gives invoice template giving the required data for excise / VAT invoicing. We need to customize this report for the actual reporting

40. Questions and Answers

41. Contact Info Ravi Sagaram [email_address]