Country specific_India_SDV1 0.doc

STATUTORY RULES FOR INDIA

COUNTRY INDIA VERSION-REFERENCE DOCUMENT

STATUTORY RULES FOR INDIA

COUNTRY INDIA VERSION-REFERENCE DOCUMENT

TATA CONSULTANCY SERVICES

STATUTORY RULES FOR INDIA-CIN Document-Vol.1

Notice

This document contains information that is proprietary and confidential to Tata

Consultancy Services, which shall not be disclosed outside Tata Consultancy

Services Ltd.(TCS), transmitted, or duplicated, used in whole or in part for any

purpose other than its intended purpose. Any use or disclosure in whole or in part of

this information without express written permission of Tata Consultancy Services is

prohibited.

© Copyright, Tata Consultancy Services (TCS).

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Document Release Note

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Statutory Rules For India. Country India Version- Reference Document

1.0 This manual contains details statutory/legal related to Excise, VAT and Service tax etc. requirements mapped in SAP

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The documents or revised pages are subject to document control.

Please keep them up-to-date using the release notices from the distributor of the document.

These are confidential documents. Unauthorised access or copying is prohibited.

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PF2060C

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Rev. No.

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About this Document

Purpose

This document is intended to get an overview of statutory requirements in India

This document provides:

Country specific general requirements

Master data requirements

Overall taxation rules in the country

Reporting requirements

OSS notes applicable

Detailed Design and Overview

This document covers all details of Statutory rules in India like Excise, Value Added Tax, Service Tax,

Tax collection at source, which are mapped in SAP ECC 6.0 under Country India Version.

Intended Audience

The document is intended to provide a broad overview of the how to map the Statutory rules

applicable in India done in Sales & Distribution Module, Material Management, Finance Accounting

Modules of SAP ECC6.0. The target audience is the SAP consultant working for CIN.

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Organization of the Document

Information in this document has been organized as follows:

Table 1: Organization of the Document

Chapter Description

Chapter 1 History & Concept of Indian Taxes

Chapter 2 Overall Country Specific Rules

Chapter 3 Master Data

Chapter 4 Business Processes

Chapter 5 Excise Registers

Chapter 6 Important Things To Know

Chapter 7 Reports

Chapter 8 OSS Notes Reference

Appendix A

Appendix B

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Contents

1 History & Concept of Indian Taxes..........................................................11

1.1 History...................................................................................................................................................11

1.2 Indian Tax Structure..............................................................................................................................11

1.3 Excise Duty...........................................................................................................................................12

1.3.1 Types of Excise Duties.....................................................................................................................12

1.4 Sales Tax..............................................................................................................................................13

1.5 Difference between Excise Duty and Sales tax....................................................................................13

1.6 Value Added Tax...................................................................................................................................14

1.7 Difference Between VAT And CST.......................................................................................................14

1.8 Tax Collected At Source.......................................................................................................................15

1.9 Service Tax...........................................................................................................................................16

2 Overall Country Specific Rules................................................................17

2.1 Language..............................................................................................................................................17

2.2 Currency................................................................................................................................................17

2.3 Country Chart of accounts....................................................................................................................17

2.4 Fiscal year.............................................................................................................................................17

2.5 Country Specific Settings......................................................................................................................17

3 Master Data..........................................................................................20

3.1 Customer Master...................................................................................................................................20

3.2 Material Master.....................................................................................................................................24

3.3 Opening Balance for RG1 Register.......................................................................................................26

4 Business Process...................................................................................28

4.1 Domestic Sales.....................................................................................................................................29

4.2 Direct Export Sales...............................................................................................................................36

4.2.1 ARE1 for Export Sales......................................................................................................................40

4.3 Deemed Export Sales :.........................................................................................................................46

4.3.1 ARE3 for Deemed Export Sales.......................................................................................................51

4.4 Scrap Sales..........................................................................................................................................58

4.4.1 Withholding tax key is maintained for TCS.......................................................................................59

4.4.2 Withholding tax types are maintained for TCS on base, surcharge, ECS and SECess...................60

4.4.3 Create the access sequence for withholding tax for TCS in SD Module..........................................61

4.4.4 Create condition types corresponding to Tax collected at Source in SD –.......................................62

4.4.5 Withholding tax types must be assigned to condition types maintained in SD for TCS....................65

4.4.6 Define Withholding tax codes for TCS..............................................................................................65

4.4.7 Define Offsetting Account.................................................................................................................66

4.4.8 Pricing procedure changes...............................................................................................................67

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4.4.9 Define Condition Type for FI postings..............................................................................................68

4.4.10 Define accounts for withholding tax to be paid.............................................................................69

4.5 Depot Sales...........................................................................................................................................70

4.6 Return Order Process...........................................................................................................................72

5 Excise Registers....................................................................................74

5.1 RG1 Register........................................................................................................................................74

5.1.1 RG1 Register Update.......................................................................................................................74

5.1.2 RG1 Register Classifications............................................................................................................75

5.1.3 RG1 Register Extraction...................................................................................................................76

5.1.4 RG1 Register Print Utility..................................................................................................................77

6 Important Things To Know.....................................................................78

6.1 Billing Document...................................................................................................................................78

6.2 Excise Invoice.......................................................................................................................................78

6.3 Monthly Utilization.................................................................................................................................78

7 Reports.................................................................................................79

8 OSS Notes reference.................................................................................................79

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List of Abbreviations

Abbreviation/ Acronym Expansion

SAP System, Applications and Products in Data processing

ECC Enterprise Central Component

VAT Value Added Tax

CST Central Sales Tax

TCS Tax collection at source

CENVAT Central Value Added Tax

ARE Application for the Removal of Excisable Goods

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1 History & Concept of Indian Taxes

1.1 History

Excise- Indirect Tax on manufacturing in India

Administered by Govt. Of India

Levied in pursuance of Entry 45 of Govt. Of India Act, 1935

Levied in terms of Central Excise & Salt Act 1944 and rates prescribed in Central Excise Tariff Act 1985

Till 1969- Physical removal of manufactured goods was under supervision of Central Excise Officer(S)

1994- Excise Gate Pass System abolished and Invoice based system has been introduced.

1996- Self Assessment procedure has been introduced.

2000- Fortnightly payment method introduced, replacing monthly payment method.

2001- New Excise rules replacing Central Excise Rules 1944. Less in number and simplified.

1.2 Indian Tax Structure It is of TWO types ,

1. Direct Taxes- Consists of Capital tax and Personal taxes.

2. Indirect Taxes- Consists of Excise Duties, Sales taxes and Service Taxes.

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1.3 Excise Duty

All goods that are produced or manufactured in India shall be charged a duty of excise called Cenvat at the rates specified in the Central Excise Tariff.

Every person who manufactures, produces, carries on trade, holds warehouses for excisable goods shall have to obtain registration under the excise laws.

No excisable goods may be removed from the factory or a warehouse except under an invoice signed by the owner of the factory or his authorised agent.

Every assessee has to submit to the superintendent of Central Excise a monthly return in the specified form. For specified situations such as manufacture of goods exempt under a notification, a prescribed declaration and/ or a financial statement needs to be filed.

Credit of service tax paid on input services, by a manufacturer of goods, is now available, in addition to the credit that was available in respect of inputs/ capital goods.

CENVAT- Amount that is paid on the value that is added at the time of sale to the Govt.

1.3.1 Types of Excise Duties

Under the excise laws, the following are the various duties, which are levied:

Basic Excise Duty (BED) : Excise Duty that is levied at the time of goods removal, either it is for sales or for own consumption(Except Salt)

Additional Excise Duty (AED) : On all excisable goods by Central Govt. to counter balance sales tax exceptions by state Govt.

Education Cess (ECS) : Levied @ 2% on sum of all Excise Components.

Secondary & Higher Education Cess : Levied @ 1% on each of the Central Indirect Taxes.

It must be on the goods Goods must be excisable Goods must be manufactured or produced Good’s manufacture or production has to be in India only.

Excise Duties are mainly based on 4M’s

It must be Mentioned in Excise Laws. It must be Movable. It must be Manufactured. 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 solld or self-consumed. Excise duty does not depend on the 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 removal of goods from the factory.

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In Process of Manufacturing the Factory uses two kinds of materials,

o Input Materials- Is defined as the one which loses its own identity in the finished product.

o Capital Goods- Is defined as the which does NOT lose it’s own identity in the finished goods.

1.4 Sales Tax

A sales tax is a consumption tax charged at the point of purchase for certain goods and services. The tax is usually set as a percentage by the government charging the tax. There is usually a list of exemptions. The tax can be included in the price (tax-inclusive) or added at the point of sale (tax-exclusive).

Most sales taxes are collected by the seller, who pays the tax over to the government which charges the tax. The economic burden of the tax usually falls on the purchaser, but in some circumstances may fall on the seller. Sales taxes are commonly charged on sales of goods, but many sales taxes are also charged on sales of services. In a highly idealized case, a sales tax would have a high compliance rate, be difficult to avoid, and be simple to calculate and simple to collect.

Sales tax is a tax on sales and can be imposed only when there is a sale.

1.5 Difference between Excise Duty and 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 manufacture of 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 soaps 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 in that factory.

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http://en.wikipedia.org/wiki/Tax-exclusive

http://en.wikipedia.org/wiki/Tax-inclusive

http://en.wikipedia.org/wiki/Tax_exemption

http://en.wikipedia.org/wiki/Percentage

http://en.wikipedia.org/wiki/Point_of_purchase

http://en.wikipedia.org/wiki/Consumption_tax


1.6 Value Added Tax

VAT is the indirect tax on the consumption of the goods, paid by its original producers upon

the change in goods or upon the transfer of the goods to its ultimate consumers. It is based on the

value of the goods, added by the transferor. It is the tax in relation to the difference of the value added

by the transferor and not just a profit.

It means every seller of goods and service providers charges the tax after availing the input

tax credit. It is the form of collecting sales tax under which tax is collected in each stage on the value

added of the goods. In practice, the dealer charges the tax on the full price of the goods, sold to the

consumer and at every end of the tax period reduces the tax collected on sale and tax charged to him

by the dealers from whom he purchased the goods and deposits such amount of tax in government

treasury

Rate of Tax VAT proposes to impose two types of rate of tax mainly:

4% on declared goods or the goods commonly used.

10-12% on goods called Revenue Neutral Rates (RNR). There would be no fall in such remaining goods.

Two special rates will be imposed-- 1% on silver or gold and 20% on liquor. Tax on petrol, diesel or aviation turbine fuel are proposed to be kept out from the VAT system as they would be continued to be taxed, as presently applicable by the CST Act.

1.7 Difference Between VAT And CST

Under the CST Act, the tax is collected at one stage of purchase or sale of goods. Therefore, the burden of the full tax bond is borne by only one dealer, either the first or the last dealer. However, under the VAT system, the tax burden would be shared by all the dealers from first to last. Then, such tax would be passed upon the final consumers.

Under the CST Act, the tax is levied at a single point. Under the VAT system, the retailers are not subject to tax except for the retail tax.

Under the CST Act, general and specific exemptions are granted on certain goods

while VAT does not permit such exemptions. Under the CST law, concessional rates are provided on certain taxes. The VAT regime will do away with such concessions as it would provide the full credit on the tax that has been paid earlier.

Under VAT law, first, the dealer pays tax on the sale or purchase of goods. The subsequent dealer pays tax on the portion of the value added upon such goods. Thus, the tax burden is shared equally by the last dealer. To illustrate the whole procedure of VAT,

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For Example,

At the first point of sale, the value of goods is Rs.100. The tax on this is 12.5%. Therefore,

the net VAT would be 12.5%. At the second change of sale, the sale value is Rs.120 and the tax

thereon is 15%. The tax that is to be paid at every point is 15%. The input tax is 15%. You will get

a credit for first change in sale of 2.5%-- i.e. 15% -12.5%. Therefore, 2.5% will be the net rate. At

the third change of sale, the sale value is Rs.150 and the tax on this is 18.75%. At the last stage,

the tax paid is 18.75%. The Input Tax is 18.75%. You get a credit for second change in sale?i.e.

18.75% -15% = 3.75%. Therefore, 3.75% would be the net VAT. This means that VAT is paid in

the last point tax under the sale tax regime

1.8 Tax Collected At Source

Tax Collection at Source or TCS, as the name implies, means collection of tax at source

by the seller or collector, from the buyer of the goods. As prescribed under Income Tax Act 1961,

it is mandatory on the part of the buyer to pay a predetermined value of TCS to the seller, while

purchasing a particular commodity. TCS is generally set for business or trade in alcoholic liquor,

forest produce, scarp, etc. Various lease, license and contracts related to areas like parking lot,

mines and toll plaza also falls under the umbrella of TCS in India.

TCS is generally collected when amassed or when paid, whichever is earlier. The seller or

collector who collects the tax is required to deposit it in any of the designated branches of the

certified banks. Tax Collection at Source is implemented to curb tax evasion and also to facilitate

proper tax collection in India.

Nature Of Goods Percentage/Rate Of Tax

Alcoholic Liquor 1

Timber Obtained Under Forest Lease 2.5

Timber obtained by any other mode 2.5

Tender Leaves 5

Other Forest Produce, excluding Tender leaves & Timber 2.5

Scrap 1

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1.9 Service Tax

Service Tax is a form of indirect tax imposed on specified services called "taxable services".

Service tax cannot be levied on any service which is not included in the list of taxable services. Over

the past few years, service tax been expanded to cover new services. The objective behind levying

service tax is to reduce the degree of intensity of taxation on manufacturing and trade without forcing

the government to compromise on the revenue needs. The intention of the government is to gradually

increase the list of taxable services until most services fall within the scope of service tax. For the

purpose of levying service tax, the value of any taxable service should be the gross amount charged

by the service provider for the service rendered by him.

Service Tax was first brought into force with effect from 1 July 1994. All service providers in

India, except those in the state of Jammu and Kashmir, are required to pay a Service Tax in India.

Initially only three services were brought under the net of service tax and the tax rate was 5%.

Gradually more services came under the ambit of Service Tax. The rate of tax was increased from 5%

to 8% w.e.f 14 May 2003. From 10 September 2004 the rate of Service Tax was enhanced to 10%

from 8%. Besides this 2% education cess on the amount of Service Tax was also introduced. In the

Union Budget of India for the year 2006-2007, service tax was increased from 10% to 12%. On

February 24, 2009 in order to give relief to the industry reeling under the impact of economic

recession, The rate of Service Tax was reduced from 12 per cent to 10 per cent.

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2 Overall Country Specific Rules

2.1 Language

There are many local languages in India. However, communication in English is acceptable as official

language of communication in majority cases. All of SAP configuration is done in English.

2.2 Currency

The currency in INR. Foreign exchange rates are maintained on a daily/ monthly basis. The rates are

published by Reserve Bank of India.

2.3 Country Chart of accounts

Though SAP standard delivers country chart of accounts “CAIN” it is not a legal requirement to follow

this chart of accounts. Each organization may use its own chart of accounts.

2.4 Fiscal year

The fiscal year is April to March for Financial reporting under statutory obligation and Taxation

purpose. Though in case of multination companies, the fiscal year may vary based on the parent

company regulations.

2.5 Country Specific Settings

Title Define Country

Release Id ECC 6.0

Menu path SAP Net Weaver General Settings Set Countries Define Countries in mySAP Systems

Transaction Code OY01

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Figure : Define Countries in mySAP Systems

Required Fields Country code, Name, Nationality, Language, Tax procedure, Date format,

Decimal format, ISO code, Vehicle country key

Configuration Prerequisites

NA

Configuration Rationale The country key contains information that the system uses to check entries such as the length of the postal code or bank account number.

The international motor vehicle country code or a country-specific code is generally used to identify the Country, since it has Global acceptability and recognition.

Reference COEs NA

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Set Country-Specific Checks

Figure : Country Field Checks

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3 Master Data

3.1 Customer Master

Menu path Logistic General Tax on Goods MovementsIndiaMaster Data Assign Users to Material Master Screen Sequence for Excise Duty

Transaction Code OMT3E

Figure : Assign Users to Material Master Screen Sequence for Excise Duty

By adding the User id here a CIN tab gets activated for that user in the Vendor and customer master screens.

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In customer master will be maintained.

In customer master CIN details you can see three tabs,

i. Excise Duty Tab

Figure : Customer Master- Excise Duty Screen

Here Customer’s Excise Control Code Number (ECC Number), Excise Reg. No, Excise Range, Excise Division, Commissionerate & Excise Indicator for Customer will be maintained in Customer Master.

ii. Sales Tax / Service Tax

Figure : Customer Master- Sales Tax / Service tax

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Here Customer’s Central Sales Tax Number (CST no.), Local Sales Tax Number (LST no.) and Service Tax Registration number will be maintained.

iii. Withholding Tax

Figure : Customer Master- Withholding Tax

Here Customer’s Permanent Account Number (PAN no.) and PAN reference will be maintained.

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Customer Excise Master Using transaction Code J1ID

Menu path India Localization Menu SAP Menu Indirect TaxesMaster Data Excise Rate Maintenance

Transaction Code J1ID

Figure : Customer Master- Excise (J1ID)

Customer Excise Details can be maintained using transaction code J1ID.

Related Tables: J_1IMOCUST-Customer Master Excise Additional Data

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3.2 Material Master

Menu path India Localization Menu SAP Menu Indirect TaxesMaster Data Excise Rate Maintenance

Transaction Code J1ID

i. Chapter ID

Chapter ID is the number given to a material in the schedules of materials published by the Government of India. The schedule lists all materials involved in manufacturing, input material and out put materials alike. It shows how much excise duty is levied on each material. Each material in the schedule is assigned its own identification code, called "Chapter ID".

Chapter ID is stored in the control code field. When you enter a material's Chapter ID in the material master, the system copies the Chapter ID to the control code field. When you create a condition record, the filed name is control code.

Figure : Material Master- Excise (J1ID)

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Related Tables: J_1IVCHID- View of Chapter ID and text J_1ICHPTER- Chapter ID Master


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Here in material, Chapter ID & plant combination maintain finished goods as RG1 material type.

3.3 Opening Balance for RG1 Register

RG1 register maintained at Manufacturing Plants for excisable finished goods. The register shows goods movements from the factory to a store and stores to customer, specifically for excisable finished goods. The R/3 System generates all the necessary entries in the register.

This report only creates register entries for goods movements that have not already been entered. It does not create duplicate entries.

Printing of RG1 Register is Daily and Monthly activity.

RG1 Entries will be maintained at Excise Group Level.

Related Tables: J_2IRG1BAL-Opening/Closing balance table for RG1

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Figure : Entry Screen of table J_2IRG1BAL

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4 Business Process

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Outbound Delivery VL01N/ VL02N/ VL03N

Sales Order VA01/VA02/VA03

Billing Document VF01/ VF02/ VF03

Accounting Document

Domestic Customer

Deemed Export Customer

Print Excise Invoice (J1IP)

Excise Invoice J1IIN



Export Customer



Create/Post/Print /Update/Close ARE-1

J1IA101

Create/Post/Print /Update/Close ARE -3

J1IA301

Sales Type

RG1 Entry


4.1 Domestic Sales

Sales Order :

Menu path Logistics Sales and Distribution Sales Order Create

Transaction Code VA01

Related Tables: VBAK-Sales Document: Header Data VBAP-Sales Document: Item Data

Outbound Delivery:

Menu path Logistics Logistics Execution Outbound Process Goods Issue for Outbound Delivery Outbound Delivery CreateSingle Document With Reference to Sales Order

Transaction Code VL01N

Here RG1 entry will takes place for the materials

Related Tables: LIKP- SD Document: Delivery Header Data

LIPS- SD Document: Delivery Item Data

Billing :

Menu path Logistics Sales and Distribution Billing Billing Document Create

Transaction Code VF01

Related Tables: VBRK- Billing Document: Header Data

VBRP- Billing Document: Item Data

Outgoing Excise Invoice for Domestic Sales :

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Menu path India Localization Menu Indirect Taxes Sales/Outbound Movements Excise Invoice For Sales Order Outgoing Excise invoice create/change/display

Transaction Code J1IIN

Figure : Excise Invoice for Factory Sales (J1IIN)

Click On

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On the create excise invoice screen make the following entries:

1. Billing document number 2. Posting date 3. Sub transaction Type

Select the OK button.

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On the create excise invoice screen check the excise values and select the save button.

Result :

A message will be displayed stating that the Excise invoice was saved, with the Excise invoice number, please note the Excise invoice number.

To display Excise Invoice Go to J1IIN Transaction code select display excise invoice and select the display icon button.

Related Tables: J_1IEXCHDR- Excise invoice header detail J_1IEXCDTL - Excise invoice line item details

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Enter the excise invoice number, Excise Year and Series group and click on OK button.


On the display excise invoice screen click on the accounting tab button and check excise values are posting to corresponding G/L accounts.

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Figure : Excise Invoice for Factory Sales –Accounting Document

Print Excise Invoice :

Menu path India Localization Menu Indirect Taxes Sales/Outbound Movements Excise Invoice For Sales Order Print

Transaction Code J1IP

Figure : Print Excise Invoice for Factory Sales (J1IP)

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4.2 Direct Export Sales

Export Sales Under BOND/No Bond/LOU :

Sales Order :



Outbound Delivery:




Billing :



Outgoing Excise Invoice for Export Sales :



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Click on ,


Enter the Billing Document number, Posting Date and Subtransaction Type and click

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Select the appropriate Series Group from F4 help.

Then Click Utilization (F6) or icon.


Click on which will toggle the selection from Bond/No Bond/ LOU.

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Selected type of export will be highlighted in BLUE color.

To change the selection click on .

Then Click on and SAVE .

Result :


To display Excise Invoice Go to J1IIN Transaction code select display excise invoice and select the display icon button.




Figure : Print Excise Invoice for Factory Sales (J1IP)

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4.2.1 ARE1 for Export Sales

ARE-1 is the export document for export clearance (Annexure-14), which shall be prepared in quintuplicate (5 copies).

This is similar to the erstwhile AR.4. This document shall bear running serial number beginning from the first day of the financial

year. During this year, for the sake of continuity, the serial number, as started from 1.4.2001, may continue.

The stationary for AR.4 Form may be used with modified name "ARE.1" during this financial year. On A.R.E.1, certain declarations are required to be given by the exporter. These should be signed by the exporter or his authorised agent. The different copies of ARE.1 forms should be of different colours indicated below:

Original White The said Superintendent or Inspector of Central Excise shall return to the exporter immediately after endorsements and signature

Duplicate Buff The said Superintendent or Inspector of Central Excise shall return to the exporter immediately after endorsements and signature.

Triplicate Pink Sent to the bond sanctioning authority, either by post or by handing over to the exporter in a tamper proof sealed cover after posting the particulars in official records.

Quadruplicate Green Retain for official records

Quintuplicate Blue Optional copy - The said Superintendent or Inspector of Central Excise shall return to the exporter immediately after endorsements and signature.

It will be sufficient if the copies of ARE.1 contain a colour band on the top or right hand corner in accordance with above colour scheme.

ARE1 Document will be in foreign currency

ARE1 requires BOND, which need to create in SAP

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4.2.1.1Create ARE1 Document

Menu path India Localization Menu Indirect Taxes Sales/Outbound Movements Exports Under Excise Regulations Exports Central Processing Create/Change/Update/Cancel/Display ARE1

Transaction Code J1IA101

Figure : ARE1 Process Flow

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Figure : Create ARE1 (J1IA101)

Select Create ARE-1 & Outgoing Excise Invoice from dropdown box.


Enter Outgoing Excise Invoice Number and click on .

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In Bond/ UT-1 Details tab, enter bond number & bond year, Hit “ENTER”.

Kindly check Duty rates (In Duty Rates tab), and Duty Values (In Duty Values Tab).


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Then Click on SAVE.

Result :

The system creates the ARE-1 and assigns it an internal ARE-1 number and also Increases the bond's reservation amount .

Sets the document status to In Process

The next step you have to carry out in the system is to post the ARE-1


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4.2.1.2Post ARE-1 Document :

When you have created an ARE-1 and the excise officer has confirmed that all the details are correct, you can post the ARE-1.

You can still make any changes that you need to before you post it.

Result :

The system:

Assigns the ARE-1 an official ARE-1 number

Clears the excise duty from the bond's reservation amount and debits it to the bond

You can no longer change the ARE-1. However, you can still reverse it, if need be. Otherwise, the next step is to update it.

4.2.1.3Update ARE-1 Document :

When the goods arrive at customs, the customs officer checks them against the excise invoice and the ARE-1. If there are any discrepancies in the quantity of the goods, he records them on the ARE-1. He also fills out Part B of the ARE-1 (Certification by the Customs Officer) and sends you three copies of the ARE-1, one in a sealed envelope.

When you receive the ARE-1, you update the dates in the ARE-1 in the system to match what the customs officer has written on the ARE-1.

Result :

The system credits the excise duty back to the running bond.

You must now send the ARE-1 to your local excise department.

4.2.1.4Close ARE-1 Document :

When the excise department sends you confirmation that the ARE-1 is correct, you record the date in the system. This closes the ARE-1.

Result :

If the bond is a running bond, the system also credits the excise duty back to the bond, if it has not already done.

The ARE-1 is now complete.

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4.3 Deemed Export Sales :

Outgoing Excise Invoice for Deemed Export Sales :



Figure : Excise invoice For Factory Sales (J1IIN)

Click of From Billing ,

Enter Billing Document Number, Posting Date & Subtransaction type

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Hit Enter or Click


Select appropriate Series Group from F4 Help.

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Then Click on Utilization (F6) or Click on icon.

By default System will show as LOCAL (As in above screen Capture)

Then Click on symbol, so that the selection will be toggled to Deemed.

Selected type will be highlighted in BLUE color.

To change the selection click on .

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Then Click on and SAVE .

Result :


To display Excise invoice, Go to J1IIN Transaction code select display excise invoice and select the display icon button.

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Figure : Print Excise invoice For Factory Sales (J1IP)

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4.3.1 ARE3 for Deemed Export Sales

In the case of deemed exports where the customer is in india but is considered export on account of regulation or since it indirectly leads to exports, ARE-3 is used. Scenarios include exports to an exporter who uses it in his manufacture or trade, exports to a SEZ, 100% EOU or to a project which is declared by Govt as deemed such as a Power project..

Customer will provide you a copy of its deemed export license and you have entered the license in the system.

After recieving a sales order from the customer for goods covered by this license. In the R/3 System, you have already created the delivery and the outgoing excise invoice. In the excise invoice, you have set the excise invoice type to Deemed Exports.

ARE3 Document will be in foreign currency

ARE3 requires Export Licence, which need to create in SAP

Process Flow :

The export clerk creates an ARE-3 and, when he is ready, posts it.

He also prints out the ARE-3 and encloses a copy with the delivery.

The shipping department sends the goods to the customer, together with the excise invoice and the ARE-3.

When the customer's warehouseman receives the goods, he checks whether the excise invoice and the ARE-3 match the goods.

If he finds that there are fewer goods than stated on the ARE-3, he enters the shortfall in the ARE-3. He then fills out Part 2 of the ARE-3 (Certificate of Warehousing by the Consignee) and sends it back to the excise clerk.

When the excise clerk receives the ARE-3, he updates the ARE-3 in the R/3 System.

He fills out the various certification dates in the ARE-3 (for example, the date when the ARE-3 arrived back at your company).

If the warehouseman noted a shortfall in the quantity of goods, the excise clerk enters the shortfall as well. Since the whereabouts of the missing goods cannot be accounted for, they no longer qualify for exemption from basic excise duty. You must therefore pay the excise duty on the shortfall, plus interest, backdated to the date when you removed the goods from your premises. The clerk specifies which excise registers to pay the excise duty from.

The process is now complete.

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http://help.sap.com/saphelp_47x200/helpdata/en/06/f7683c43e87845e10000000a11402f/content.htm

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4.3.1.1Create ARE3

Menu path India Localization Menu Indirect Taxes Sales/Outbound Movements Exports Under Excise Regulations Deemed Exports Central Processing Create/Change/Post/Update/Cancel/Display/Reverse ARE-3

Transaction Code J1IA301

Figure : Create ARE3

Select Create ARE-3 & Outgoing Excise Invoice from Dropdown box.

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Enter Outgoing Excise Invoice Number and hit Enter or click

Check the Duty rate and Duty Values in respective Tabs,


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In License Tab Enter License Number and License year,

Then click or hit Enter.

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In Certificates tab, Enter Dispatched on Date and time of removal.

Click on so that system will check the missing data and message will be raised by system if any data is missing.

Kindly maintain the missing data and click on SAVE .

Result :

The system creates the ARE-3 and assigns it an internal ARE-3 number and also Increases the bond's reservation amount .

Sets the document status to In Process

The next step you have to carry out in the system is to post the ARE-3.


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4.3.1.2Change ARE-3 :

Once you have created an ARE-3, you can still change the following information until you post it:

Which export licenses are assigned to the line items

Which excise invoices are assigned to it

Which addresses are entered

Any long texts

Any package details

4.3.1.3Post ARE-3 :

When you have created an ARE-3 and you are ready to ship the goods, you can post and print the ARE-3.

You can still make any changes that you need to before you post it.

1. In the top line:

a. Select Post.

b. Select ARE-3 Internal Document.

c. Enter the internal ARE-3 number and choose .

3. On the Certification Dates tab, enter the time that the date and time that the goods are being dispatched.

4. Save the document.

Result :

The system:

Assigns the ARE-3 an official ARE-3 number

Deducts the quantity or value of the goods from the license

You can no longer change the ARE-3. However, you can still reverse it, if need be. Otherwise, the next step is to update it.

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http://help.sap.com/saphelp_47x200/helpdata/en/60/fd683ce3fbfd47e10000000a11402f/content.htm


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4.3.1.4Update ARE-3 :

When the goods arrive at the customer’s premises, the customer checks them against the excise invoice and the ARE-3. If there are any shortfalls in the quantity of the goods he records them on the ARE-3. The customer also fills out Part 2 of the ARE-3 (Certification of Warehousing by the Consignee) and sends you a copy.

When you receive the ARE-3, you update the ARE-3 in the system to match what the customer has written on the ARE-3.

Procedure

1. From the SAP Easy Access screen, choose Indirect Taxes Sales/Outbound Movements Exports Under Excise Regulations Deemed Exports Central Processing Update ARE3.

2. In the top line:

a. Select Update.

b. Select ARE-3 Internal Document.

c. Enter the internal ARE-3 number and choose .

3. On the Certification Dates tab:

o Enter the Countersigned by Customer date as per the ARE-3.

o Enter the Arrived Back date.

4. Enter any shortfalls that the customer has noted on the ARE-3.

5. Save the ARE-3.

Result

The ARE-3 is now complete.

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4.4 Scrap Sales

Sales Order :



Outbound Delivery:




Billing :



Excise Invoice :






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4.4.1 Withholding tax key is maintained for TCS

Figure : Tax key for TCS

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4.4.2 Withholding tax types are maintained for TCS on base, surcharge, ECS and SECess

Figure : Withholding tax type for TCS

Similarly create withholding tax key for Surcharge and Ecess

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Since this withholding tax is configured with Base amount as Modified net amount, the base for the

withholding tax will be the net amount (i.e., not inclusive of the tax condition values.) In case you wish

to add some tax condition values to the base for TCS calculation, you will need to maintain the

posting key assigned to the tax condition type in the pricing procedure along with the combination of

the withholding tax code assigned to the TCS related condition type at the following location:

Menu path Financial Accounting (New) Financial Accounting Global Settings(New)Extended Withholding Tax Withholding Tax Base AmountDefine processing key for Modified Net Amount

Transaction Code SPRO

By doing so, the condition values of the tax condition types assigned for these processing keys will

also be included in the base for the withholding tax calculation.

4.4.3 Create the access sequence for withholding tax for TCS in SD Module

Copy the existing access sequence J1AW and create the new access sequence J1IW with the

following accesses:

Figure : Access Sequence

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4.4.4 Create condition types corresponding to Tax collected at Source in SD –

Figure : Condition Type for Base TCS

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Figure : Condition Type for ECess TCS

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Figure : Condition Type for Surcharge TCS

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4.4.5 Withholding tax types must be assigned to condition types maintained in SD for TCS

Figure : Assign Codition type to withholding tax type

4.4.6 Define Withholding tax codes for TCS

Set the withholding tax rate as per requirement here.

Figure : Withholding tax code for TCS

Create Tax code with Posting indicator ‘3’. Similarly also create Tax codes for Surcharge and Ecess

with respective tax rates.

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4.4.7 Define Offsetting Account

Since posting will happen from SD as well as from FI with the TDS code, off-setting concept posting is

used for the TCS tax types. The GL accounts are assigned as below –

Figure : Define Offsetting account for TCS

Same G/L account should be maintained for transaction key WIT based tax line item and the SD-FI

condition based tax line item. A different G/L account has to be maintained for the transaction key

OFF based line item.

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4.4.8 Pricing procedure changes.

The condition types corresponding to TCS will have to be added to the pricing procedure as shown

below –

Figure :1 Assign condition type to Pricing procedure

The condition types for TCS (JTCS, JTEC AND JTSE) are to be defined as statistical in the pricing

procedure. The system calculates the values in SD but doesn’t post them directly from SD. Posting

would take place with the condition type assignment to TCS withholding tax types. (as configured

earlier in step 5)

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4.4.9 Define Condition Type for FI postings

We will need to define a new condition type and add this to the pricing procedure to post to the FI.

This condition type will be manual and can be manually filled at the time of creation of sales order.

This can also be copied from the statistical TCS condition types in the pricing procedure.

For example, the screen shot below shows how to create the condition type corresponding to TCS

which would be posted to FI:

Figure : Condition type for FI postings

This condition type JWTS will have to be added to the pricing procedure. This is not maintained as

statistical and has a corresponding accounting key –

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Figure : Assign Condition for FI posting to pricing procedure along with Acc. Key

Similar condition types will have to be created and added to the pricing procedure for ECS on TCS

and SECess on TCS.

4.4.10 Define accounts for withholding tax to be paid

Figure : Define GL accounts for TCS to be paid over

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4.5 Depot Sales

Figure : Depot Sales Process

(Depot Recieves goods from the company’s Factory through STO)

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Manufacturing PlantExcise Invoice (J1IIN)

Depot

Delivery (PGI)VL10G

Goods Receipt (MIGO)

Capture Excise

Invoice (J1IG)

Stock and Depot Register RG23DUPDATE

STO Purchase Order from Depot

(ME21N)


Figure : Depot Sales Process

(Depot Procures goods directly from external resources)

RG23D 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 leived again when the goods are sent from th DEPOT.

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 RG23 D register and excise recovered from the customer.

To print RG23 D (Depot Register), Follow the process explained for RG1 register.( Refer Chap.5 named EXCISE REGISTERS)

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DEPOT

Sales Order (VA01)

Outbound Delivery

(VL01N)

Excise Invoice

(J1IJ)

Billing Document

(VF01)

Customer


4.6 Return Order Process

Sales Order :



Outbound Delivery:




Credit For Returns (Billing Type - RE) :



Credit for Returns Billing Document is created to give Credit to the Customer for the goods returned by him.

After Creating Billing Document go to VF02 ,enter billing document number then click on Release to Accounting (Green Flag) Icon .

Capturing Excise Invoice :

The Excise duty for the returned Material needs to be reversed.

Menu path India Localization Menu Indirect Taxes Procurement Excise Invoice Incoming Excise InvoiceCentral Processing Capture/Change/Cancel/Display/Post

Transaction Code J1IEX

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Figure : Capture Excise Invoice (J1IEX)

Result :

Document is posted. Internal excise Invoice XXXX generated.

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5 Excise Registers

5.1 RG1 Register

RG1 register maintained at Manufacturing Plants for excisable finished goods. The register shows goods movements from the factory to a store and stores to customer, specifically for excisable finished goods. The R/3 System generates all the necessary entries in the register.

This report only creates register entries for goods movements that have not already been entered. It does not create duplicate entries.

Printing of RG1 Register is Daily and Monthly activity.

To extract the data to RG1 Register, Material numbers has to be maintained in the table J_2IRG1BAL - Opening/Closing balance table for RG1.

5.1.1 RG1 Register Update

Menu path India Localization Menu Indirect Taxes Registers Excise Tax Update RG23A/C Issues and RG1

Transaction Code J1I5

Figure : Update RG1 Register

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5.1.2 RG1 Register Classifications

Categorizes the goods movement for the purposes of various reports

Register Type Goods issues Goods receipts

RG1 IDH- Removal from factory on payment of duty for Home use

RMA- Receipt from manufacture

IDE- Removal on payment of duty for export under no bond

ROP- Receipt from outside under any other provision

IWE- Removal without payment of duty for export under bondIWT- Removal without payment of duty for transfersIWO- Removal without payment of duty for other purpose

You can update the RG1 Register by selecting material document header values or Material document line item level details or both together.

Related Tables : J_2IRG1BAL- Opening/Closing balance table for RG1

System will display the ‘Update of Registers RG1 and RG23 (Part1’) screen:

Displays all the line items to meet the selection criteria to update the RG1 Register.

Select the line items which needs to be updated to RG1 Register by selecting the check box at the beginning of the each line item

Simulate the selection by using the Simulate function or use Shift+F10 to simulate the selection

System will display the selection Green or Red Traffic lights. The line items which can be updated will be displayed with Green Traffic Lights and the line items which can not be updated will be displayed with Red Traffic Lights.

After selecting the right documents select the line item and use the Create button to update the RG1 Register or use CTRL+Shit+F11 to make register entry.

Result :

Processing over for <number of records selected> records

5.1.3 RG1 Register Extraction

This step needs to be performed in order to create the RG1 details into the respective tables.

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Prerequisites

You have to complete the update of RG1 Register before performing this step.

Procedure

Menu path India Localization Menu Indirect Taxes Registers Excise Tax Extract


Figure : Extract RG1 Register

1. Click on execute icon or Press F8 or Program Execute

2. If the RG1 Register is being generated for the Period First Time, system will execute the report and display the pop-screen with Register name and GreenTick mark, if it is successfully extracted, otherwise it will show the Red Cross.

Result :

RG1 data has been extracted

5.1.4 RG1 Register Print Utility

The objective of this process is to print the RG1 Register or to display on the screen.

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Prerequisites

The data must be extracted to the RG1 Register for the period to which RG1 Register need to be printed.

Procedure

Menu path India Localization Menu Indirect Taxes Registers Excise Tax Print Utility Program


Figure : Print RG1 Register

Click On

Figure : Print RG1 Register

System will display the Print parameters maintenance screen assign the out put device name as Local Printer (LP01) and select the Print Preview option. System will display the output on the screen.

See the output on the screen and based on the requirement print the output using Ctrl + P option or through menu Text Print.

Result :

RG1 Register ready to print or you can see on the screen.

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6 Important Things To Know

Determination of Excise Duty in Sales and Distribution.

Information on Tax Procedures & Conditions.

Finance(Accounting) entries related to excise taking place in SD.

Accounting Entries :

6.1 Billing Document

Description of Accounting Entry Dr/Cr Amount

Customer Dr 121.77 INR

Sales (Domestic) Cr 100 INR

CENVAT Suspence ( Includes BED,ECS & S&HEcess) Cr 8.24 INR

Taxes (VAT@ 12.5%) Cr 13.53 INR

6.2 Excise Invoice Description of Accounting Entry Dr/Cr Amount

CENVAT Suspence Dr 8.24 INR

CENVAT Payables Cr 8.24 INR

6.3 Monthly Utilization

Description of Accounting Entry Dr/Cr Amount

CENVAT Payables Dr 8.24 INR

CENVAT Clearing Cr 8.24 INR

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7 Reports

J1I7 – List of Excise Invoices

J1I6 – Cenvat Forecast

J1I2 – Sales Register

J1IANX18 - Pro Forma of Running Bond Account

J1IANX19 - Statement Regarding Export of Excisable Goods

J1IARE_AGE - Ageing Analysis for ARE Documents

J1IBONSUM - Bond Summary Report

J1ILICSUM - Deemed Export License Summary

J1IUN - Forms tracking

J1IR – Register Data Download

S_ALR_87012357 - VAT Report (Run report for taxcodes which includes VAT)

8 OSS Notes reference

1. SAP Note 952441- CIN: General Clarifications for CIN - SD

2. SAP Note 952289- CIN: General clarifications for Tax Procedure TAXINN

3. SAP Note 951955- CIN: General clarifications for RG1 goods

4. SAP Note 1168591 - Tax collected at Source (TCS) u/s 206C for sales in India

5. SAP Note 1337138 - Tax collected at Source (TCS)-Changes in Challan

6. SAP Note 1034008 - Budget 2007- Exports Scenario Changes

Other References :

1. www.service.sap.com 2. www.help.sap.com 3. www.cbec.gov.in

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http://www.cbec.gov.in/

http://www.help.sap.com/

http://www.service.sap.com/

https://websmp105.sap-ag.de/~form/handler?_APP=01100107900000000342&_EVENT=REDIR&_NNUM=1034008&_NLANG=E


