Pre-Release Document Oracle Financials for India (OFI) …eirc-icai.org/admin_panel/background_Material/GST_Functional_P2P... · Pre-Release Document Oracle Financials for India (OFI)

OFI-GST Procure to Pay Flow 1

Pre-Release Document

Oracle Financials for India (OFI)

Goods and Services Tax (GST)

Procure to Pay Functional

Author: Vaishali and Somdeep (P2P)

Somdeep (Reverse Charge and ERS Invoice)

Creation Date: 21-Mar-2016

Last Updated: 02-Mar-2017

Document Ref:

Version: 1A

Organization: Oracle India Private Limited.


Document Control

Change Record

Date Author Version

Change Reference

21-Mar-16 Vaishali and Somdeep

1A Initial document

30-Sep-16 Vaishali and Somdeep

1.0 Phase-I frozen document

30-Dec-16 Vaishali and Somdeep

1.1 Modified the ERS invoice flow chart to include running ADS (Pay On Receipt AutoInvoice)’ Program separately

02-Mar-17 Somdeep 2.0 Reverse Charge Process and ERS Invoice

Reviewers

Name Position

Rajnish Kumar Director, Tax Development

V S Baburaj Director, Product Strategy

Audience

Name Position

12.1 & 12.2 Implementation team 12.1 & 12.2 Customers

https://people.us.oracle.com/pls/oracle/f?p=8000:3:17306812252087::::PERSON_ID:829515787540207


Table of Contents

Pre-Release Document .............................................................................................................. 1

Document Control .................................................................................................................. 2

Phase1 ...................................................................................................................................... 6

1 – Introduction .......................................................................................................................... 6

2 – Scope ................................................................................................................................... 6

3 – Prerequisite Setups .............................................................................................................. 6

4 – Functional Flow .................................................................................................................... 7

5 – Requisition to Purchase Order (Pre-PO- PO Documents) .................................................... 8

5.1 Flow Diagram ................................................................................................................... 8

5.2 Create Requisition ............................................................................................................ 9

5.3 India tax details form .......................................................................................................11

5.4. Create RFQ (Request for Quotation) ..............................................................................13

5.5 Creating Quotation ..........................................................................................................15

5.6 Create Purchase Order from the approved Requisition ....................................................17

6 – Tax recalculation logic .........................................................................................................20

7 – Tax on receipts ...................................................................................................................20

7.1 Flow Diagram ..................................................................................................................20

7.2 Receipt Creation ..............................................................................................................21

8 – Tax Accounting on Receipts ................................................................................................25

8.1 Accounting for Receipt Routing - Direct Delivery and Standard Routing ........................27

8.1.1 Flow Diagram ............................................................................................................27

8.1.2 Direct Delivery – Recoverable Tax ............................................................................29

8.1.3 Direct Delivery – Non-Recoverable Tax ....................................................................29

8.1.4 Standard Routing - Recoverable Tax ........................................................................30


8.1.5 Standard Routing - Non-Recoverable Tax .................................................................30

9 – PO/Receipt Matched AP invoice .........................................................................................31

9.1 Flow Diagram ..................................................................................................................31

9.2 Process and Accounting ..................................................................................................31

10 – Standalone AP Invoice ......................................................................................................35

10.1 Flow Diagram ................................................................................................................35

10.2 Process and Accounting ................................................................................................35

11 –Tax Recovery Accounting (Interim) ....................................................................................37

11.1 Flow Diagram ................................................................................................................37


12 – Third Party Invoices ..........................................................................................................44

12.1 Flow Diagram ................................................................................................................45


13 – Costing Effect – Accounting Entries ..................................................................................50

13.1 Average Costing................................................................................................................50

13.2 Standard Costing ...........................................................................................................51

Phase2 .....................................................................................................................................53

14 – Introduction .......................................................................................................................53

15 – Scope ................................................................................................................................53

16 – Reverse Charge ................................................................................................................53

16.1 Model Law .........................................................................................................................53

16.2 GST Functionality of Reverse Charge ...............................................................................54

Flow Diagram ........................................................................................................................55

16.4 Configuration: ....................................................................................................................56

16.5 HSN/SAC Code:................................................................................................................60

16.6 Linking of Reporting Code value to 3rd party Registration: ................................................61


16.7 Prepayment: ......................................................................................................................62

16.8 Standard Invoice ...............................................................................................................64

16.10 Period Ending Process: ...................................................................................................66

16.11 Accounting ...................................................................................................................69

17 – ERS Invoice ......................................................................................................................69


16 – Summary...........................................................................................................................73

17 – Call to Action .....................................................................................................................74


Phase1

1 – Introduction The Procure to Pay cycle (P2P) is vital to an organization as in this process the organization buys and receives goods or services from its vendors and makes necessary payments. This business process covers the process of requesting, purchasing, receiving, paying for and accounting for goods and services.

2 – Scope This document provides the details of Functional flow for ‘Oracle Financials for India’ (OFI) Procure to Pay cycle from GST point of view along with accounting entries.

Note: This document provides the details of Functional flow for ‘Oracle Financials for India’ (OFI) Procure To Pay cycle from GST point of view along with accounting entries. Note: The current content has been compiled in reference to the frozen scope of the Phase-I deliverables (Ref: GST Phase -1 Deliverables.docx)

3 – Prerequisite Setups For the P2P cycle to work in the new GST architecture, the below setup needs to be defined

Regime

Tax types

Tax rates

Tax Categories

Tax Rules

Tax Defaulting basis

Item Classification

Claim term

Common Configuration

First and Third party Registration


Flow Diagram

To start with, this document facilitates with a flowchart which will allow the users to get an outline of the

setup flow for Procure to Pay Cycle. Some of the steps outlined in this flowchart are required and some

are Optional. Required step with Defaults means that the setup functionality comes with pre–seeded,

default values in the application. However, to ensure a successful setup, you need to review those

defaults and decide whether to change them to suit your business needs. If you need to change the

default values, you should perform the corresponding setup step. You need to perform Optional steps

only if you plan to use the related feature.

Note: - In The above flow diagram R standard for ‘Required’ and O stands for ‘Optional’

4 – Functional Flow

The P2P cycle comprises of the following steps,

Regime Registration

(R Tax rates (R)

Tax Categories (R)

Tax types (R)

Document sequence

(O)

Tax Defaulting

basis (R)

Tax Rules (R)

Define Item

Classification (R)

Define Claim Terms

(R)

Common Configuration

(R)

First Party Registration

(R)

Third Party Registration

(R)

Create Requisition

(Localization taxes –

applied)

Create RFQ


Applied)

Create Quotation


Not Applied)

Create Purchase

Order (Localization

taxes – Applied)

Receipt creation (Localization taxes

–Applied) Taxes are freezed Once

receiving is done

Create Payable Invoice-

Localization taxes from receipts

are copied to Invoice

Invoice Payment


5 – Requisition to Purchase Order (Pre-PO- PO Documents)

Every organization that operates a business has to purchase material such as raw materials services etc.

The procurement process of any organization consists of many steps like material requirement planning,

creation of purchase requisition, receiving quotations from various suppliers etc. Please refer to the

following section for details

5.1 Flow Diagram

Create Requisition Enter

Header/Line Info

Navigate to Tools India Tax Details. Tax category is

defaulted based on defaulting mechanism defined

Create RFQ Tax category is defaulted from requisition

Create Purchase Order

and Approve


defaulted from requisition to Purchase order


5.2 Create Requisition

A purchase requisition is an internal request to purchase a material / service which will have details of

certain quantity of material or service on a certain date which is required by the organization. To create

requisition navigate to

Responsibility Oracle Purchasing Requisitions Requisitions

Enter Requisition Header:

The header holds the general information about the requisition that is related to all the lines. Choose the

requisition type (here it is purchase requisition). Preparer is the default person who is creating the

requisition and cannot be changed. You can give the description in the description field.

Enter Requisition Line:

In the requisition line, select the item that you wanted to purchase and enter the quantity and need by

date. In the Source details tab, you can input detailed information. You can give a specific note to the

buyer which might give particular information related to this purchase. RFQ required check box denotes

that the purchase of the item requires a request for quote.

Requisitions can be added in any currency set up in EBS by identifying the currency code and exchange

rate type on currency tab


Click on distribution button and enter the charge account

Close the form and save your work. Click the ‘Approve’ button to submit this requisition for approval.

Now navigate to Tools India tax details form. The India tax details form will show the tax category

Defaulted.

For more information on the tax defaultation logic refer the ‘OFI-GST- Tax Defaultation flow’

document.


Notes:-

Unlike earlier we will no longer have Localized forms in the new GST solution and to view the tax

details the navigation is Tools India tax details

Tax category defaulted based on tax defaultation logic can be manually Overridden at each document

level until the document is approved.

5.3 India tax details form

SL No Field Functional Description Query/Enabled

1 Organization Inventory Organization name No

2 Location Inventory Organization Location No

3 Document Number PO number No

4 Revision / release Number No

5 Currency PO currency No

6 Amount PO line amount No

7 Tax amount Total tax amount No

Tax

Category is

defaulted


8 Total Amount Total PO amount No

9 Line Number Po Line number No

10 Item Item Code No

11 Item Description Descript of the item attached to PO No

12 Tax category Tax category Defaulted based on

defaulting Mechanism

Yes

13 Tax rate name Tax type attached to the tax

category

No

14 Tax type Tax type attached to tax category No

15 Tax point basis Determines the point in which tax

accounting is done. Gets defaulted

from Tax type setup

No

16 Precedence Gets defaulted from tax category

setup

No

17 Tax conversion date Date on which tax is calculated No

18 Tax rate Tax rate defined at tax rate setup No

19 Tax amount Amount calculated for each tax type No

20 Recoverable amount Tax amount which can be

recovered. Get populated only if the

tax type is a recoverable

No

21 Recoverable Get populated only if the tax type is

a recoverable

No

22 Inclusive Get populated only if the tax type is

a inclusive

No

23 Self Assessed / reverse charge Gets defaulted from tax type No

24 Party name and Party type Gets defaulted from PO Yes


5.4. Create RFQ (Request for Quotation)

A Request for Quotation (RFQ) is a formal request sent to the suppliers to find the pricing and other

information for an item or items. Based on the information supplied, the supplier quotes a quotation

against the RFQ form.

In Oracle EBS, RFQ’s can be auto created from an existing Purchase Requisition or can be a fresh RFQ.

Navigation to Auto create the RFQ is

Responsibility Oracle Purchasing (USA) Auto Create and then query the Requisition number

Your Requisition summary is shown in the next screen. Check box your Requisition line and in

the Document Type, select RFQ and click Automatic button to Auto Create RFQ.

It will navigate to a new window. Here the RFQ Type is Standard RFQ and click create button

In the next window, RFQ is auto created from an existing Purchase requisition.

Select the line

against which RFQ

needs to be

created

Select

the RFQ

type


Click Suppliers button and enter the details of the Suppliers to whom you want to send this RFQ.

Click on Terms button and add payment terms and freight terms. Click Price Breaks button for entering

pricing information for the RFQ.

Now from the Tools India tax details form, we can see that tax category is defaulted


Save the transaction.

5.5 Creating Quotation

A quotation is a supplier’s response to RFQ. Now we will create quotations based on the response from

the suppliers with relevant to RFQ which we have created in step 5.4.

To create a quotation from the RFQ, first query the RFQ. The below picture shows the completed RFQ.

Tools

Copy

Document

Tax category is

defaulted


In the next screen, enter the details of quotation sent by the supplier. Click OK button.

Repeat the same steps if you want to create multiple quotation for multiple suppliers.

Once the quotation is created, system will show the below message

Change the status of the quotation to Active and approve the quotation.


5.6 Create Purchase Order from the approved Requisition

Purchase Order (PO) is the formal request to a vendor to supply certain materials or services. A PO can

be created with reference to a requisition or RFQ or another PO.

Responsibility Oracle Purchasing Auto Create and then query the Requisition number

Change

status to

active

Select Document

type as ‘Standard

PO’


Your Requisition summary is shown in the next screen. Check box your Requisition line and in

the Document Type, select standard PO and click Automatic button to Auto Create PO. By clicking

Automatic button, a standard PO is created based on the details provided in the Purchasing requisition.

You can select Supplier either in the New Document form or in the Purchase Order form

After clicking on the Create button in the above screen a Standard PO is created as follows

Click on ‘Create’

Button to confirm

the PO creation


In the shipment form, Shipment number, Org, Ship-to, UOM, Quantity and Need-by-date are shown by

default. These fields can be edited as needed.

Even in the more tab and distribution details tab, the default values will be populated from requisition.

Now, Navigate to Tools India tax details.

The default tax category is automatically defaulted here

Now approve the PO. No accounting entry happens when a PO is created.

Note:

Unlike earlier we will no longer have Localized forms in the new GST solution and to view the tax details

the navigation is Tools India tax details

Tax category is

defaulted from

requisition level


6 – Tax recalculation logic

As per the current architecture, the tax defaultation engine should recalculate the taxes at every

document level. However if the tax is already defaulted / manually overridden at parent document level,

then the same tax category gets defaulted for further documents until unless there is some change. If the

master document does not have the tax category attached, then based on the tax defaultation logic the

tax category will get defaulted at each document level.

7 – Tax on receipts

Once the PO is sent to the supplier, the supplier sends the goods to the organization. The goods now

have to be received in Oracle.

7.1 Flow Diagram

Select the PO lineEnter

Inventory details


defaulted from PO level

Check on ‘Confirm taxes’ Check box to freeze the tax

category and it is mandatory to check

Navigate to Receipt form

and Save the receipt

‘Receiving Transaction processor’ program will be fired and

it will process Base / Localization tax details


7.2 Receipt Creation

Navigation for creating a receipt is Responsibility Oracle Purchasing Receiving Receipts

Enter the PO number and click Find button

Check the Lines you want to receive and enter the sub inventory details

In the lower part of the screen, Purchasing displays the following detail information for the current

shipment line: Order Type, Order Number, Source, Due Date, Item Description, Hazard, Destination, UN

Number, Receiver Note, and Routing.

Now if we navigate to Tools India tax details, we can see that tax category is defaulted here also.

Select the line

against which

receipt needs to

be created

Shows the PO

details against

which receipt is

created


Now we have to click on ‘confirm taxes’ check box to freeze the tax category. Once this check box is

checked, overriding the tax category is not possible.

Note:

If a receipt is saved without checking the ‘Confirm Taxes’ check box, the Receiving Transaction

Processor program will end in error and no receipts will be created.

In GST solution ‘India Receiving Transaction’ Processor program will not be triggered and has no

relevance.

Unlike earlier we will no longer have Localized forms in the new GST solution and to view the tax

details the navigation is Tools India tax details

Once the check box is checked, below message will appear

Tax category

defaulted


Click on Header and save the receipt to get the receipt number

Once the receipt is saved, system automatically triggers the “Receiving Transaction Processor” (RTP)

concurrent. Unlike earlier, now “India Receiving Transaction Processor program” will not be fired. The

base Receiving Transaction Processor concurrent itself will process the India localization tax details.

‘Confirm Taxes’

check box

needs to be

checked to

freeze the taxes

before receipt

creation

Confirmation

message once

the taxes are

freezed


Once the RTP concurrent is completed, in the Receiving transaction Window we can see that receipt

processing has already happened

Receiving transaction

processor program is fired

after receipt creation and it

will create / process both

base receipt detail as well

as Localization tax details


8 – Tax Accounting on Receipts

Based on the tax point basis, tax types like recoverable / non-recoverable, different routing method

adopted, different accounting entries will get generated at different stages.

The accounting entry generated after the receipt creation and this is the core accounting

Event Account Debit Credit

Receipt

Receiving Inventory Line Amount

Inventory AP Accrual Line Amount

For the India tax details, the below lines are inserted in GL_INTERFACE table after the Receiving

transaction processor program is completed.


The below script can be used extract data from GL_INTERFACE

Below accounting entry is generated for each tax type


Receipt

Receiving Inventory Tax Amount

Inventory AP Accrual Tax Amount

Select gcc.segment1,

gcc.segment2,gcc.segment3,gcc.segment4,gcc.segment5,gi.code_

combination_id,gi.entered_dr,gi.entered_cr,gi.user_je_category_na

me,gi.reference10

from gl_code_combinations gcc, gl_interface gi

where gi.date_created like sysdate and gi.code_Combination_id =

gcc.code_Combination_id and reference10 like '%Receipt

number%';


8.1 Accounting for Receipt Routing - Direct Delivery and Standard Routing

8.1.1 Flow Diagram

Create PO Receipt Routing set to

Navigate to Tools India Tax Details.

Attach Category recoverable or Non-

recoverable

Navigate to Receipt form and select

the PO line for receipt creation

‘Receiving Transaction processor’ program

will be fired and it will process Base /

Localization tax details. Both Receiving and

Delivery transaction will be created.


Check ‘Confirm taxes’ check box.

Lines are inserted in GL_INTERFACE table

for tax accounting (refer query mentioned in

Chapter 8 to extract the data)

Direct Delivery


Attach Category recoverable or Non-

recoverable

Navigate to Receipt form and select

the PO line for receipt creation

‘Receiving Transaction processor’ program

will be fired and it will process Base /

Localization tax details. Only Receiving

transaction will be created.


Check ‘Confirm taxes’ check box.

Lines are inserted in GL_INTERFACE table

for tax accounting (refer query mentioned in

Chapter 8 to extract the data)

Standard Routing

Perform the Receiving transaction by navigating to

Purchasing Receiving Receiving transactions


When a recoverable tax category is attached, in India tax details form (both at PO and receipt level) the

Recoverable check box will be checked and recoverable amount will be populated.

Note:

For a tax type to be recoverable, the below setup has to be in place

- Recoverable check box needs to be checked at Tax type Setup

- Recoverable option needs to be set to ‘Yes’ in item classification setup

- Claim term has to be defined for the Tax type.

If any of the above setup is missing, then the tax type will be treated as a non-recoverable tax.

When a non-recoverable tax category is attached, in India tax details form (both at PO and receipt level)

the Recoverable check box will be unchecked and recoverable amount will not be populated.

Recoverable check box is

checked and Recoverable

amount is calculated.


8.1.2 Direct Delivery – Recoverable Tax

The accounting entry generated in GL_INTERFACE is


Receipt

Tax Interim Recovery Tax Amount

Inventory AP Accrual A/c Tax Amount

8.1.3 Direct Delivery – Non-Recoverable Tax



Receipt

Receiving Inventory Tax amount

Inventory AP Accrual Tax amount

Recoverable check box is

unchecked and

Recoverable amount is not

calculated.


8.1.4 Standard Routing - Recoverable Tax



Receipt



8.1.5 Standard Routing - Non-Recoverable Tax



Receipt



Note:

The non–recoverable tax amounts need to be added to item cost. So after delivery transaction, lines

are inserted in MTL_MATERIAL_TRANSACTIONS (MMT) and MTL_TRANSACTION_ACCOUNTS (MTA).

For more information on queries that can be used to find out the details of the lines inserted in the

MMT and MTA tables, refer document 1065343.1.

Period End Accrual functionality which is not supported in current architecture will not be supported

even in GST solution.


9 – PO/Receipt Matched AP invoice

In oracle payables an invoice can be created by using the purchase order / receipt information from

purchasing system to enable online matching with invoices. Invoiced or billed items are matched to the

original purchase orders / receipt created to ensure that invoice is created only for goods or services you

ordered and/or received.

9.1 Flow Diagram

9.2 Process and Accounting

Create Payables invoice Responsibility: Payables responsibility to create an AP invoice Navigation: Invoice Entry Invoices

Create an Invoice for supplier against whom PO /receipt is created. Invoice Header

In invoice header level, select the operating Unit, invoice type and enter the PO number i.e. 65 in our example. Once you select the PO number, supplier name and Site automatically gets defaulted from the PO.

Create Invoice Match

Action ‘Receipt’

Click on Match option Select receipt Click on Match

button

Line / distribution details are defaulted from

Receipt level to Invoice

Since Tax point basis was Delivery, the taxes are freezed in

India Tax Details form

Navigate to Tools India Tax Details. The tax

category is defaulted from Receipt to invoice

Validate and Run Create accounting


Matching Receipt to the invoice

To create a receipt matched invoice, the match type in Invoice header should be “Receipt”.

We shall not enter the invoice line / distribution details as this will come automatically from matching the

invoice with Receipt.

Match Action

is set to

‘Receipt’


The next step would be to Click on Match button in Invoice work bench and query for the Receipt which

we are intending to match to the invoice and click on find.

Select the line which needs to be matched to the invoice and click on Match button

Query the

Receipt

Click on ‘Match’ button to

default distribution details

from receipt to Invoice


Now we can see that the line details and Distribution details at invoice level is automatically populated

from PO / receipt.

Tax Defaultation

Now if we navigate to Tools India tax details, we can see that Taxes which are defaulted at receipt are

defaulted at invoice level as well

Now validate the invoice and run Create accounting. Accounting entry generated

Tax category

from Receipt

got defaulted to

Invoice

Tax Point basis is set

as ‘Delivery’

The accounting class for the tax type

is set as ‘Miscellaneous’


10 – Standalone AP Invoice

Standalone AP Invoices will be raised for non-item based expense or service activities and they will not

have any reference to any purchasing documents like PO, receipt etc. These invoices are directly created

in invoice work bench by manually entering the supplier details and distribution details.

As Item information is not available for such invoices, Item-based taxes will not be applicable for

standalone invoice.

10.1 Flow Diagram


Responsibility: Payables responsibility to create an AP invoice Navigation: Invoice Entry Invoices In invoice header level, select the operating Unit, invoice type, Supplier name and site details etc.

Now navigate to Line level details and enter the Line and distribution Details

Enter the Header details like invoice

type, Supplier Name, site etc

Click on Line Items and fill the line

level and distribution details

Navigate back to Header. Tools -

India Tax details

Pick the Organization and location.

The same is required for adding

taxes/tax defaultation if any

Validate and Account the invoice

Tax details can be viewed in India Tax

Details form / View accounting

(Accounting class ‘Miscellaneous

Expense’

Lines are inserted in

GL_INTERFACE table for tax

accounting (refer query

mentioned in Chapter 8 to extract

the data)


Now navigate to Tools India tax details

Based on the tax default rule we have setup, the ‘P2P testing 2’ tax category is defaulted automatically.

Below we can also see the Taxes attached to the ‘P2P testing 2’ category.

Once the Organization and location details are entered, save the transaction and navigate back to invoice

work bench and validate and Account the invoice. The accounting entry generated at this stage is

Enter the Organization

and Location details

The tax point basis is

‘Invoice’

Tax lines are generated

with accounting class as

‘Miscellaneous Expense’

Tax category

defaulted


11 –Tax Recovery Accounting (Interim)

Users have the flexibility of selecting the Tax Point Basis (TPB) while defining the Tax Types

based on which the accounting will happen at differently. In the same way the recovery process

can also be done at different stages based on the Tax Point Basis. They are

11.1 Flow Diagram

Create PO Enter header /

line details

Navigate to Tools India Tax Details. Attach tax category

with Recoverable tax type and TPB as Delivery

Navigate to Receipt form and select the PO

line for receipt creation

‘Receiving Transaction processor’ program will be fired and

it will process Base / Localization tax details

Navigate to Tools India Tax Details. Check

‘Confirm taxes’ check box.





the data)

Navigate to Tools India Tax Details. From Menu

open

Enter the claim details and click on populate

values

Select the lines which needs to be processed

Enter claim term details click on Process option

The processed line status is changed from

‘Pending Recovery’ to ‘Recovered’





the data)



Once the receipt accounting is done, for a receipt with recoverable taxes,

The accounting entry is generated in GL_INTERFACE is


Receipt



Once the receipt accounting is done, to process recovery amount, navigate to


Now in India tax details form navigate to

Tools Process

Claims


In the Claim details form enter the tax invoice number and tax invoice date and enter the Action as

‘Recover’

Once the above details are entered click on ‘Populate Values’ button which will populate the tax invoice

number and tax invoice date to all the tax lines

Now select the tax line which you want to process or you can also choose Select all option if you want to

process all the tax lines. Also before processing the field ‘Intended Use’ needs to be populated.

Enter the tax

information Details

Click on ‘Populate

values’ button to

default the Tax invoice

information details to

each line level. Post

that each line will have

the tax invoice number,

date information

entered at header

level.


Once the above information’s are entered, click on ‘process’ button. Below confirmation message will be

shown

Now we can see that Status of the tax line is changed from Pending Recovery to Recovered

Enter Intended

use option

Manufacturing

or Non

Manufacturing

Confirmation

message for

Recovery

Processing


In the above case, only 50% of the tax amount is recovered and other 50% is pending for recovery on

next month. That is because of the claim term ‘GST Claim Term’ Setup. As the setup of claim term GST

Claim Term’ is

Also, the once the recovery is processed,

The accounting entry is generated in GL_INTERFACE is

The line status is changed

from ‘Pending recovery’ to

‘Recovered’



Recovery

Tax Recovery Recovered

Amount

Tax Interim Recovery Recovered Amount

Note:

Interim recovery to recovery – currently recovery process is manually done via process recovery

option and this will be an Interim Solution. We are checking the feasibility to automate the entire

process.


12 – Third Party Invoices

Third party invoice functionality provides provision to pay to the Vendor other than the PO Vendor. This will be required for paying the services offered by other Vendors related to that PO. An approved Invoice for the Non-PO Vendor will be created automatically when the invoice is created via payable open interface.

For using the third party invoice functionality, the tax type attached to the PO should have the

‘Update vendor on

transaction’ check box

should be checked at

tax type definition.


12.1 Flow Diagram

Create PO Enter header

and line information

Navigate to Tools India Tax Details. Attach tax category

with ‘Update vendor on transaction’ check box checked

Navigate to Receipt form and select the PO line for receipt

creation

Navigate to Tools India Tax Details. Change the

party Name and party site at tax type level Click

apply. Click on ‘Confirm taxes’ Check box

Payables Open Interface Import – Imports Invoice for Item line for PO vendor and

Third party Payables Open Interface Import - Imports Invoice for tax line for Non PO vendor

Four concurrent requests are triggered

Receiving Transaction Processor

ADS (Pay On Receipt AutoInvoice)

Third party Payables Open Interface Import

Payables Open Interface Import

.

Validate and Account both Standard

Invoice and Third party Invoice



accounting (refer query mentioned

in Chapter 8 to extract the data)



Create a purchase order with tax type which has ‘Update vendor on transaction’ check box checked at tax

type setup.

In Receipt form, before saving the receipt navigate to Tools India tax details. Change the ‘Party Name’ and ‘Party site’ to a new vendor and click apply button to save the changes

Note:

The third party vendor details can also be updated at PO level and if it is updated at PO level, the same

gets defaulted to receipt level as well.

Now click on confirm taxes check box to freeze the tax details

Change the Party

Name and Party Site

to a Non PO vendor

Click Apply to

save the changes


Now once the receipt is saved, system automatically fired the below concurrent

In the above request set, the program ‘Third party Invoices - Payables open interface Import (Payables

Open Interface Import)’ creates the Third party invoice against the Non –PO vendor and ‘Payables Open

Interface Import’ program creates the invoice against the vendor in the PO. The output of the ‘Third party

Invoices - Payables open interface Import’ shows invoice for tax amount has been created against the

third party vendor.

Below concurrent

are fired


The output of ‘Payables Open Interface Import’ program shows the invoice details created against the PO

vendor.

Now in invoice work bench, when queried, the invoice created against PO vendor will show the Item + tax

amount in India tax details form even though invoice line level only item line amount is reflected.

Invoice created

against Third party

vendor

Invoice created

against PO vendor


Below accounting is created for the third party invoice


13 – Costing Effect – Accounting Entries

13.1 Average Costing

In a average costing organization, the below accounting is generated for

A. Recoverable Taxes

After receipt Accounting


Receipt

Interim recovery A/c Tax Amount

Inventory AP Accrual

A/c

Tax Amount

After Recovery


Receipt

Tax Recovery Tax Amount


In case of recoverable taxes, the MTL tables will not be impacted / hit with the tax amount.

B. Non Recoverable Taxes

After receipt Accounting


Receipt




Once the delivery transaction is done, MTL_TRANSACTIONS_INTERFACE table gets updated with non-

recoverable tax amount and the same gets added to item cost. Accounting entry at that stage will be


Receipt

Material Tax Amount

Receiving inventory Tax Amount

13.2 Standard Costing

In a standard costing organization, the below accounting lines are inserted in GL_INTERFACE table once

the Receiving transaction is completed

A. Non-Recoverable taxes

Accounting entry for PO receiving


Receipt



Accounting entry for Delivery transaction is


Receipt

Purchase Price

Variance

Tax Amount


Note:

In case of standard costing Organization, the MTL tables will not be impacted / hit with the tax amount.


B. Recoverable taxes

After receipt accounting, the accounting entry generated in GL_INTERFACE is


Receipt

Interim Recovery Tax Amount


Once the recovery is done, the accounting entry generated in GL_INTERFACE is


Receipt

Recovery Tax Amount

Interim Recovery Tax Amount

Note:

There is no relevance of PO destination in GST architecture. Whether the destination is ‘Expense’

or ‘Inventory’ the accounting treatment will be same.

The accounting impacting on costing and OPM remains same as it is in current architecture.


Phase2

14 – Introduction The Procure to Pay cycle (P2P) is vital to an organization as in this process the organization buys and receives goods or services from its vendors and makes necessary payments. This business process covers the process of requesting, purchasing, receiving, paying for and accounting for goods and services. The OFI functionality lets you satisfy all business needs related to Tax calculation required for a Reverse Charge Transaction and ERS Invoice.

15 – Scope This document provides the details of Functional flow for ‘Oracle Financials for India’ (OFI) Procure to Pay cycle from GST point of view along with accounting entries.

Note: This document provides the details of Functional flow for ‘Oracle Financials for India’ (OFI) Reverse Charge and Pay On Receipt (ERS) cycles from GST point of view along with accounting entries. Note: The current content has been compiled in reference to the frozen scope of the Phase-2 deliverables (Ref: GST Phase -2 Deliverables.docx)

16 – Reverse Charge

16.1 Model Law

“Reverse charge’’ means the liability to pay tax by the recipient of supply of goods or

services instead of the supplier of such goods or services in respect of such categories of supplies as

notified under sub-section (3) of Section 8. The concept of Reverse Charge existed earlier under the

Service Tax provisions for services like Works Contract, Manpower, Goods transport Agencies, Legal

services etc., However, under the GST, Reverse charge mechanism has been introduced both for

Goods and Services. Accordingly, all other provisions of this Act and CGST Act, as applicable, will apply

to the recipient of such goods and / or services, as if the recipient is the supplier of such goods and / or

services i.e. for the limited purpose of such transactions, the recipient would be deemed to be the

‘supplier’

Section 12(3) talks about Time of supply of Goods, wherein for Reverse Charge cases, the time of supply would be the earliest of the following dates:

(a) The date of the receipt of goods, or (b) The date on which the payment is made, or (c) The date immediately following thirty days from the date of issue of invoice by the supplier:


While the above said concept is already prevalent under the Service Tax regulations, the concept is altogether new under the Excise and especially VAT, where predominantly the point of determinants were removal from factory and sale.

Section 13 (3) talks about Time of Supply of Services, wherein for Reverse Charge cases, the time of supply would be the earliest of the following dates

(a) The date on which the payment is made, or (b) The date immediately following sixty days from the date of issue of invoice by the supplier

In case, it is not possible to determine the time of supply of services under the above said options, the time of supply shall be the date of entry in the books of account of the recipient of supply.

16.2 GST Functionality of Reverse Charge

As per the Model law requirement, we need to capture the Reverse Charge on Prepayment. Below are

the salient features of the Reverse Charge functionality on Prepayment:

We need to calculate the tax as ‘Self Assessed’ on Prepayment.

There is the requirement to capture the HSN (Goods) or SAC (Services) codes in Prepayment.

Also, we need to account the liability of Reverse Charge on Prepayment. GST laws specify that it

should be Reversal entry instead of Net Off entry on Prepayment application to standard

invoice with Reverse charge taxes.

Need to have the Repository update on the Reverse Charge taxes of Prepayment as well as the

accounting.

The Accounting of Reverse Charge taxes to the Period End Processing Concurrent which

has been introduced as a part of Model law feature. This will avoid multiple accounting

adjustments happening in the invoice life cycle and will consider the net consolidated value in the

period end process.

https://gst.caknowledge.in/time-supply-goods-services/


Flow Diagram

Configure HSN/SAC Code in the

seeded Reporting Type

Create a Prepayment Invoice having Reverse Charge

Taxes attached to it and HSN/SAC code attached

Validate and Pay the Prepayment Invoice

Validate the Standard Invoice

Create a Standard Invoice having Reverse Charge Taxes attached to it

and same HSN/SAC code attached as well

Apply the Prepayment to Standard Invoice based on

lines having same HSN and SAC codes

Repository will get updated

Run the Period End Process in ‘Save’ and then in

‘Final’ modes



liability accounting


16.4 Configuration:

Regime:

Regime Type: Transaction Tax Tax Authority: GST Tax Authority

Tax Type:

Self Assessed/Reverse Charge: 'Y'

Mandatory

checkbox for

Reverse

Charge Taxes


Tax Rate:


Tax Category:

Third party Registration:


Tax Rule: Define the Tax Rule based on business requirement

Claim Term:


16.5 HSN/SAC Code:

1. HSN Code is meant for Goods. For inventory item(reporting code only for item)

2. SAC Code is meant for Services. For non inventory item(reporting code for both 3rd party and

item)

3. New seeded Reporting Types are introduced to capture the details. These Reporting Types are

User configurable.

4. At transaction level we have the flexibility to modify the HSN/SAC code defaulted from 3rd Party

Registration or Item Classification

Seeded Reporting Types for HSN and SAC codes.

1. SAC Code for Non Inventory Item: GST_SAC_CODE_ITEM

2. SAC Code for 3rd Party: GST_SAC_CODE_TP

3. HSN Code for Item: GST_HSN_CODE

Entity is 3rd party which means we will

have to attach the Reporting Code

value to the 3rd party Registration.

Likewise, if Entity is Item then the

Reporting Code value to be attached to

Item Classification.


16.6 Linking of Reporting Code value to 3rd party Registration:

Attached the Reporting

Code value to the Third

party Registrations


16.7 Prepayment:

In prepayment we have the provision to attach the Reverse Charge taxes unlike the current architecture.

In the current architecture the

“India Tax Details” UI was not

enabled but here its enabled

Defaulted from Tax

Type setup

Defaulted from Third Party Registration

though the field has the flexibility to

change the value

Organization and Location

is mandatory


Validate and Pay the Prepayment:


16.8 Standard Invoice

SAC Code should be

same as that of PP

invoice

Mandatory


Note:

When you are going to create a Reverse Charge for a Prepayment you are accounting the tax

liability. Again when you create the AP invoice for which the TPB is set, you are going to

calculate for the full value and when the Prepayment is applied, the system will check if the

SAC/HSN codes are same in both documents and if those are same then it will allow you to

trigger an offset entry for the Reverse Charge which is calculated on PP.

If SAC code is entered, HSN code will be disabled. So both SAC and HSN codes are mutually

exclusive.

Prepayment can have 2 lines having multiple HSN/SAC codes, only the adjustment will be by

grouping of HSN/SAC codes. Application will be done at line level by grouping of HSN/SAC

codes. So the system will allow to apply those lines of prepayment where HSN/SAC codes are

same.

Prepayment VALIDATE, Standard Invoice VALIDATE and Prepayment APPLICATION does not

create any accounting. Only period Ending process will create accounting and update the

repository.

16.9 Prepayment Application


16.10 Period Ending Process:

Data should get populated into the Repository(table jai_rgm_recovery_lines) once the

prepayment is applied to the Standard invoice

Based on the data populated, the Period Ending Process shall create the accounting

in GL

For Standard invoice there will be a record inserted into the repository table with

liability account and for Prepayment also there will be a liability account. Once the

Prepayment is applied to Standard Invoice, there will be a negative Reversal entry

against liability to adjust the prepayment application.


A new concurrent program: India - Period Ending Process is introduced for the period ending

process. There are 2 valid modes of running the period end process

a. Save - In this mode, the invoices will be prepared for GSTN and the user can view those

details and they can upload the information to the GSTR

b. Final - In this mode all the records will be locked and the accounting will get created in GL

Running the program in Save mode:

The status of the Repository against the transaction can be found out by the column:

REPORTING_STATUS_FLAG which will be marked as ‘S’ when the program is run in Save mode


Running the program in Final mode:

The status of the Repository against the transaction can be found out by the column:

REPORTING_STATUS_FLAG which will be marked as ‘RF’ (Ready to File) when the program is run in

Final mode. Once it’s filed, the system will not allow any adjustment to the invoice. So the user can

go and take the data and file it to GSTN

At this point of time the LIABILITY Accounting will get generated. So with the Period end Process

in Final mode the system will generate Liability accounting and Adjustment accounting in GL


16.11 Accounting

Once Period End Process Program is completed



Period End

Process

Liability Tax Amount

Suspense Tax Amount

17 – ERS Invoice

Payment on Receipt enables the user to automatically create standard, unapproved invoices for payment

of goods based on receipt transactions. Invoices are created using a combination of receipt and purchase

order information that eliminates duplicate manual data entry. It automatically creates invoices with

multiple items and distribution lines, and includes tax. Payment on Receipt is also known as Evaluated

Receipt Settlement (ERS).


17.1 Flow Diagram

Create PO for Supplier / Supplier site which has

ERS Invoice setup

Navigate to Terms Set ‘Pay on’ option to

‘Receipt


defaulted based on defaulting mechanism defined

Create a receipt Check the ‘Confirm taxes’

check box

Receiving Transaction Processor program will be triggered

.

ERS invoice is imported to Payables

Validate the ERS invoice and run create

accounting





the data)

Run the ‘ADS (Pay On Receipt AutoInvoice)’ Program




Create a purchase with Pay on option set to ‘Receipt’. Once the PO is approved, create a receipt. Once

the receipt is saved, ‘Receiving Transaction Processor’ program will be triggered automatically. After

successful completion of ‘Receiving Transaction Processor’ program, run the ‘ADS (Pay On Receipt

Autoinvoice) program:-

Once receiving transaction processor program is completed



Receipt



The output of payable Open interface program, the ERS invoice number which got created will be

displayed

Receiving Transaction Processor

ADS (Pay On Receipt AutoInvoice)



When we query the invoice number in invoice work bench and navigate to Tools India tax details form,

the tax category has defaulted from receipt level.

ERS invoice number

which got imported

to payables

Tax category is defaulted from

Receipt. Since confirm taxes

check box is checked at receipt

level, the fields are freezed at

invoice level


Once the invoice is validated and Accounted, the below accounting entry is generated by navigating to

Tools

Notes:

1. For both Recoverable and Non recoverable taxes, the tax lines will hit the AP Accrual Expense

Account

2. For ERS invoices, the TPB should always be set at ‘DELIVERY’

16 – Summary

The above document will provide the below benefits:

Transaction flow in different stages of P2P in Oracle GST solution.

Summary accounting entries generated at each stage

Major difference between the current India Localization structure and the GST solution.

This document will help you understand the different scenarios / transaction flows in P2P cycle

Reverse Charge Process

ERS Invoice


17 – Call to Action

This is not the final document and further changes shall be incorporated as and when there are any

further updates from Product Management / Development teams in regards to the changed

features/functionality or pending product clarifications, if any.

You can also refer the documents in GST Info Center (Documentation Tab) released as part of

Phase2 deliverables.

E-Business Suite Release 12: India Goods and Service Tax (GST) Info Center (Doc ID 2176820.2)