BBP Template

SAP Implementation Project: PARINAAMBusiness Blue Print Document for Finance Tax Process (TDS & WCT)

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Document History

Document NameBusiness Blueprint

TitleFinance With Holding Tax Process

Document PurposeTo be process in SAP for Tax Deducted at Source, (TDS), Works Contracts Tax ( WCT)

Key WordsSupplier Invoices , Payments , TDS Deduction , TDS Certificates issuance , WCT Certificate issuance, Reporting

Document StatusIn progress

Contact for Enquiries

Process BasicsIllustrative Response

Process NameFinance Extended Withholding Tax including Works contract tax

Process NumberMHRIL-FI-02-02-111

Process Description (Brief Bullet Points) What Does the Process Do Calculation and processing taxes applicable on vendor invoices or payments

Process Owner (preferably indicate the position in the organization structure rather than the name)Head Finance

Input Process Dependent BBPs MM, AP, AR, GL & HCM

Document Sign-Off

CompanyNameDateSignature

Document Change Control

Release / VersionDescriptionDateDateSign

V1.0Extended With Holding TaxCreated BySuanand K

Reviewed ByMohan Krishnamurthi

Approved By

Created By

Reviewed By

Approved By

Glossary

S.NoDescriptionFull Form

1. CurrencyA currency is the money in general use in a country. In Financial Accounting, a currency has to be specified for each company code. This is the local currency. All other currencies are considered as foreign currency.

2. Recipient TypeSystems object that you use to classify payment recipients according to their profession, for the purposes of withholding tax reporting.

3. With Holding Tax rateThe percentage rate used to calculate the tax amount.

4. With Holding Tax CodeA two-digit code that represents the specifications used for calculating and displaying tax.

5. With Holding Tax TypeIn one business transaction, several kinds of withholding tax may have to be withheld. The withholding tax type governs the way in which extended withholding tax is calculated.

Introduction

This document depicts the SAP enabled TO-BE version of the business process of MHRIL. The document contains how the process under reference will be handled in the TO-BE SAP scenario along with the business benefits and organisational changes required to implement the SAP enabled business processes. The document also highlights Tax Processes (TDS & WCT) and covers the reporting requirements of MHRIL with respect to the process under reference. These are evolved based on the detailed study of the business processes and functions of Customer and with the inputs from the series of Business Blueprint Workshops conducted for this purpose.Intended UsersThis document will help: MHRIL to understand and approve the requirements and design of the proposed application, as adequate for meeting its stated business needs TCS team to design and develop the application using the requirements as the basis, as well as to plan and manage all project resources thereof. The acceptance testing team to develop test data and to test the application The maintenance and support team to understand all aspects of the process, application, and maintain it.This document states all of the conceptual results of the project PARINAAM. These project results were devised and decided on by the project team and the department experts from customer MAHINDRA HOLIDAYS & RESORTS INDIA LIMITED during the Business Blueprint project phase. This is the main concept document of the project. It is supplemented by separate specifications for custom developments.The content of this document forms the basis and the guidelines for the subsequent Realization phase. This document aims to describe the future business solution based on SAP ERP. Both, IT subjects and organizational issues that are required to understand the situation, are described in it. Any additional explanations that are only relevant when the project is in progress are given in the various project management plan documents, which the project management team will provide on request. Authors and contributors can be referred to in section Document History. SAP R/3 FI module provides a very wide and comprehensive range of functionality that meets the requirement of most of the enterprises worldwide. Thus there was a requirement to study the existing Finance and Reporting practices of MHRIL and map the same to the functionality provided in SAP ECC6.0 in order to evolve the Business Blue print. The main project objectives and business drivers behind MHRILs decision to implement SAP are to Streamline the processes related to Tax Processes (TDS & WCT) in Finance. Standardize business processes and practices. Eliminate the processes which add no value such as redundant data collections and reconciliation. Address the current and future business requirements. Capture and make available information needed for effective and accurate Finance strategies. Integrated Solution for real time accounting and enhanced reporting.

Table of Contents1.Scope61.1Business Process Master List reference61.2Scope in Brief61.3Location where the Business is performed71.4Key Policies/Operational Decisions or Logic within the Process72.Process Description / Requirements82.1Explanation of Functions and Events82.2Business Requirements83.Solution in SAP93.1TDS Codes103.2Assignment of TDS Codes to Vendor Master103.3Lower deduction of TDS (TDS Exemption)113.4TDS Deduction Process113.5Remittance Challan Process113.6TDS Certificate113.7Quarterly e-filing of Challan123.8Works Contract Tax (WCT)123.9Works Contract Tax Codes123.10WCT Remittance Challan Process124.Business Process Diagram134.1Extended With Holding Tax Process135.Organizational Consideration145.1Organization Structure Consideration145.2Master Data Considerations (including all relevant data relationships)145.3System Configuration Considerations146.Changes to Existing Organization Process146.1Changes observed/Suggested147.Description of Improvements148.Functional Deficit149.Approach to Cover Functional Deficit1410.Integration & Interface Considerations1410.1Integration1410.2Interfaces1411.Reporting Requirements1411.1Standard Reports1411.2Developed Reports1512.Data Migration1512.1Data Conversion / Historical Data1512.2Data Validation and Reconciliation1512.3Data Cleansing Requirement1512.4Scope1513.Enhancements & Forms1513.1Functional Deficit1513.2Enhancements1513.3Outputs (e.g. Forms)1514.Authorization Requirements1615.Workflow Requirements1616.Traceability Matrix16

ScopeBusiness Process Master List referenceBPML Reference

Process Number Core Process Level-1 Process Area Level -2 Business Process Level-3Remarks

MHRIL-FI-02-02-111FICOFinancial AccountingExtended Withholding Tax

Scope in Brief

Scope of this document covers the current MHRIL process on Income tax deducted at source other than salaries under various sections of the income tax act 1961 as applicable. Maintaining recipient types- For example whether tax to be deducted on corporate /others as the tax rate is varied for corporate and others. Maintaining tax codes as applicable under various sections of the Income tax act. Maintaining exemption limits or reduction in rate of tax. Deduction of TDS on advances and clearing against the Invoice is subject to business decision on adjusting advance payments. Computation of total taxable amount subject to maximum limits not chargeable to tax under various sections of the per Income tax act 1961. Treatment of TDS on overseas payments for services. Number ranges for TDS challan, certificates & other bank remittance challans. Remittances. Generation of certificates. Filing of annual returns.

Works contract tax (WCT) is similar to TDS; however there may be Specific formats for payments, updating, and issuance of certificates and filing of returns subject to applicable vendors.The main purpose of this document is to calculate and process the taxes applicable on vendor invoices or payments.

Location where the Business is performedLocation Scope covers Head office / branches / resorts of MHRIL company code and Line of Business (LOB) as defined in organization Structure.

Key Policies/Operational Decisions or Logic within the ProcessNot Applicable

Process Description / RequirementsExplanation of Functions and Events TDS or WCT are deducted and recorded at the time of booking vendor invoice. TDS certificate generated/prepared for the deductions made. Taxes are deducted at each branch/resort and returns are filed based on location. Returns are filed quarterly (e-filing).

Business Requirements TDS should be deducted on real time basis either at the time of invoice or payments. TDS on advance payment should be adjusted during invoice against total TDS. Maintenance of tax types and tax codes to be derived automatically from the system. Accumulation of maximum amount not chargeable to tax. Calculation of tax based on exemption limits Generation of certificates Filing of returns Real time calculation of WCT.

Solution in SAPThe following will be configured in SAP to address the business requirements (2.2).Basic Settings:1) Withholding tax (TDS/WCT) country: Withholding tax will be created for each country specific and relevant to vendor. IN will be used for MHRIL.i) Recipient types: Recipient types are used to determine the rate of tax to be used at the time of tax deduction and tax certificate generation. Following will be recipient types for MHRIL: CO - Corporate OT - Others ii) Section code:Section code refers to the assessing officer under the Income tax act 1961, where the tax will be remitted and returns will be filed. This will be maintained and determined either at the time of advance payment or at the time of Invoice whichever is earlier. This is must for generation of challan and tax certificate. In addition to above, following masters need to be maintained in section code: Assessing officer where the returns are being filed. Tax deduction number maintained in the search term. Complete address of the Income tax office.For instance Section code for Chennai can be maintained as 1000.

2) Withholding tax types:This represents the classification of tax types under various sections as listed below: SectionDescription

194CPayment to Individual / HUD / Corporate

194JFees for Professional

195For overseas payments for service

194ABank Interest

194BWinnings from Lottery / Crossword Puzzle / Horse Race

194DPayment of Insurance Commission

194HCommission or Brokerage

194IRent of Plant & Machinery / Land, Building, Furniture, etc / Professional or Technical Fess

Based on above classification, withholding tax types will be created in the system. Standard Withholding tax types are available in the system, which can be referred for creation of specific types. Based on the business requirements, the above section codes can be maintained for both for Invoice and payments. This will be represented by 2 characters: For Invoice:194 C- C1 for Individuals, C2 for HUD and C3 for Others. Similar tax types can be created under different sections.For Payment /Advance:194 C- P1 for Individuals, P2 for HUD and P3 for Others. Similar for other types of paymentsRounding off rule for withholding tax type: Rules will be defined for each withholding tax type in respective company code. 3) Withholding tax codes:Tax codes represents the percentage of tax prescribed under various sections of the Income Tax Act 1961, which will be deducted either at the time of Invoice or Payment including advance payment. Tax types are assigned to respective tax codes. Withholding tax codes will be represented by a maximum of two characters:For Invoice:194 C- C1 for Individuals, C2 for HUD and C3 for Others.For Payment /Advance:194 C- P1 for Individuals, P2 for HUD and P3 for Others.Presently MHRIL is not calculating surcharges separately, which are clubbed with the main income tax. Separate rate type would be created for surcharge with different calculation procedure.

4) Activation of Extended withholding tax and assignment of company codesi) Assignment of withholding tax types to the company code: All the withholding tax types are assigned to company codes with validity period. ii) Formulas for withholding tax: As per tax requirement for business, formulae will be developed to calculate the various taxes.iii) Assignment of GL Codes:Presently separate GLs are used for different types of taxes; same will be followed in SAP.

TDS CodesTDS Codes will be created as per the applicable tax rates for payments as well as invoice.

Master data: Assignment of tax codes in the Vendor MasterBased on the nature of service the applicable tax types and tax codes will be attached to the vendor masters which are to be made liable. Multiple tax types can be assigned to a single vendor.In cases where the Vendor is not liable for deduction or at lower rate of tax the same will be entered.In the Vendor master either with 100% exemption or reduction percentage for a specified Validity period. Vendor master is to have the relevant Permanent account number of the vendor in order to pick up during certificate printing.

Assignment of TDS Codes to Vendor MasterTDS codes will be assigned to vendor master as per applicable rates for individual vendors. Both categories of tax codes i.e. for payment as well as for invoice booking will be assigned to each vendor. Some vendors may be rendering services that are subject to TDS in more than one section. As per the nature of transaction, user has to delete the tax codes which are not relevant for that transaction. Items% of TDS

Professional Fees ( 194J)10

Contractors ( 194C) Advt.1

Interest from Bank 194 A10

Contractors (194C) Other than Advt.2

Lower deduction of TDS (TDS Exemption)In case , if any vendor provides certificate of exemption, respective effect will be given in vendor master which will ensure deduction of tax at reduced rate of tax for that vendor.Following information has to be maintained in Vendor master: Exemption certificate Number Exemption Validity Period Exemption percentage Exemption Volume

TDS Deduction ProcessDuring Vendor InvoiceDuring vendor invoice as per TDS codes assignment (in vendor master) respective TDS will be deducted. During Vendor Advance (Down Payment)At the time of vendor advance as per TDS codes assignment (in vendor master) respective TDS will be deducted. Down payment adjustment with InvoiceWhen user will adjust the vendor advance with invoice, system will reverse the TDS amount proportionately. At the time of making advance payment to Vendors TDS amount is deducted for the advance payment.On receipt of final Invoice from Vendor, Advance payment earlier will be reversed in full including the TDS amount and the Invoice will be entered for the full amount capturing the relevant TDS amount. Subsequent Adjustments in TDS deductedIn case of error of deduction of TDS, subsequent adjustments can be done only through specific function of TDS JV available in CIN. The changes may be in TDS code or amount deducted. Depending upon the stage when adjustment is made, system can generate accounting entry.

Remittance Challan ProcessRemittance Challan will be generated through the system. This remittance Challan will propose the amount which will be used to prepare the Challan physically (This function does not generate the Challan form). This step will clear open items in the account of TDS Payable and credit the bank. This means this will effect bank payment of TDS.Challan Update ProcessUpdate bank details (Basic Statistical Return (BSR) code, payment date and Challan number) in the system after depositing the money in the bank.

TDS CertificateTDS certificates are to be issued quarterly. The certificate has to be issued after downloading from IT website. In case the certificate is printed wrongly and needs to be cancelled, the cancellation will be possible through system. In such an instance, the number given to that certificate stands cancelled and cannot be used again. In case of specific requests from vendors, TDS Certificates already issued can be reprinted with DUPLICATE clearly printed on the face of the certificate. It is also to be noted that certificate needs to be printed in the first instance rather than preview. Print preview will be considered as original certificate generated.

Quarterly e-filing of ChallanQuarterly e-file report can be generated and filed.

Works Contract Tax (WCT)During Vendor InvoiceDuring vendor invoice as per WCT codes assignment (in vendor master) respective WCT will be deducted.Subsequent Adjustments in WCT deductedAdjustment can be made through WCT JV function, respective entry will be posted.

Works Contract Tax CodesDifferent tax code and type will be defined under respective sections, which will be used to deduct tax at the time of payment.Considering WCT rates are not common across India a separate tax type to be created with 2 character for differentiating the states and respective tax code to be mapped.For example: WCT for Tamil Nadu to be mapped as W1 as tax type and 4 % as tax code. This tax code and type to be mapped vendor master at company code level.

WCT Remittance Challan ProcessWCT Deduction will be performed in the system as a part of SAP Standard Functionality, However, remittance Challan update, WCT Remittance & Certificate generation are not part of the standard functionality. This will be developed by obtaining MHRIL specific requirements.

Business Process DiagramExtended With Holding Tax Process

Organizational Consideration0. Organization Structure Consideration Company Code = 1025 (MHRIL Designated) Chart of Accounts0. Master Data Considerations (including all relevant data relationships) Existing TDS & WCT rate through Supplier Master or customer if required.0. System Configuration Considerations Vendor master Customer masterChanges to Existing Organization Process0. Changes observed/Suggested None.Description of Improvements Better tracking of documents through the entire process of TDS. Duplicate certificates can be printed from the system through secured authorization level. The original certificate will be printed once only. Handling of special scenario such as reduced rates of deduction is driven by standard SAP system. Quarterly e-file generated by the system.Functional Deficit Tax computation, deduction and accounting for WCT will be system driven but, Certificate will not be generated through system.Approach to Cover Functional Deficit Printing of certificate for WCT to be managed out of the system. System will give the available data.Integration & Interface Considerations0. IntegrationNone.0. InterfacesNone.Reporting Requirements0. Standard ReportsSl. NoRequirementsSAP reports

1MIS on TDSJ1INMIS

2Certificate PrintingJ1INCERT

0. Developed ReportsReporting

WWRICEF-IDDescriptionReport Type (ABAP, BI, BOBJ)Data ElementsRelevant KPIOwner

Printing of WCT CertificateForms

Data Migration0. Data Conversion / Historical Data TDS codes to be attached to vendors subject to TDS. WCT Codes to be attached to vendors subject to WCT.0. Data Validation and Reconciliation Vendor master data with historical value will be provided to MHRIL in specified format /template. MHRIL to validate and reconcile the data for consistency and correctness.0. Data Cleansing Requirement For Completeness and correctness all data cleansing related activity will be performed by MHRIL.0. Scope NoEnhancements & Forms0. Functional DeficitYes0. EnhancementsEnhancements

WRICEF-IDDescriptionData Object (Vendor Invoices)Functional GapAlternative SAP StandardReasonOwner

MHRIL-FI-02-02-111

Work Contract Tax Certificates printingSystem Does not supportCustomizationFinance

0. Outputs (e.g. Forms)Output / Forms

WRICEF-IDDescriptionData Object (Sales Order)Output Type (Form, EDI, etc.)FrequencyVolumesOwnerAttachment

XX-xx-O001Tax Certificates

XX-xx-O002Tax Challans

Authorization RequirementsD Direct fit, W Work around, N Not in SAP, C Customization

ActivityData InputData OutputResponsibility / AuthorizationRemarksProcessing System (SAP, Non-SAP)

Create Invoice / Down payment for TDS vendors.1Company Code, Vendor No, TDS, Amount.FI Document with TDSD

Create TDS JV for subsequent adjustments2Document numberAccounting document generatedD

Create Remittance Challan3Co Code, Section Code, TDS Section, Recipient TypeRemittance Challan generated and amount proposed.D

Create Bank Challan4Co Code, Section Code, TDS Section, Recipient Type, Bank Challan No. and House BankBank Details updated in Remittance ChallanD

Quarterly e-file4Co Code, Section Code, TDS Section, Recipient TypeQuarterly e-file generated.D

Certificate PrintingAd hocVendor, date range, document range.Printed CertificateD

Provision5Co Code, PO#, VendorProvision createdD

Workflow RequirementsNone.Traceability Matrix

KPMG ProcessTCS-MHRIL BBP

Process NoProcess TitleProcess NoProcess TitlePage No

7.1TDS rate updation3.1Tax Codes13

7.4TDS filing3.7Quarterly filing15

7.5Issuance of certificate3.6 & 3.10TDS/WCT Certificate15 & 16

Mahindra Holidays & Resorts India LimitedTata Consultancy Services Limited

Project: PARINAAM MHRIL-TCS CONFIDENTIAL Page 9 of 18