CIN Governor and Masters

Contents
India Localization
1. India Legal Requirements Overview
2. Logistics Process Overview ( Procurement & Sales )
3. Utilization
4. Extended Withholding Tax

© SAP 2007 / Page 1
Contents
India Localization
3. Utilization

© SAP 2007 / Page 2
India Localization Requirements - Overview
 CenVAT (Excise)
 VAT / LST / CST
 Service Tax
 Cenvat Credit
© SAP 2007 / Page 3

 Central Value Added Tax (Excise)
 VAT (LST) / Central Sales Tax
 Service Tax
 Cenvat Credit
© SAP 2007 / Page 4

Central Value Added Tax (Excise)
What is Cenvat?
 Tax on manufacturing or production of goods in India
 Goods having 4M Characteristics are covered under this

- Movable (No duty on Immovable Goods)
- Marketable (Bought and Sold)
- Manufactured (Come up out of a process)
- Mentioned (Central Excise Tariff)
 Every legal entity that manufactures or produces excisable goods

shall pay the duty leviable on such goods
 Materials are classified under various tariff headings (Chapter Ids).

This will be subject to change in every financial budget.
 Goods consumed in-house also liable for payment of duty
© SAP 2007 / Page 5

What is the basis of charge?

 Tax Rates Provided by GOI and are subject to change after each
year based on the budget
 Exemption to pay duty on intermediate products in the

following cases
- used for manufacturing capital goods
- used for manufacturing final goods which are eligible for
Cenvat credit
 Duty shall be paid when the goods are removed from the
place of production or place of storage
 Excise duty not payable on goods manufactured for

exports or deemed exports
 Goods manufactured in factory for use within the factory

for repairs of machinery installed within the factory are exempt from
excise.
© SAP 2007 / Page 6
Types of Excise Duty
 Basic Excise Duty (BED)
 Additional Excise Duty (AED)
 Special Excise Duty (SED)
 Education Cess on Excise
 Secondary and Higher education Cess
© SAP 2007 / Page 7

Duty Calculation
 Specific duty – It is calculated on the basis of certain unit,

length, weight etc. Eg. cigarette
 Ad valorem duty – It is based on the value of the goods

 Duty based on tariff value – The Govt. may fix tariff value from
time to time. The duty will be calculated as percentage of tariff
value fixed by the Govt. and not on assessable value
© SAP 2007 / Page 8

Duty Calculation Considerations
 Transaction value is the price actually paid or payable for the

goods and includes any other amount that the buyer is liable
to pay in connection with such sale
 Any additional consideration flowing directly or indirectly to

the seller from the buyer should be added to the transaction
value.
 Cost of production is not relevant for the purpose of

determining assessable value.
 Assessable value may be lower than the cost price of the

goods.
 Goods should be assessed in the form in which they are

removed.
© SAP 2007 / Page 9

Excise Payment Overview
Vendor Plant Customer
 Pays Excise Duty  Pays Excise Duty for all  Pays Excise component to
outbound goods movement the Vendor
 Claims Cenvat
© SAP 2007 / Page 10

CENVAT PAYMENT
 Duty to be paid by 5th of the following month
 Duty deposited in bank using TR 6 challan and credited to PLA
 Duty is paid by debiting PLA
© SAP 2007 / Page 11

Excise Registers
Statutory Excise Reporting
 Excise Registers
(RG23A & C Part I & Part II,RG1, PLA, RG23D)
 Excise Monthly Returns
 Bond Registers
 License Registers
 Running Bond Registers
© SAP 2007 / Page 12

 CenVAT (Excise)
 VAT / LST / CST
 Service Tax
 Cenvat Credit
© SAP 2007 / Page 13

VAT / Central Sales Tax
How is Sales tax treated in India ?
 This is a tax on sale
 VAT / LST is charged on sales within the state
 Central Sales Tax (CST) is charged on inter-state sales
 Any sale would be charged to either VAT or CST but only to

one of them
 Every person carrying on any business is required to charge

VAT / CST, on all sales made by him, and pay it to the
Government
 VAT / CST shall be charged at the rate in force as on the date

of sale
© SAP 2007 / Page 14

VAT / Central Sales Tax
Tax Impact under VAT System

Rs.
STAGES
I– Manufacturer II – Wholesaler III – Retailer
Selling price 100.00 Cost price 100.00 Cost price 120.00
(excl. tax)
VAT @ 12.5% 12.50 Overheads & profit 20.00 Overheads & 24.00
@ 20% profit @ 20%
Sale price 112.50 Sale price 120.00 Sale price 144.00
(excl. tax) (excl. tax)
Tax paid 12.50 VAT @ 12.5% 15.00 VAT @ 12.5% 18.00
Sale price 135.00 Sale price 162.00

(incl. Tax) (incl. Tax)
Tax paid 2.50 Tax paid 3.00
(15-12.50) (18-15)
© SAP 2007 / Page 15

CENVAT vs. VAT
Cenvat VAT
Central – Value Added Tax State – Value Added Tax
Revenue to Central Government Revenue to State Government
Tax on Manufactured Goods Tax on Sale of goods
Single point tax - paid at the first point of goods movement Multi Point Tax – payable at each stage of value chain
Credit can be availed Credit can be availed except in case of LST
General CENVAT rate @ 16% with exceptions General VAT rate @ 4% or 12.5% with exceptions
Centrally administered –Cenvat Chain cannot be broken on State administered – Chain broken on interstate transactions
interstate boundaries
Cenvat credit can be availed on Services Cenvat credit cannot be availed on Services
© SAP 2007 / Page 16

 CenVAT (Excise)
 VAT (LST) / Central Sales Tax
 Service Tax
 Cenvat Credit
© SAP 2007 / Page 17

Service Tax
 Tax on services rendered
 Applicable only on those services which have been notified

by the Government
 Tax is payable @ 12 % plus education cess & Higher and

Secondary education cess
 Exemptions to persons rendering taxable service below

400,000 INR
 Tax to be paid by 5th of the next month
 Service tax is payable on advances
© SAP 2007 / Page 18

Service Tax
Service Tax Considerations
 Service tax is payable on value of services
 Value of service is the gross amount charged by the service

provider for the taxable service provided
 Any discount/rebate given to customer before accepting the

payment would be deducted from the gross amount
 In most of the cases person providing the taxable service is

liable to pay tax
 Reimbursement of expenses incurred on behalf of customer

is not taxable
 No tax on services which are exported or used for providing

services which are being exported
© SAP 2007 / Page 19

Service Tax
Export of Service
 Should be at least partly performed outside India
 It is delivered outside India and used outside India
 Payment for such services is received in foreign exchange
 No tax on services which are exported
© SAP 2007 / Page 20

Service Tax
Import of Service
 Should be provided from outside India to a person in India
 Service provider does not have a place of business in India
 Person receiving such service has a place of business in India
 Person receiving such services is liable to pay service tax
 Cenvat credit can be utilized for tax payment
 Tax paid can be used for availing credit
© SAP 2007 / Page 21

Service Tax
CENVAT Credit on Input Services
 Service provider is entitled to take credit of service tax paid on input

services
 Credit can be taken only when full payment has been made for the
service
 Credit may be taken for service tax and also for education Cess ,
Secondary and Higher Education Cess paid
 In case the service provider is engaged in exporting services, he shall
be granted refund of CENVAT on input services
 In many cases, various input services will be consumed in the

headquarters/administrative offices of manufacturers and OSPs. In
such cases, the invoices indicating the payment of service tax will be in
the name of such headquarters/ administrative offices. Provision can be
made for availing credit of such service tax, in the premises where
manufacturing activity is undertaken or the premises where the output
© SAP 2007 / Page 22
services are rendered.
Service Tax
Reporting
 Half yearly return in form ST-3 to be filed within 25 days from

the end of the half year
 Return needs to be accompanied by TR -6 challan evidencing

duty payment
© SAP 2007 / Page 23

 CenVAT (Excise)
 VAT / LST / CST
 Service Tax
 Cenvat Credit
© SAP 2007 / Page 24

CENVAT Credit
A manufacturer or producer of the final product or provider

of taxable services is entitled to take credit of –
 Cenvat (Excise)
 Education Cess
 Secondary and Higher Education Cess
 Secondary and Higher Education Cess
 Service tax paid on input services
 Countervailing Duty
© SAP 2007 / Page 25

CENVAT Credit
What items can be considered for taking Credit?
 A manufacturer or producer of the final product or provider of

taxable services is entitled to take credit of CENVAT paid on the
INPUTS used in the manufacturing process
 INPUTS include inputs in capital goods manufacture which
would
be used further in manufacturing process
 Inputs need not be contained in the final product. It should have

been used in the process
© SAP 2007 / Page 26

CENVAT Credit
What items can be considered for taking Credit?
 CENVAT paid on the CAPITAL GOODS used in the manufacturing

process
 Capital goods should be used in manufacturing process and

not in any office
 Service tax and education cess paid on any input service used in
relation to manufacturing process
 When capital or inputs are removed as such (i.e. without using),

only the credit availed originally needs to be paid
 Inputs are eligible for Cenvat credit even if the intermediate products
are exempt
© SAP 2007 / Page 27

CENVAT Credit
When the Credit may be taken?
 Cenvat credit in respect of inputs may be taken immediately on

receipt of the inputs
 Input includes all goods, except diesel and petrol / gasoline,

used in relation to the manufacturing whether directly or
indirectly and whether contained in the final product or not
 Credit in respect of inputs shall be available whether such

inputs are lying in stock or used in the manufacturing process
© SAP 2007 / Page 28

CENVAT Credit
 Cenvat credit in respect of capital goods may be taken for an

amount not exceeding 50 % of the duty paid on such capital
goods in the year in which such goods are received and balance
in any subsequent financial year
 Cenvat credit in respect of the capital goods shall be allowed

even if such goods have been acquired on lease, hire
purchase or loan agreement
 No Cenvat credit shall be allowed on any input or capital good

which is used in the manufacture of exempted goods or in
providing exempted services
© SAP 2007 / Page 29

CENVAT Credit
 No time limit for availing CENVAT credit
 Unutilized Cenvat credit at the year end should be shown

under “Loans & Advances” in Balance Sheet
 Cenvat credit balance should be reviewed at the year end

and any non-utilizable portion should be added to purchase
cost
 SSI units ( turnover below 10 million INR) cannot avail

Cenvat credit on inputs but can avail Cenvat credit on Capital
goods. But this credit can be utilized only when SSI unit
becomes liable to pay excise.
© SAP 2007 / Page 30

CENVAT Credit
How the CENVAT credit may be Utilized?
Cenvat credit may be utilized towards payment of –
 Excise duty on any final product
 An amount equal to Cenvat credit taken on inputs if such

inputs
are removed as such
 An amount equal to Cenvat credit taken on capital goods if

such capital goods are removed as such
 Service tax on any output service
© SAP 2007 / Page 31

CENVAT Credit
How the CENVAT credit may be Utilized?
 Towards payment of Education cess on excisable goods or on

taxable services
 Where any input or input service is used in final product which

is cleared for export, the Cenvat credit in respect of input or
input service so used shall be utilized towards payment of
excise duty on domestic consumption or towards payment of
service tax on output service
 Where the adjustment mentioned above is not possible, the

manufacturer shall be allowed a refund of such an amount
© SAP 2007 / Page 32

CENVAT Availment & Utilization Overview
SALES EXCISE
ON-LINE TRANSACTIONS INVOICE PROCESS
GOODS
RECEIPT
CENVAT on hold
Debit CENVAT
for Cap Goods
on-hold A/c DESPATCH
Credit ED Payable A/c
VENDOR EXCISE
INVOICE PROCESS
Debit CENVAT A/c Excise Duty
CENVAT Account
Payable A/C
Credit CENVAT A/c
Debit ED Payable A/c

MONTHLY TRANSACTIONS (Consolidated Entry)
DEPOSIT SELECT
FUNDS REGISTER Excise duty
IN PLA Utilization
ACCOUNT PLA A/C Transaction
Debit Credit PLA A/c
PLA Account
© SAP 2007 / Page 33

Contents
India Localization
3. Utilization

© SAP 2007 / Page 34
Logistics Process Overview
Domestic Vendor Import Vendor Domestic Vendor
Subcontractor
Plant X Plant Y
Overseas Depot A Depot B

Customer
Domestic Customer
© SAP 2007 / Page 35

Excise Procurement Scenarios
 Domestic Procurement Process
 Subcontracting Process
 Stock Transport Process
 Imports Purchase
 Service Procurement Process
© SAP 2007 / Page 36

Typical Procurement Cycle
Payment Processing Requirement Determination
Invoice Verification Vendor Selection
Goods Receipt Order Processing
Purchase Order Monitoring
© SAP 2007 / Page 37

© SAP 2007 / Page 38

Domestic Procurement of Raw Materials
Vendor Delivery Goods Receipt Excise Invoice Vendor Invoice
 Vendor liable to pay  GR at Factory Gate  Excise Invoice Post  Liability to Vendor
excise to Govt.
 Excise Invoice  CENVAT – Part II - Price
 Vendor Excise Invoice Capture Register entry - Excise
accompanies Goods - Other Taxes
 Excise Invoice Post - Other Costs
(Optional)
 Excise Stock – Part I

Register entry
© SAP 2007 / Page 39

Domestic Procurement of Raw Materials
Accounting Entries
 GR Posting
Inventory Account Dr.
GR/IR Clearing Account Cr.
 Excise Invoice Posting
Excise Duty A/C Dr.
CENVAT Clearing Account Cr.
CENVAT Onhold A/C ( For Capital Goods) Dr.
 Vendor Invoice Posting
CENVAT Clearing A/C Dr.
GR/IR Clearing A/C Dr.
Accounts Payable Cr.
© SAP 2007 / Page 40

Procurement: Cancellation of CENVAT Credit
 It is possible to cancel the CENVAT credit after it has been availed.
 In the first step, the material document has to be cancelled.
 This is followed by canceling the CENVAT credit.
© SAP 2007 / Page 41

Procurement: Vendor Returns
 Vendor returns possible by creating an excise invoice for Other

movements
 Avail the credit for the materials/goods that are received.
 Create an excise invoice for the materials/goods returned to

the vendor and pay excise duty by posting this invoice.
© SAP 2007 / Page 42

Procurement: Additional Adjustments
 A supplementary excise invoice for extra excise duty sent by a

vendor can be captured and credit availed
 CENVAT credit for Materials destroyed, lost, etc. can be written off
 Surrender of credit for the excisable materials which are used for
non-productive purposes
 All these are taken care by Excise JV Transaction
© SAP 2007 / Page 43

Procurement: Adjustments & Reversals
Highlights
C E N V A T A d ju s tm e n t
S c rap
N o n -p r o d u c tio n u s e
A d d i t io n a l E x c is e P a id b y V e n d o r
D e p o s it in to P L A th r o u g h T R 6
C a n c e l E x c is e In v o ic e
Flexibility
Flexibility for
for 100%
100% Compliance
Compliance
W ith R e fe r e n c e to E x te r n a l D o c u m e n t
Management of CENVAT Credit for Capital Goods

CENVAT Reversals and Adjustments
One-Step Reversal of Excise Invoice
© SAP 2007 / Page 44
© SAP 2007 / Page 45

Subcontracting Process
Input
Challan
Sub contractor
FACTORY
Output
© SAP 2007 / Page 46

A. With out Payment of Duty: Removal of Materials from Factory
Subcon Transfer Subcon Challan

Order Posting Challan Printing
Note: Print Immediate

Option to be used
© SAP 2007 / Page 47

A. With out Payment of Duty : Receipt of materials from subcontractor
Subcon challan Complete

Goods Receipt
Reconciliation Challan
Note: Challans on which quantities are

not completely returned have the status
assigned
© SAP 2007 / Page 48

A. With out Payment of Duty : Reversals
Reverse Credit
Run Listing Get Material Qty not
availed on Input
Transaction returned on Challan
Material
Note: Listing Transaction gives list of

Challans due for Reversal
© SAP 2007 / Page 49

A. With out Payment of Duty : Recredit
Get Material Qty

Run Listing Recredit
subsequently
Transaction Reversed Credit
returned on Challan
Note: Listing Transaction gives list of

Challans due for Recredit
© SAP 2007 / Page 50

B. Under Full Payment of Duty : Transfer Posting of Input Material to Subcon
Excise Excise
Subcon Transfer
Invoice Invoice
Order Posting
Creation Posting
Note: Excise Invoice

created and Posted
under other Movements
© SAP 2007 / Page 51

B. Under Full Payment of Duty : Receipt of Material from Subcon
Excise Excise
Invoice
Goods Receipt Invoice Invoice
Verification
Capture Post
© SAP 2007 / Page 52

© SAP 2007 / Page 53

Stock Transport Process
Supplying Plant Goods Receipt –

Excise Invoice
Delivery Receiving Plant
 Plant liable to pay  GR at Plant Gate  Excise Invoice Post
excise to Govt.
 Excise Invoice  CENVAT – Part II
 Excise Invoice Capture Register entry
accompanies Goods
 Excise Invoice Post
(Optional)

Register entry
© SAP 2007 / Page 54

Stock Transport Process
FEATURES
 Applicable for Plants in different registration Ids
 Assessable value in excise master used for duty computation
 EI capture in receiving plant w.r.t
- STO
- GR
 Excise Values copied from supplying plant invoice during EI capture
Delivery through MM Excise Invoice –

No Inter Plant Billing
Stock Transfer Other Movements
© SAP 2007 / Page 55

© SAP 2007 / Page 56

Imports Purchase
Goods Receipt &

Imports PO Commercial Invoice Invoice Verification
Excise Invoicing
 Vendor Outside India  Liability to Customs in  GR at Factory Gate  Vendor Invoicing
India
 Duties to be paid to  Excise Invoice - Price
Customs  CD & CVD Capture - Other Costs
 Credit can be claimed  Excise Invoice Post

on CVD

Register entry
 CENVAT – Part 2
Register
Imports Purchase
Accounting Entries
 Commercial Invoice Posting
Customs Clearing Dr.
Customs Payable (Commissioner) Cr.
 GR Posting
Inventory Account Dr.
GR/IR Clearing Account Cr.
 Excise Invoice Posting
Excise Duty A/C Dr.
Customs Clearing Account Cr.
 Vendor Invoice Posting
GR/IR Clearing A/C Dr.
Accounts Payable (Vendor) Cr.
© SAP 2007 / Page 58

© SAP 2007 / Page 59

Service Procurement
Service Entry &

Service PO Invoice Verification
Acceptance
 PO for Services  Additional Detailing of  Vendor Invoicing

Individual Services
 Service Tax, Ecess Performed  Inclusive of Service
and SECESS Tax
 Additional Control of
 Service Provider liable acceptance
to Pay ST to Govt.
© SAP 2007 / Page 60

Service Procurement
Vendor Payment FI - JV Utilization
 Payment Inclusive of  Transfer to Service  Utilization Service Tax

Service Tax Tax availed accounts availed against
Service Tax Payable
 Credit Taken on
availed accounts
© SAP 2007 / Page 61

Service Procurement
Accounting Entries
 Accounting Entry after Vendor Invoice Verification
Accounts Payable (Vendor) Cr.
GR/IR Clearing Account Dr.
Service Tax Receivable Account Dr.
Education Cess on Service Tax Receivable Account Dr.
Sec.Education Cess on Service Tax Receivable Account Dr.
 FI-JV after Vendor Payment to avail Service Tax Credit
Service Tax Availed Account Dr.
Education Cess on Service Tax Availed Account Dr.
Sec.Education Cess on Service Tax Availed Account Dr.
Service Tax Receivable Account Cr.

Education Cess on Service Tax Receivable Account Cr.
Sec.Education Cess on Service Tax Receivable Account Cr
© SAP 2007 / Page 62

Excise Sales Overview
Removal of Goods
From Factory From Depot
Full
Full Compliance
Compliance across
across the
the
Distribution
Distribution Process
Process
© SAP 2008 / Page 63

Excise Sales Scenarios
 Sale from Factory
 Transfers to Depot
 Sale from Depot
 Export Sale
© SAP 2007 / Page 64

 Sale from Depot
 Export Sale
© SAP 2007 / Page 65

Sale from Factory
Supplying Plant
Excise Invoice
Price: 1000
Dispatch
Qty : 10 PC
Duty 16%
+ 160
Debit:
Rs. 160
Excise
Duty
Payable
A/C
Fortnightly utilization
CENVAT/Part II Register
PLA Register
© SAP 2007 / Page 66
Sale from Factory
 No CIN related updates

Delivery
 Update Registers and batch utilization

Goods Issue
 ED Payable
 Utilization
Excise Invoice
© SAP 2007 / Page 67

Sale from Factory
Separate Commercial and Excise Invoice
Printing Commercia
Proforma Excise
Sales Order Delivery Excise l
Invoice Invoice
Invoice Invoice
 Posting to Excise duty payable account

 Posting to CENVAT accounts for Utilization
© SAP 2007 / Page 68

Sale from Factory
Single Commercial and Excise Invoice
Commercia Printing
Excise
Sales Order Delivery l Excise
Invoice
Invoice Invoice
 Posting to Excise duty payable account

 Posting to CENVAT accounts for Utilization
© SAP 2007 / Page 69

Sale from Factory
Excise Document Flow
Excise
Delivery Billing Invoice
Sales Order Ship to: Bill to: 2300 Sold to :
Sold to : 2300 2300 Material: 2300
Material: 400 Material: 400 Material:
Quantity: 5 400 Quantity: 5 400
Quantity: 5 Quantity: 5
© SAP 2007 / Page 70

Sale from Factory
Excise Invoice Features
 Excise invoice created automatically in background

during creation of billing document
 Feature made optional and triggered based on

customization
settings
 Excise group and Series group automatically

determined based on customization
 Provision to print excise invoice immediately after

automatic
creation of excise invoice
© SAP 2007 / Page 71

Sale from Factory
Utilization Due List
 Listing of all billing documents due for utilization

provided
 Also includes ability to view,
- Account balances
- Total duty amount needed to utilize the displayed billing
documents
- Deficit, if any
© SAP 2007 / Page 72

Sale from Factory
Batch Utilization
 Excise Invoices can be created in Batches
 Provision of additional fields in selection screen like,
- Billing Date
- SD Document Category
- Billing Document Category
© SAP 2007 / Page 73

 Sale from Depot
 Export Sale
© SAP 2007 / Page 74

Transfers to Depot
Stock Replishme Printing

Proforma Excise
Transfer nt Excise
Invoice Invoice
Order Delivery Invoice
© SAP 2007 / Page 75

Transfers to Depot
Depot Excise Requirements
 Distribution of Excisable goods at depot involves

maintenance of RG23D registers.
 Incoming Excise Invoice reference is required to be

mentioned on depot Sales Invoice
 At the Factory gate, Excise is paid on the declared value

of the goods to be sold at depot.
 Depot should charge from the customer the same Excise

duty
from that was paid at factory/source.
 In case of price escalations at depot the difference needs

to be
paid at the factory.
© SAP 2007 / Page 76
Transfers to Depot
Depot Receipts for Stock Transfer
 GR made against the delivery note / stock transfer

 Excise invoice details directly copied from factory invoice
 Loss in transit taken care of
 Ship-from can be captured at Excise Invoice for depot.
 Multiple P.O.s can be combined in one receipt
 Folio number generation can be switched on through
customization
 Item details are proposed for stock returns
© SAP 2007 / Page 77

Transfers to Depot
Depot Receipts for Direct Purchases
 GR made against the PO

 Individual excise invoice details copied from PO item or
can be entered at item level
 For imports CVD can be marked
 Ship-from can be captured at Excise Invoice for depot.
 Multiple P.O.s can be combined in one receipt
 Folio number generated based on customization
© SAP 2007 / Page 78

 Sale from Depot
 Export Sale
© SAP 2007 / Page 79

Sale from Depot
Excise Commercia
Delivery &
Sales Order Invoice l
PGI
Capture Invoice
 Selling Price 1000 , Quantity 10, ED @ 16% = 160

 RG23D – Reduce quantity by 10, Debit 160
© SAP 2007 / Page 80

Sale from Depot
Depot Sales
 Separate steps for Excise Invoice create and verification

 Option for Single step creation and verification through
customization
 Option to cancel excise invoice before verification

 Provision to create depot invoice before post goods issue based
on delivery document
 Option to restrict incoming excise invoice selection from the

same source of supply
 User-exits for unit conversion and Excise / Series group

determination
© SAP 2007 / Page 81

Sale from Depot
Depot Sales: A-Certificate Selection
 Pick up the A-certificates relevant for the current removal
 A-certificate can be selected along with the corresponding

excise invoice
 Multiple A-certificates can be picked up
 Splitting of the A-certificate amount across removals not

allowed
 Separate RG23D entries in the same folio for better tracking
 Value gets added up and cumulative excise proposed during

Billing
© SAP 2007 / Page 82

RG23D Register
Depot Text
Receipt update the quantity and the value in RG23D
Receipt in  The Text
 reference / mother invoice details in terms of batches etc captured
Material – Text
 Reference to the mother invoice is made

depot  Update goods issue quantity
sale from
Movement /
 Excise amount cannot differ from that paid at the first point of
goods movement
© SAP 2007 / Page 83

Depot Operations
 Comprehensive solution for Depot functionality

 RG23D Maintenance and Printing functionality is available
 Provision to receive Internal as well as External Excise Invoice
at Depot.
 Close integration with MM and SD processes
© SAP 2007 / Page 84

 Sale from Depot
 Export Sale
© SAP 2007 / Page 85

Export Sale
Invoice  Price 1000, Quantity 10, Duty@ 16% = 160

Plant Excise
Supplying
 Update Registers
under bond
If Exported
 Debit ED payable a/c 160

under bond  Update Cenvat Part II register and PLA register
If not exported  Fortnightly utilization
© SAP 2007 / Page 86

Export Sale
Excise Bonding Document Flow
Excise Bond Capture

Delivery Invoice Register Licence
Billing
Ship to: Sold to : Sold to : Sold to :
Sales Order Bill to: 2300
2300 2300 2300 2300
Sold to : 2300 Material:
Material: Material: Material: Material:
Material: 400 400
400 400 400 400
Quantity: 5 Quantity: 5
Quantity: 5 Quantity: 5 Quantity: 5 Quantity: 5
 Bonds / LOUT / Licence as applicable in the Business process
© SAP 2007 / Page 87

Export Sale
Deemed Export Sales
 Sale is marked as Deemed
 Excise status of customer gives complete concession
 No amount utilization
 Use of local excise invoice range based on series group
© SAP 2007 / Page 88

Contents
India Localization
3. Utilization

© SAP 2007 / Page 89
Utilization
Monthly Utilization
 Facilitates payment of duty accumulated for each month
 Features include
 Display of pending invoices
 Option for Posting date
 Posting to a Business area
 Selection based on a range of dates
 Optionally, Selection based on a range of invoices
 Utilization strategy based on customization settings
 Posting of TR6 Challan entry to PLA account
© SAP 2007 / Page 90

Utilization
Utilization Due List
 Feature to view list of all billing documents due for utilization
 Other features include ability to view

- Account balances
- Total duty amount needed to utilize the displayed billing
documents
- Deficit, if any
© SAP 2007 / Page 91

TR6 Challan Posting with PLA Register
Updation
House Bank Own
Prepare Cheque & TR 6 Chllan

Post Accounting document in FI
to post the payment
Excise PLA hold A/c Dr
House Bank A/c Cr
Banker Transfer the
funds toExcise
Authorities and
Acknowledge the Create Excise JV - PLA updation
TR 6 Chllan TR6 Challan (J1IH )
Enter the Accounting Doct. or

TR6 Challan No., FY,
Plant, Excise Group, etc.,
Allocate the TR6 Challan Amount

as per TR6C i.e. BED / AED / SED
Update the PLA Register &

Accounting Document Posted
EXCISE PLA A/c Dr
Excise PLA hold A/c Cr
PLA Register for Value
© SAP 2007 / Page 92

Utilization of CENVAT
Input Output
Debit Balance Credit Balance
Perform the Excise

Excise duty payable on
Utilization
Customer Invoice
Input Credit from Vendor

Material Purchase
Input Credit from Vendor

Capital Purchase (50%) Total Available Total Excise duty
RG23C Balances RG23A payable
PLA Balance
Is the Balance
Sufficient
TR6 Challan Payment

NO Yes
Apportion the payable amount

between the
Registers
RG23A, RG23C & PLA
Post the Utilization

RG23A & C Part II Accounting document generated
PLA Register & Registers updated
based on Amount apportionment
© SAP 2007 / Page 93

CENVAT Availment & Utilization Overview
SALES EXCISE
ON-LINE TRANSACTIONS INVOICE PROCESS
GOODS
RECEIPT
CENVAT on hold
Debit CENVAT
for Cap Goods
on-hold A/c DESPATCH
Credit ED Payable A/c
VENDOR EXCISE
INVOICE PROCESS
Debit CENVAT A/c Excise Duty
CENVAT Account
Payable A/C
Credit CENVAT A/c
Debit ED Payable A/c

MONTHLY TRANSACTIONS (Consolidated Entry)
DEPOSIT SELECT
FUNDS REGISTER Excise duty
IN PLA Utilization
ACCOUNT PLA A/C Transaction
Debit Credit PLA A/c
PLA Account
© SAP 2007 / Page 94

Contents
India Localization
3. Utilization

© SAP 2007 / Page 95
EWT: TDS Overview
Vendor Vendor
Income tax office
Deduct Tax Issue

from Vendor Certificates
Pay Tax to
Government
Bank
© SAP 2007 / Page 96

EWT: TDS (Tax Deducted at Source)
• Tax is deducted at source from all payments/provisions which are

hit by the TDS provisions of the Act
• Some of the above payments/provisions pertain to services that

come within the scope of Tax Deducted at Source (‘TDS’) under the
Indian Income-tax Act, 1961 (‘Act’).
• Tax is not deducted from payment for goods
• TDS is required to be deducted at the time of payment or invoice

posting whichever is earlier.
• The taxes which are so deducted, will then have to be deposited to

the credit of the Indian Government on or before 7 th of next every
month.
• The company will have to issue TDS certificates to the vendors for
the tax deducted and also file with the tax office, Quarterly & Annual
Return‘ of the total taxes deducted during the year under the
various sections of the Act.
© SAP 2007 / Page 97
EWT: Vendor TDS
Services
Mumbai plant
Invoice
Vendor Certificate
Vendor
Payment
ABC Ltd
Advance
Payment/Challan
Quarterly
Returns
Income Tax
BANK Office
© SAP 2007 / Page 98
EWT: Vendor Transactions
Down
Payment
Reverse Credit
Invoice
Invoice Memo
Clear DP
Cash Journal
Postings
Challan
TDS JV
Update
Logistics
Invoice Bank
Challan
Reprint Print Cancel

Certificate Certificate Certificate
Quarterly
Returns
© SAP 2007 / Page 99
EWT: Customer Interest TDS
Mumbai plant
Advance
Customer
Certificate
Interest Payment
ABC Ltd
Payment/Challan
Quarterly Returns
Income Tax
BANK
Office
© SAP 2007 / Page 100

EWT: Provisions and Adjustments
• TDS computed on entries in provisional liability accounts (GR/IR

and SR/IR Accounts)
• TDS is computed at each period end on uncleared entries

remaining in the GR/IR and SR/IR accounts
• GR/IR and SR/IR accounts relevant for computing TDS on

provisions identified separately
• GL accounts to which the provisional TDS is posted identified

and document Type used for provisional TDS postings is
separately identified
• JV facility available for carrying out changes to TDS relevant

postings
• Accounts to which losses (non-recoverable TDS) is to be posted

and the document type to be used for TDS adjustment postings
is identified separately
© SAP 2007 / Page 101

EWT Activities
Daily Activities Periodic Activities
TDS on Challan
Provisions Update
Posting On payment
Where required due date
TDS
Certificate
Printing,
Reprinting and
Cancellation
Posting on appropriate
Invoice, Credit
due dates
Memo, Down
Payment, etc
Tax
Adjustment
JV Quarterly
Where required Return
© SAP 2007 / Page 102

Thank you!
© SAP 2007 / Page 103

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Contents

1. India Legal Requirements Overview

2. Logistics Process Overview ( Procurement & Sales )

4. Extended Withholding Tax

1. India Legal Requirements Overview

2. Logistics Process Overview ( Procurement & Sales )

4. Extended Withholding Tax

 VAT / LST / CST

© SAP 2007 / Page 3

 Central Value Added Tax (Excise)

 VAT (LST) / Central Sales Tax

© SAP 2007 / Page 4

 Tax on manufacturing or production of goods in India

 Goods having 4M Characteristics are covered under this

 Every legal entity that manufactures or produces excisable goods

 Materials are classified under various tariff headings (Chapter Ids).

 Goods consumed in-house also liable for payment of duty

© SAP 2007 / Page 5

What is the basis of charge?

 Exemption to pay duty on intermediate products in the

 Excise duty not payable on goods manufactured for

 Goods manufactured in factory for use within the factory

Types of Excise Duty

 Basic Excise Duty (BED)

 Additional Excise Duty (AED)

 Special Excise Duty (SED)

 Education Cess on Excise

 Secondary and Higher education Cess

© SAP 2007 / Page 7

 Specific duty – It is calculated on the basis of certain unit,

 Ad valorem duty – It is based on the value of the goods

© SAP 2007 / Page 8

Duty Calculation Considerations

 Transaction value is the price actually paid or payable for the

 Any additional consideration flowing directly or indirectly to

 Cost of production is not relevant for the purpose of

 Assessable value may be lower than the cost price of the

 Goods should be assessed in the form in which they are

© SAP 2007 / Page 9

Vendor Plant Customer

© SAP 2007 / Page 10

 Duty to be paid by 5th of the following month

 Duty deposited in bank using TR 6 challan and credited to PLA

 Duty is paid by debiting PLA

© SAP 2007 / Page 11

Statutory Excise Reporting

 Excise Monthly Returns

 Running Bond Registers

© SAP 2007 / Page 12

 VAT / LST / CST

© SAP 2007 / Page 13

How is Sales tax treated in India ?

 This is a tax on sale

 VAT / LST is charged on sales within the state

 Central Sales Tax (CST) is charged on inter-state sales

 Any sale would be charged to either VAT or CST but only to

 Every person carrying on any business is required to charge

 VAT / CST shall be charged at the rate in force as on the date

© SAP 2007 / Page 14

Tax Impact under VAT System

Sale price 135.00 Sale price 162.00

© SAP 2007 / Page 15

Central – Value Added Tax State – Value Added Tax