Topics to be covered
Introduction
CENVAT Concept
CENVAT Rules and Terminologies
India Localization in SAP R/3
CENVAT and Sales Process.
India Localization Configurations in SD
Q&A
Conclusion
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What is CENVAT!?
In India, excise duty is a tax on the manufacture of goods that is levied
when goods leave the place of manufacture. Manufacturers can set off the
duty paid on input materials against their output duty, a procedure known
as CENTRAL VALUE ADDED TAX (CENVAT).
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CENVAT!?
Excise duty is a duty, levied on production or manufacture of goods. It is a
tax levied on manufacture of goods and the liability to pay excise duty
arises immediately on manufacture or production of goods
Once manufacture of goods is complete, excise duty is payable, whether
the goods are sold or self-consumed. Excise duty does not depend on the
end use of the goods.
Excise Duty is a tax on manufacture of goods but for the sake of
administrative convenience, it is collected only on removable of goods from
the factory.
CENVAT Credit
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CENVAT Credit
Rs.100 ED: Rs.10 Rs.500 ED:Rs.50
Raw Material
A
FG-C
Raw Material
B
Rs.50 ED: Rs.5 Input Tax credit availed: Rs.15
Tax liability = OTL CENVAT credit
Rs.35 = Rs.50 Rs 15
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CENVAT!?
Types of excise duties
Under the excise laws, the following are the various types of duties, which are levied: -
Basic duty: This is the basic duty levied under the Central Excise Act.
Special excise duty: This special duty is levied under special circumstances where
the levy of such additional duty is justifiable or found necessary to protect other
industries.
Additional Duty in lieu of Sales Tax : It can be charged on all goods by the central
government to counter balance exemptions from sales tax granted by various State
Governments to the detriment of industries in other States.
Additional Duty on specified items under the Act : If the Tariff Commission set up
by law recommends that in order to protect the interests of industry, the Central
Government may levy additional duties at the rate recommended on specified goods.
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CENVAT!?
WHEN AND HOW MUCH CREDIT CAN BE TAKEN
The Cenvat Credit in respect of inputs may be taken immediately on receipt of the
inputs.
The Cenvat credit in respect of Capital Goods received in a factory at any point of
time in a given financial year shall be taken only for an amount not exceeding fifty
percent of the duty paid on such capital goods in the same financial year and the
balance of Cenvat Credit may be taken in any subsequent financial year.
The Cenvat credit shall be allowed even if any inputs or capital goods as such or
after being partially processed are sent to a job worker for further processing,
testing, repair etc. and it is established from the records that the goods are received
back in the factory within180 days of their being sent to a job worker.
Where any inputs are used in the final products which are cleared for export, the
Cenvat Credit in respect of the inputs so used shall be allowed to be utilised towards
payment of duty on any final product cleared for home consumption and where for
any reason such adjustment is not possible, the manufacture shall be allowed refund
of such amount.
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CENVAT
Rule 1. Short title, extent and commencement.-
Rule 2. Definitions.-
Act capital goods Customs Tariff Act exempted goods final products first stage
dealer an importer input manufacturer or producer
Rule 3. CENVAT credit.-
Rule 4. Conditions for allowing CENVAT credit.-
Rule 5. Refund of CENVAT credit.-
Rule 6. Obligation of manufacturer of dutiable and exempted goods.-
Rule 7. Documents and accounts.-
Rule 8. Transfer of CENVAT credit.-
Rule 9. Transitional provision
Rule 10. Special dispensation in respect of inputs manufactured in factories located in
specified areas of North East region and Kutch district of Gujarat.-
Rule 11. Power of Central Government to notify goods for deemed CENVAT credit.-
Rule 12. Recovery of CENVAT credit wrongly taken.-
Rule 13. Confiscation and penalty.-
Rule 14. Supplementary provision
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CENVAT
So far
What is Excise Duty and Types of Excise duties?
What are CENVAT Rules?
What is CENVAT credit?
How and when CENVAT is availed?
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SAP R/3 and CENVAT
CIN Country India Version
India localization (earlier CIN) is no longer add-on component in version SAP 4.7EE
SAP provides following std. tax procedure for country india
Formula based tax procedure TAXINJ
Condition based tax procedure TAXINN
Automatic tax code determination possible for inbound orders
Refer Oss notes 608238 & 607272
CIN data updation directly possible from
Material master
Vendor master
Customer master
Tax/Excise Duty set up for MM & SD
Tax Procedures
Pricing Procedures
CENAVT registers
Transaction Codes
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Tax/Excise Duty set up for MM & SD
Basic Settings
Master Data
Account Determination
Business Transactions
Tools
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Basic Settings
Excise Registration IDs
Company Code Settings
Plant Settings
Excise Groups
Series Groups
Excise Duty Indicators
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Excise Registration IDs
A number assigned to each premises or
location that has registered as a manufacturer
with the excise authorities.
Mention whether AED, SED, CESS
applicable. If blank will not be available for
inputs
Max no. of line
items in outgoing EI
Permits deductible /
non deductible ED
at GR
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Company Code Settings
User can edit
Dr account
during JV
Utilizes from First month for
PLA in JV excise year
Excise invoice
selection
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Plant Settings
Plant defined as Depot
or not
Multiple plants to one
Excise Registration ID
GRs per EI can be set as
below
Multi GR Multi Credit
Multi GR Single credit
Single GR
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Excise Groups
Excise Reg ID linked
to Excise group &
Plant
Depot definition at
Excise Grp & Plant
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Series Groups
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Excise Tax Indicators
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Account Determination
Describe which excise accounts (for excise duty and CENVAT) are to be posted
to for the various transaction types including sub transaction type if any
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During transactions system determines which G/L accounts to post to by
looking at the:
Excise group, Company code & Chart of accounts
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Tax Procedures
SAP provides following std. tax procedure for country India
Formula based tax procedure TAXINJ
Condition based tax procedure TAXINN
Pricing Procedures
Factory sales and Depot Sales
JINFACT, JDEPOT,JSTKTR w.r.t TAXINN -
JFACT, JINDEP, JINSTK w.r.t TAXINJ
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Excise Registers
Excise Laws require you to maintain a number of registers in a specified
format relating to excise duty. They have to be printed out monthly and
shown to the authorities in the event of an audit. The SAP captures this
requirement.
Type of Registers:
RG23A PART I
RG23A PART II
RG23C PART I
RG23C PART II
RG I
RG23D
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Excise Registers
RG23A: Raw Material
The entries pertaining to quantity will go into RG 23 Part I and that of
duty will go into Part II in the appropriate duty column. i.e. Basic
Excise, SED, Additional duty, etc
RG23C: Capital Goods
RG23CI-Part I entry: Excise stock entry at the time of GR (only
quantity)
RG23CII-Part II entry: Credit entry of Capital goods (only value)
RG-I : Finished Goods (only Quantity)
The finished goods (manufactured, sub-contracted or gained) and sales
or stock transfer are entered in the RG I Register
Register RG I is updated after creation of an excise invoice while
dispatching the goods from the factory premises with reference a
commercial invoice or a pro-forma invoice
RG23D: Depot (this indicates both the Quantity and the amount)
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CIN Master - J1ID
Maintain Chapter IDs
Excise Duty Indicators
Determination of Excise Duty
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Excise rate Determination
Get SSI Yes Is the
duty Customer
Rates. SSI?
No Get Ch ID Get Customer
Of the Excise
Get material indicator
Excep Yes Excp rates
duty Maintained? Get plant
rates Excise
indicator
No Get final
Excise
indicator
Get rate
Based on
Ex Ind & CH ID
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CENVAT Availment and Utilization
On-Line Transactions
Goods
Receipt
Credit CENVAT Sales Excise
on-hold A/c CENVAT on hold Despatch
Invoice Process
for Capital goods
Debit ED Payable A/C
Vendor Excise
Invoice Process
Debit CENVAT A/c Excise Duty
CENVAT Account
Credit CENVAT A/c Payable Account
Credit ED Payable A/C
Fortnightly Transactions
Deposit funds in PLA
Select Excise Duty Utilization
Account
Register Transaction
Credit PLA A/c
PLA Account
Debit PLA A/c
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CENVAT Utilization
Payment to be made to Excise Department for the Self Removals for
the last month.
Utilization to be done against the last months incoming excise duties
and CVD.
CENVAT utilization to be done before the 5th of next month.
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SAP Transactions
Activity SAP Transactions
Register Updates J1I5
RG23 A (Part I & II and RG I)
Register Extraction J2I5
Register Printing J2I6
Utilization J2IU
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India Localization: Sales & Distribution
Features: It covers the following
Sales from Factories
Sales from Depots
Stock Transfer
Export Sales
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Factory Process - Materials
In the Process of Manufacturing the Factory uses two kinds of
materials.
Input Material:
Is defined as the one which loses its own identity in the
finished product.
Capital Goods:
Is defined as the one which does NOT lose its own identity in
the finished goods.
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Sales from Factory
J1IEX
Capture EI
Excise Invoice
Supplying Plant Dispatch
J1IIN
Add up to Excise Duty Payable A/c
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Factory Process- Registers
The Factory uses the following Excise Registers
RG23 A - Part I (Captures the material A/c)
RG23 A - Part II ( Captures the Duty A/c)
RG23 C - (Captures Capital Goods Duty A/c)
RG 1 - Is a finished Goods Register
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Factory Process- Registers
RG23 A Part I & Part II
Material is received in the factory as for Quality
inspection or for Direct Input.
Material after Quality Inspection or when used as
Direct Input will go into the RG 23 A Registers.
The entries pertaining to quantity will go into RG 23
Part I and that of duty will go into Part II in the
appropriate duty column. i.e. Basic Excise, SED,
Additional duty, etc.
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Factory Process- Registers
RG23 C
Purchase of Capital Goods by the factory for manufacturing
purpose are only passed in RG23 C Register.
The excise law permits claiming 50% MODVAT Credit in the
current year and 50% in the next year for Capital Goods.
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Factory Process- Registers
RG I
The finished goods(manufactured, sub-contracted or gained) and
sales or stock transfer are entered in the RG I Register.
Register RG I is updated after creation of an excise invoice while
dispatching the goods from the factory premises with reference a
commercial invoice or a pro-forma invoice.
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Depot Process:
The RG 23 D register is used to update the excise entries in case of
Exciseable Depots.
The Excise duty is payable when the goods are sent from the factory.
However, it is not levied again when the goods are sent from the
DEPOT.
However, while taking sale from the DEPOT and if price escalations
happen, then the extra excise is paid using a A certificate. These
details are entered in the RG23 D register and excise recovered from
the customer.
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Sales From Depot
ME21N MIGO J1IJ
J1IIN J1IG
Excise Invoice
Plant Depot Dispatch
Add up to the Excise Duty Payable A/c
Reduce the Quantity
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Depot Process
Transactions can happen through two scenarios:
Scenario1: Depot receives goods from the companys factory
through stock transfer.
Scenario 2: Depot procures goods directly from external sources.
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Depot Process:
For Doing Goods Receipt:
Scenario 1: Stock Transfer
Step1: Do GR (Transaction code:MB01)
Step 2: Excise Invoice Capture at Depot (Transaction Code: J1IG)
Scenario 2:
Step 1: Do GR (Transaction Code: MIGO)
Step 2: Excise Invoice Capture at Depot (Transaction Code: J1IG)
At the time of Sale:
Sales Order Delivery J1IJ (always requires a delivery
number) PGI Billing
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Export Process
In the process of Exports under bond duty is not payable and the
goods move out from the factory against an ARE1.
However, goods not under bond move out of the factory by paying the
duty and refund is separately claimed on showing proof of export I.e.
shipping bill.
In case of Deemed Exports, the same procedure is followed as in
exports, However, the form used is ARE3.
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Important Things to Know
Determination of Excise Rate in Sales and Distribution
Information on Tax Procedure and Conditions
FI Entries related to Excise taking place in SD
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Determination of ED Rate in Sales and Distribution
Settings for the same done through Transaction Code J1ID
Material: Material Chapter ID
Customer Excise Details: Excise Indicator for Customer
Plant Excise Details: Excise Indicator for Plant
Excise Indicator Customer + Excise Indicator Plant = Excise Indicator Final
Material Chapter ID + Excise Indicator Final = Excise Tax Rate
Refer Slide No.27
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FI Entries related to Excise in SD
During the passing of Billing document to Accounting: (VF02, Release to
Accounting)
Dr Customer Rs. 125/-
Cr Sale Rs. 100/-
Cr Excise Duty Recoverable Rs. 16/-
Cr Taxes Rs.9/-
During creation of Excise Invoice: (J1IIN)
Dr Excise Duty Recoverable Rs.16/-
Cr Excise Duty Payable Rs.16/-
During Monthly Utilization: (J2IU)
Dr Excise Duty Payable Rs. 16/-
Cr CENVAT Clearing Rs.16/-
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Information on Tax Procedure and Conditions
Menu Path:
SPRO Financial Accounting Financial Accounting Global Settings Tax on
Sale and Purchase Define Procedure
Procedure: TAXINJ
The various Condition types applicable in SD are:
Excise Conditions: JMOD, JSED, JAED , JCES, etc.
Tax Conditions:JIN1, JIN2,etc.
Note:
Excise Conditions are statistical. Since, these are determined from SD pricing
procedure
Tax conditions are non-statistical. Since, these are determined from TAXINJ
While defining tax codes (using Transaction Code: FTXP), to maintain Excise
Duty (JMOD) as a changeable field, remove statistical check and maintain 100%
for JMOD. After the changes are made, one has to again put the statistical checks
in procedure TAXINJ
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Lets Clarify our Doubts
Copyright 2003 Bristlecone, Inc. | April 14 2004 10
