GST- Goods and Services TaxSAP – SOLUTION APPROACH

INTRODUCTION:

The purpose of this document is to provide an overview of the solution approach given by SAP to implement the Goods and services tax which will be applicable in India starting 01-Jul-17.

GST at a Glance:

What is GST ? - GST is the newly proposed form of destination based taxation. GST is one indirect tax for the whole nation, which will make India one unified common market. Applies to whole of India including J&K.

MODEL OF GST IN INDIA:

GST Model in India is based on a dual structure model.

1. Central component – CGST2. State component- SGST3. Integrated component – IGST ( applicable only for Inter state /Imports)

TAX RATES IN GST:

The proposed tax rates are as below

Rate of essential items including food grains 0%

Rate for common use items or the items for mass consumption 5%

Lower standard rate for goods and services 12%

Higher standard rate for goods and services 18%

Rate for demerit/ luxury goods 28%

Rate for goods that are exempt for GST 0%

TAXES SUBSUMED BY GST:

The following central and state level taxes existing will be subsumed by GST.

Central:

1) Central Excise Duty2) Service Tax3) Additional EDs4) CVD and Special Additional Duty on imports5) Surcharge and Cesses

State:

1) VAT2) Luxury Tax3) Entry Tax4) Entertainment Tax5) Taxes on lottery / gambling6) States cesses / surcharge

LEGAL REQUIREMENT:

The legal requirement for any company is to have a GST registration number in each state where the company has a business. There is no monetary limit on the value done in each state. The GST registration is a PAN based number.

SOLUTION APPROACH IN SAP FOR GST:

The solution given by SAP for GST is based on business place, Tax procedure TAXINN, related MM and SD pricing procedures and condition records, related tax codes and account assignments for the tax codes. In the document, solution approach has been documented for an Indian company with 2 plants in 2 different states – one Maharshtra and one in Andhra.

The company code details are I100 – New Life sciences ltd.

Plant 1 – 1000 – Pune - Maharashtra

Plant 2 – 1100 – Hyderabad - Andhra

LIST OF OSS NOTES APPLIED

SL NO

OSS NUMBER PARTICULARS

1 2385575 Master data note for ERP2 2407980 Tax Configuration Note 3 2415115 GST India - Changes to Transaction data- DDIC 4 2376723 GST IN: BAdI definition for screen enhancement in Enjoy transactions of FI and MM5 2410105 GST India - Sales related changes for India GST for sales order creation and Invoice posting 6 2417506 GST India – Utilities (Utility Objects for GST)7 2416018 GST India: Stock Transfer8 2426581 GST India: Tax calculation based on vendor region and vendor GST classification9 2378678 GST IN: BAdI implementation in Enjoy transactions of FI and MM

10 2419214 GST IN: Changes to MIRO Invoice item level screen11 2419215 GST IN: Changes for FI Invoice item level screen12 2405502 GST India - Changes to Master data- DDIC activities13 2410917 GST IN: Line item wise tax calculation for sales invoices14 2428495 GST India: Corrections to note 241601815 2405801 GST FAQ Notes

The basic notes for GST related to business place/GST number and other master data related notes have been implemented

CONFIGURATION SET UP FOR GST

ORGANIZATION STRUCTURE FOR GST

The standard solution given by SAP is based on the concept of BUSINESS PLACE. The GST registration number is assigned to this business place. If a company has multiple plants/sales offices etc in one state from where the supply of goods or services is made, then it is sufficient if it has one business place and have all the plants/sales offices assigned to that. Every logistics related transaction originating in the plant/sales office – will have the GSTN in the FI document because these are assigned to that business place, which in turn has the GST registration number at the tax line item level.

Since the purchases and sales have the corresponding tax amount tracked at the GST registration number level, the GST amount can be tracked for each and every business place by configuring separate GL accounts for each business place. This makes the reporting easy for each business place.

Definition of business place : The path for configuring business place is

SPRO > CROSS APPLICATION COMPONENETS > GENERAL APPLICATION FUNCTIONS > BUSINESS PLACE

ASSIGNMENT OF BUSINESS PLACE TO PLANT

TAX PROCEDURE:

The recommended tax procedure is TAXINN for GST. The tax procedure will contain the conditions relevant for GST .This is a condition type based tax calculation procedure. If the earlier TAXINJ is used, then migration to TAXINN is a prerequisite for the GST solution.

TAX CODE CONFIGURATION:

The tax codes are configured using transaction code FTXP. The following are the tax codes configured for GST. Both Input and Output tax codes need to be configured. The rates of the tax codes can be maintained only in the relevant condition record or pricing procedure in MM/SD respectively.

Input Taxes –

I0 Only 0% GST

I1 0% Input for Essential goods

I2 5% Input for common goods and Services

I3 12% Input for lower standard rate

I4 18% Input for Higher standard rate

I5 28% Input for Luxury items

Output Taxes –

O1 0% Output for Essential goods

O2 5% Output for common goods and Services

O3 12% Output for lower standard rate

O4 18% Output for Higher standard rate

O5 28% Output for Luxury items

In order to use the Tax codes in direct FI posting,access sequence MWST should be used in the condition type, so that the tax rate can be maintained.

ACCOUNT ASSIGNMENT :

The account assignment for the tax codes need to be done in OB40 and also in table J_1IT030K_V.

OB40:Transaction Key JIC:

Table J_1IT030K_V

CONFIGURATION OF CONDITION TYPES IN MM

SPRO->SAP Reference IMG->Materials Management->Purchasing->Conditions->Define Price Determination Process->Define Condition Types

The condition types are used to represent pricing elements such as prices, discounts, surcharges, taxes, or delivery costs in the SAP System. We have defined new condition type for new GST tax structure which are as below

1. Central GST – This will be levied for intra-state purchase2. State GST- This will be levied for intra-state purchase3. Inter-State/Import GST - This will be levied for inter-state/Import purchase

Central GST condition type

State GST condition type

Integrated /Import GST

GST Non-Deductible condition type: - These conditions will not undergo for Cenvat. These condition type are loaded directly on inventory.

Central GST Non-Deductible

State GST Non-Deductible

Integrated/Import GST Non-Deductible

MM ACCESS SEQUENCE

An access sequence is a search strategy with the aid of which the SAP System searches for valid condition records of a certain condition type.

Access sequence JGSI is created with multiple condition table as shown below with their key fields.

ACCOUNT DETRMINATION IN OBYC and OB40

Created a transaction event key ZFR for import and assigned the GL of interstate/import. Additionally, created multiple account key for Central, State and Integrated GST which are as below.

Integrated/Import GST account keys for pricing

Central GST account key

State GST account key

Integrated/Import GST

SCENARIOS IN MM

1. INTRA-STATE PURCHASE: - This kind of purchase basically takes place when the material is purchase within state. There are two different taxes involved for this kind of purchase i.e. Central GST and State GST.

2. INTER-STATE PURCHASE: This kind of purchase basically takes place when the material is purchase among two different states. There is only one tax applicable i.e. Integrated GST.

3. IMPORT PURCHASE: - The name itself tells the material is procured from other country. In this process once the material is received at India port it needs to be cleared for custom duties to release the material from customs.

4. STOCK TRANSFER ORDER WITH GST BILLING: - In this stock transfer process the material is transferred from one plant to other plant within a company code. Once the goods are delivered from supplying plant a Billing is generated at the supplying plant.

GST Incoming invoice booking is in development mode.

5. SERVICE PROCUREMENT: - In this kind of process we avail services from vendor.

6. SUBCONTRACTING PURCHASEThe existing Subcontracting process will remains the same. It is mentioned in SAP solution proposal they may develop new transactions (similar to J1IF01-Creation of Challan 57F4 and J1IFQ- Reconciliation of Challan) for GST. Once this is finalized will complete subcontracting process.

CONFIGURATION OF PRICING PROCEDURE IN SD

ACCESS SEQUENCE IN SD

SCENARIOS IN SD