Country India Version Details

Materials Management (MM)

Purpose
Country Version India (CIN) contains a number of enhancements to standard Materials
Management (MM) functions that allow you to handle local requirements, in particular excise
duty.

Features
The purchasing process has been enhanced to take into account all procedures relating to excise
duty and excise invoices. The CIN enhancements include the following features:

Master Data

The material master has been enhanced so that you can assign each material master record to
the appropriate chapter ID (which controls the excise duty rates).

Similarly, the vendor master records and plant master records have also been enhanced. The
system is therefore able to calculate the correct excise duty for each combination of vendor,
plant, and material.

You have to maintain all of this master data before you can start working with the system.

Day-to-Day Activities

You can enter incoming excise invoices in the SAP System, fully integrated in the following
standard processes:

 External procurement from domestic vendors

 External procurement from foreign vendors
 Subcontracting
 Stock transfer

You enter most incoming excise invoices using the Incoming Excise Invoices transaction, but you
use a different transaction for subcontracting purposes.

When you enter an excise invoice, the system automatically posts the excise duty to the
appropriate CENVAT accounts if the duty is deductible. If not, the system automatically adds the
duty to the material cost.

This transaction also handles entries in Parts I and II of excise registers RG 23A and RG 23C.
When the storeperson posts a goods receipt associated with an excise invoice, the system
creates an entry in Part I of the appropriate register. When the accounts supervisor approves the
excise postings, the system creates an entry in Part II of the register.
The system also allows you to enter multiple goods receipts for a single excise invoice, if
necessary.
Reporting

You can print out all excise registers, including RG 23A and RG 23 C, for submission to the excise
authorities.

Since you can only credit excise duty on capital goods to your CENVAT accounts over a period of
two years, the system also offers you functions for tracking outstanding CENVAT credits and
using these when they mature.

Excise Invoice (Incoming)

Definition

A business document that is issued by your vendor to accompany any goods that it sends you. It
stipulates how much excise duty has been paid on the goods.

Use

In the external procurement process, each delivery that your vendors make is accompanied by an
excise invoice. You have to post these in the system. This document is required as proof of the
excise duty that you have paid, so that you can then offset the duty against the excise duty that
you levy on outputs.

Generally speaking, you have one excise invoice for each goods receipt, but see also Multiple
Goods Receipts for a Single Excise Invoice.

Structure

In the SAP System, the excise invoice consists of header data and line items. The header data
comprises:

 An internal number
 The excise invoice number
 The date of the excise invoice
 The details of the original vendor who generated the excise invoice, if your vendor
purchased the goods from another vendor and was merely selling them on to you

At line item level, the excise invoice lists the materials on the excise invoice, showing the
following information:
 Chapter ID
 Quantity of materials
 Excise duty base amount
 Rates of excise duty
 Amount of duty paid

Material Master (Excise Data)

Definition

The part of the material master record that contains information relating to Indian excise duty.

Use

In conjunction with other data, this data is used to calculate excise duty on various transactions.

To maintain the data, from the SAP Easy Access screen, choose Indirect Taxes ® Master Data ®
Excise Rate Maintenance, and then select the following options described below.

Structure

The excise part of the material master is divided into the following screens:

Chapter IDs

On this screen, you define the chapter IDs and corresponding descriptions as described in the
excise tariff structure. This information is used when you create excise invoices and is also shown
in the various excise registers.

Material and Chapter ID Combination

On this screen, you maintain the excise data relating to your materials. For each material,
specify:

 Chapter ID
 Whether the material can be sent to subcontractors (see Subcontracting)
 The material type

This denotes, for example, whether the material is a raw material, a capital good – this
affects the CENVAT process – or if it is a finished good on which excise has been paid, to
be covered by the Update of RG 1 and Part I Registers.
 Whether you accept more than one goods receipt per excise invoice, and if so, whether
the excise duty should be credited to the CENVAT account immediately a goods receipt is
posted (multiple credit) or not until all the goods receipts have arrived (single credit) (see
Multiple Goods Receipts for a Single Excise Invoice)

This information is valid for a given plant. If the information is valid for all of your plants,
however, leave the Plant field blank.
Material Assessable Value
On this screen, you maintain the net dealer price and the assessable value of all materials that
you send to subcontractors or for any other issue. These values serve as the excise base value
when the materials are issued, and tell the system how much excise duty to reverse from your
CENVAT account.

CENVAT Determination
On this screen, you specify which raw materials are used to produce which finished (or
semifinished) goods. The system uses this information to determine whether it you can claim a
CENVAT credit for a material.
Excise Tax Rate
On this screen, you specify for each chapter ID every possible rate of excise duty that might
apply, so you must take into consideration each permutation of plant and customer; and each
combination of plant and vendor.
You can maintain the basic excise rates in the following forms:
 Ad valorem
 Specific
 As a combination of both

For each rate, specify until which date it applies.

You can also maintain the additional excise duty and special excise duty in ad valorem form,
should any apply. If you need to give these rates as a fixed sum, use the Quantity Based AED
and SED screen.
Additional Excise Rate
On this screen, maintain any cess applicable.
Exceptional Material Excise Rate
On this screen, maintain any exceptions that apply to the excise rates that you have defined.
Exceptions can apply to a single material from all vendors, of to a single material from one
vendor only. If you have an exceptional rate for a customer–material combination, you can
maintain it here as well.
Sales Tax Setoff Percentages
On this screen, maintain the percentage of local sales tax on inputs that you can deduct against
LST on outputs. The setoff amount is deducted from the inventory valuation of the material.
Currently very few states, for example, Maharashtra and Gujarat, participate in this scheme.

Vendor Master (Excise Data)

Definition

The part of the vendor master record that contains information relating to excise duty.

Use

In conjunction with other data, this data is used to calculate excise duty on various transactions.

To maintain the data, from the SAP Easy Access screen, choose Indirect Taxes ® Master Data ®
Excise Rate Maintenance, and then select the following options described below.

Structure

The excise part of the vendor master is divided into the following screens:

Vendor Excise Details

On this screen, you enter your vendors' tax numbers, which are used for various forms of
correspondence and reports:

 Excise registration number (and the range, division, and collectorate in which this is
located)
 Central sales tax (CST) number
 Local sales tax (LST) registration number
 Permanent account number (PAN)

In order for the system to be able to calculate which rate of excise duty to apply on purchases
from the vendor, you must also:
 Assign it a vendor excise duty status (for more information about how this works, see
Determination of Excise Duty Rates)

 Specify what type the vendor is, for example, a manufacturer, first-stage dealer, or
importer for 57AE returns

 If the vendor qualifies as a small-scale industry (SSI), you must also specify:

o What its SSI status is (which you must first have defined under SSI rates, see
below)
o Whether or not it is participating in the CENVAT scheme

SSI Rates
On this screen, you define the excise rates that apply to purchases from vendors that qualify as
SSIs. You define one status for each band (or "slab") of sales volume provided for by the law,
and for each SSI status, the rates of excise duty that applies to that slab under the two schemes
(see Excise Duty for Small-Scale Industries).
Excise Indicator for Plant and Vendor
On this screen, you define the final excise duty indicator (for more information about how this
works, see Determination of Excise Duty Rates).

Plant Master (Excise Data)

Definition

The part of the plant master record that contains information relating to Indian excise duty.

Use

In conjunction with other data, this data is used to calculate excise duty on various transactions.

To maintain the data, from the SAP Easy Access screen, choose Indirect Taxes ® Master Data ®
Excise Rate Maintenance, and then select the following options described below.

Structure
The excise part of the plant master is divided into the following screens:

Excise Indicator for Plant

On this screen, you enter your plants' tax registration numbers, which are used for various forms
of correspondence and reports:

 Central sales tax (CST) number

 Local sales tax (LST) registration number
 Permanent account number (PAN)

In order for the system to be able to calculate which rate of excise duty to apply on purchases
for this plant, you must also assign it a plant excise duty status (for more information about how
this works, see Determination of Excise Duty Rates).

Excise Indicator for Plant and Vendor

On this screen, you define the final excise duty indicator (for more information about how this
works, see Determination of Excise Duty Rates).

Excise Indicator for Plant and Customer

On this screen, you define the final excise duty indicator (for more information about how this
works, see Determination of Excise Duty Rates).

External Procurement (Domestic)

Purpose

This process illustrates how the basic procurement process – including excise duty – is handled
by the SAP System.

Process Flow

1. You create a purchase order for the goods you want and send it to the vendor.

After a few days, the vendor sends you the goods together with an excise invoice.

2. Now that the goods have arrived, you enter the goods receipt and capture the excise
invoice.
a. The store person enters the goods receipt.

The system creates a goods receipt document, and an accounting document to

debit the raw materials account and credit the goods receipt clearing account.
Assuming that the materials are subject to excise, it also creates an entry for the
goods receipt in Part I of the appropriate excise register.
 Note that if you first want to post the goods to blocked stock, for any
reason, do so using the standard procedure. The excise clerk then captures
the excise invoice as normal.

b. The excise clerk captures the excise invoice.

For information about what to do if the vendor sends the goods in more than one
delivery, see Multiple Goods Receipts for a Single Excise Invoice.
3. A supervisor in the accounts department checks the excise invoice captured by the clerk,
makes any changes necessary, and posts it.

The system automatically debits the excise duty to the excise duty accounts and credits
the CENVAT clearing account. It the creates an entry in Part II of the appropriate excise
register to record this posting.

4. You post the vendor's invoice, following the standard procedure.

If the excise supervisor has reduced the amount of excise duty that is to be credited to
the CENVAT account, the system adds the difference to the material price.
The system also creates an accounting document. The document contains debit postings
to clear the clearing accounts for goods receipts and CENVAT; and a credit posting to
create an open item on the vendor's account.

Alternatives

The above procedure is just one way of using the SAP System to handle incoming excise
invoices. If your business processes differ from the procedure described above, there are a
number of alternatives available to you.

Capture Excise Invoice Before Goods Receipt

In step 2, the vendor sends you the goods and there are two documents, the goods receipt and
the excise invoice. If your business processes require, you can capture the excise invoice before
the goods receipt is posted.

During the goods receipt, the system adjusts the material value for any changes to the taxes that
the clerk has made in the captured excise invoice. An accounting document to debit the raw
materials account and credit the goods receipt clearing account is created.

One Person Captures and Posts Excise Invoice

In the procedure described above, the excise clerk captures the excise invoice and the excise
supervisor posts it. If you want, you can have one person perform both of these activities in a
single step, using the transaction under Indirect Taxes ® Procurement ® Excise Invoice ®
Incoming Excise Invoice ® Central Processing ® Capture/Change/Cancel/Display/Post.
Creating Purchase Orders

To create a purchase order, follow the standard procedure, but when you fill out the item
information, enter the following data on the Invoice tab:

 Enter a tax code.

If you do not, the system will not calculate excise duty or display it on the excise invoice
create screen.

If you are only eligible for partial CENVAT credit, you must use an appropriate
tax code. If the CENVAT credit is less than the duty amount entered, the system
will automatically add the difference to the inventory value when you come to
verify the invoice.
 Select GR-based IV, to activate goods receipt-based invoice verification. During invoice
verification this will enable the system to update the material value to allow for any
discrepancies between the taxes in the purchase order and the taxes stated by the
vendor in the excise invoice.

The purchase order shows the excise duty and sales tax that you expect to pay. The taxes are
calculated in the purchase order according to the vendor, material, and tax code.

Entering Goods Receipts

Use

In this procedure, you enter the goods receipts, following the standard procedure.

The standard transaction contains some features that are specific to companies in India only. For
example, it contains an additional dialog box in which you can enter the number of the excise
invoice that has arrived with the goods. And the transaction also creates an entry for the goods
receipt in Part I of excise register RG 23.

If you allow more than one goods receipt per excise invoice, see Multiple Goods Receipts for a
Single Excise Invoice.

Prerequisites

You have maintained the Customizing settings at the excise group level, so that Part I entries are
created at GR blocked stock, for stock transport orders, and for consumption stock. You do so in
the Country Version India Implementation Guide, by choosing Global Settings ® Excise Groups.

Procedure

1. From the SAP Easy Access screen, choose Logistics ® Materials Management ®
Inventory Management ® Goods Movement ® Goods Receipt ® For Purchase Order ®
GR for Purchase Order.
2. In the top line, enter the purchase order number and choose .

A dialog box appears.

 3. Enter data as required:

o If you have not yet captured the excise invoice:

 Leave the Excise invoice field blank.

 Fill out all of the other fields.

o If you have already captured the incoming excise invoice, enter the excise
invoice number.

4. To close the dialog box, choose .

If you choose , the system will not make an entry in Part I of the excise register.

5. Check that all the line items are correct, and adjust them as required.
6. Save the goods receipt.

Result

As well as creating a goods receipt document, the system creates an entry in Part I of the excise
register.

Entering and Verifying Invoices

Follow the standard invoice verification procedure, but select Calculate tax on the Vendor Items
screen. The system proposes the deductible excise duty items in the invoice document.

External Procurement (Imports)

Purpose

This procedure shows you how to handle the countervailing duty (CVD) on imports, which is
levied in place of excise duty. Unlike other forms of customs duties, such as basic customs duty
or special customs duty, you can credit CVD paid on imports to your CENVAT account.

Prerequisites

Vendor Master Record for Customs Office

Create a vendor master record for the customs office, so that you can create liabilities for the
CVD (see step 3 in the process flow).

Condition Type for CVD

The system does not treat the CVD using tax codes, but as a condition type for planned delivery
costs. Specify which condition type you use as follows:

1. In the Country Version India Implementation Guide (CIN IMG), choose Global Settings ®
Excise Defaults.
2. Enter, for the tax calculation procedure that you use, the CVD condition type in the CVD
cond. field.

For more information about how the system handles customs duties using condition types, see
Planned Delivery Costs.

CVD Clearing Account

When you post CVD to a CENVAT account (see step 5 below), the system debits the CVD to the
BED account and credits it to a CVD clearing account.
To specify which G/L account you want to use as the CVD clearing account:
1. In the CIN IMG, choose Global Settings ® Company Settings.
2. Enter the G/L account number in the CVD acct field.

Process Flow
1. You create a purchase order for the goods that you want and sent it to the vendor.

For each material that you will have to pay CVD on when it comes through customs, you
enter the CVD as a pricing condition.

2. The vendor ships the goods to you.

When the goods arrive in India, they go through customs. The customs officers issue a
bill of entry for the goods, which is in effect an invoice for the CVD on the goods. Once
they have inspected the goods, they send them on to you.

3. The goods arrive at your plant, together with the bill of entry. In order to record the bill
of entry in the system, the excise clerk:
a. Enters an invoice for the bill of entry

In Accounts Payable (FI-AR), the system creates a new vendor item for the CVD
at the customs office. The item is offset to the CVD clearing account.

b. Captures an excise invoice for the bill of entry

4. The storeperson posts the goods receipt.

5. The excise supervisor posts excise invoice.
6. The excise clerk enters the vendor invoice for the materials, following the standard
procedure.

Creating Purchase Orders

Use
You follow this procedure to create a purchase order for imports.

Country Version India (CIN) contains a sample pricing procedure for imports,
J_IMP.

Procedure

Create a purchase order for the materials that you want to order using the standard
procedure, but when you fill out the item information, make sure that you observe the following:

 Invoice tab

o Enter a zero-rate tax code

o Deselect GR-based IV

 Conditions tab

a. Select the countervailing duty (CVD) condition and choose .

b. In the Rate field, enter the rate of CVD that will be levied on the material when it
arrives at customs.
c. In the vendor field, enter the vendor master record that you have created for the
customs office.

Then, once the vendor has delivered the goods and you enter the invoice, the
system will automatically credit the CVD liability to the customs office.