Country India Version

Definitions
Excise Group A unit within an excise registration, in India, which keeps its own set of excise records. Whereas the excise registration reports to the excise authorities, the excise group is a purely internal organizational unit. Each excise group keeps records of all transactions that have to be reported to the excise authorities. When the time comes to present these records to the authorities, the excise registration compiles the information from all of its excise groups. Series Group Series groups allow you to maintain multiple number ranges for the outgoing excise documents. Based on excise regulations and exemptions from the authorities you can maintain multiple number series for outgoing documents. But each of these series has to be declared to the excise authorities. Tip: If no financial postings are required for an Excise invoice in this series group then you tick the 'No utilization' indicator. If the CENVAT has to be paid immediately and you need not wait for the Fort nightly payment then mark the 'Immediate Utilization' indicator. e.g., You could define two series groups, group 001 for excise invoices, and group 002 for 57 F4 documents.

Chapter ID
The number given to a material in the schedules of materials published by the government of India. The schedule lists all materials involved in manufacturing, input materials and output materials alike. It shows how much excise duty is levied on each material. Each material in the schedule is assigned its own identification code, called "chapter ID." e.g., The schedule contains an entry for ceramic roofing tiles, which are liable to basic excise duty at 16%. The chapter ID associated with these tiles is 6903.10.

Excise Registers The excise authorities require you to maintain a number of registers relating to excise duty. They have to be printed out monthly and shown to the authorities in the event of an audit. The SAP system makes all the entries for these registers automatically, and you can prepare copies of them as and when necessary The SAP system handles the following excise registers: Register RG 1 Register RG 23A and 23C, Parts I and II Register RG 23D Personal Ledger Account (PLA) This is the bank account from which you transfer any money owing to the excise authorities. Register RT-12 This is a monthly report that summarizes the CENVAT and PLA information from the other registers.

Register RG 1 A register of excisable finished goods kept by manufacturing plants. The register shows goods movements from the factory to a store specifically for excisable finished goods. The SAP system generates all the necessary entries in the register, and to prepare a copy of the register. Set the material type to Finished Goods in the material masters that you use for finished goods. Register RG 23A/23C A record of receipts and issues of excisable materials, as kept by manufacturing plants. The register consists of two parts: Part I shows the quantities of the materials. Part II shows the amounts of excise duty on the materials, and how much you have transferred to the CENVAT accounts.

Previously, manufacturers were required to keep two separate registers, RG 23A and RG 23C for raw materials and capital goods respectively. This is no longer the case, but the distinction still remains in the system. The system generates all the necessary entries in the register. You can prepare a copy of the register as required. CENVAT Document An accounting document that the system automatically creates when it generates a Part II entry. Register RG 23D A record of receipts and issues of excisable materials, as kept by depots. In procurement, when the warehouseman posts a goods receipt, the system creates a register entry. In sales, when a sales clerk creates a sales order, he has to specify which excise invoices were delivered with the goods that are being sold. Then, when the warehouseman posts the goods issue, the system generates another register entry. The system generates all the necessary entries in the register. You can prepare a copy of the register as required. ARE Document A document, in India, that accompanies exports and deemed exports. The documents ensure that you do not have to pay excise duty on these transactions. There are two types of ARE documents, ARE-1 and ARE-3. Excise Bond A document, in India, that effectively licenses a manufacturing plant to remove goods from its premises without paying basic excise duty, on condition that the goods are then exported. An excise bond covers a fixed amount of excise duty. The excise duty of the goods exported under bond cannot exceed the bond value. Deemed Export License A license issued by the excise authorities under which an exporter can procure goods from a manufacturer without payment of basic excise duty.

The license is not a blanket exemption. It only applies to purchases of specific quantity or value of specific goods from a specific vendor, for example, 20 personal computers from Computer World Pvt. Ltd.

Exemption Forms
Some customers may be liable to excise duty at reduced rates or exempt from it altogether (for example, customers abroad). Such businesses must provide you with a copy of their exemption forms in order to claim their exemption. If you make a sale to a customer that is in possession of an exemption form, you have to record the form number in the sales order. The system then automatically applies the appropriate rate of excise duty. When you create the sales order, enter the form, using the customer tax classification fields. Based on the customer tax classification status, you can use different excise rates for a sale transaction. If the form has not been submitted by the time you create the pro forma excise invoice, the excise value will be recalculated at the normal rate.

Export-Oriented Units (EOU)

Any sales that you make to export-oriented units (EOUs) require special treatment by the SAP System. You have maintained a zero-rate excise duty indicator for customers that qualify as 100% EOUs. When you come to create the excise invoice, the excise value is zero in the pro forma excise invoice document. No excise duty is debited to the CENVAT account, and so no accounting entries are generated. However, the sale is marked as a deemed export, and the system generates an outgoing excise invoice. Even though the excise duty is zero, when you print the excise invoice, the system calculates the duty for the purposes of printing.

Excise Duty Utilization

When you create an excise invoice, the system allows you to display the information about the excise duty, including which CENVAT accounts the excise will be debited to. If a company defaults in the fortnightly payment of CENVAT, the excise collectorate can enforce an immediate payment of excise. Alternatively, you may have excess CENVAT credit and want to pay the duty immediately and not wait for a fortnight. This is also the case for some export removals where you claim the refund from DGFTA, in which case you need to pay the duty immediately.

Sales from Factories

The SAP system handles sales from factories, allowing for the creation of excise invoices, which you have to send with each delivery that is subject to excise duty. There are two scenarios, depending on whether you want to send the commercial invoice along with the delivery or at a later date. Along with the delivery the document flow would be OR (standard sales order type) LF (standard delivery type) F2 (invoice). At a later date The document flow would be OR JF (delivery type, a copy of LF) JEX (pro forma billing document type, a copy of document type F8) F2.

Two sample pricing procedures are provided for this sales procedure, J1INFAC (condition-based excise determination) and JFACT (formula-based excise determination).

Sales from Depots

You may first ship them to a separate location for storage (a depot), from where you will sell them. Excise duty is payable when you send the goods from the factory to the depot, but it is not levied again when you sell the goods. Sometimes when you make a final sale of goods from a depot, price escalations could have happened with retrospective effect. In such scenarios you need to pay the extra excise duty at the factory using an A Certificate. You need to register the A certificate details in the RG 23D register and the excise recovered from the customer

Other Outward Movements

The system also allows you to create an excise invoice with reference to various other documents, as follows: Goods issue documents (for example, transfer postings) Vendor excise invoices (for when you return faulty goods to a vendor, for example) Factory excise invoice (for sales returns)

Note: you can create an excise invoice without reference to any document at all.

Exports under Excise Regulations l

Manufacturing plants are entitled not to pay any basic excise duty on export sales, as long as the goods are accompanied by an ARE document. The system handles AREs and the appropriate permit documents, such as export bonds and deemed export licenses. The system does not handle exports to Nepal and Bhutan, which are subject to separate legislation. The system allows you to process three types of exports: Exports under bond Exports under claim for rebate Deemed exports

You must create an ARE document for all goods that you export under these schemes. You use the same function to process all ARE documents.

Exports under Bond

One of the ways of exporting goods without paying basic excise duty is to obtain an excise bond from the excise authorities and then fill out an ARE-1 document to go with every export.

Excise Bond
A document that effectively licenses a manufacturing plant to remove goods from its premises without paying basic excise duty, on condition that the goods are then exported. An excise bond covers a fixed amount of excise duty. The excise duty of the goods exported under bond cannot exceed the bond value. In the system, the term "excise bond" also covers letters of undertaking, and all of the excise bond functions apply equally to letters of undertaking, unless stated otherwise.

When you obtain a bond from the excise department, enter it in the system. The system numbers each bond automatically.

Exports under Claim for Rebate

If you have not obtained an excise bond, you must pay any excise duty liable when removing goods from your premises for export. However, you can claim a rebate for the excise duty once you have completed the export if you fill out an ARE-1 to go with the export.

Deemed Exports
You can ship deemed exports to any customers in possession of a deemed export license without paying any basic excise duty, but only if the goods are accompanied by an ARE-3 document.

Notes
Capital Goods

Businesses are allowed to set off excise duty on purchases of capital goods against excise duty on outputs. However, unlike with raw materials, you can only set off half of the duty in the first year, and the rest in any year after that Register RG 1 Entries The SAP system creates all register RG 1 entries automatically. In most cases, the system does not generate an RG 1 entry at runtime. It generates any missing entries when you execute the Register Update program (see below). It assigns all entries a serial number. Register RG 23A/23C Part I Entries When you enter a goods receipt for excisable materials, the system automatically asks you if you want to create the Part I entry in Register RG 23A or RG 23C. If so, the system generates a Part I entry. If not, it does not, but you can generate all missing Part I entries later. The system automatically enters the excise invoice number in the Part I entry. If the excise clerk has already captured the excise invoice when the warehouseman enters the goods receipt, the system enters the excise invoice number in the Part I entry immediately. If the warehouseman enters the goods receipt before the excise clerk enters the excise invoice, the Part I entry does not contain a link to the excise invoice number. However, the system updates the excise invoice number automatically when the excise clerk captures the excise invoice later on. The system does not automatically generate Part I entries for goods issues of excisable materials, with two exceptions: When you enter a goods issue for vendor returns When you enter a goods issue for stock transport orders for plants, but only when you use the Goods Movements transaction

Part II Entries The system only creates a Part II entry when you post an incoming excise invoice. It does not create one if you only capture an excise invoice. That way, you can ensure that excise clerks can capture excise invoices but cannot make any Part II entries. The excise supervisors can then check and post the excise invoices posted by the clerks.

When the system generates a Part II entry for an incoming excise invoice, it creates a CENVAT document to debit the excise duty to the excise duty account, and credit it to the CENVAT clearing account:

The excise duty is cleared from the clearing account when the accounting clerk enters the vendor invoice. When the system generates a Part II entry for an outgoing excise invoice, it creates a CENVAT document to debit the excise duty to the excise duty account, and credit it to the CENVAT suspense account:

Part II Entries Whenever you as a manufacturing plant post an incoming excise invoice, or create an outgoing excise invoice, the system automatically creates an entry in Part II of the appropriate register (RG 23A or RG 23C). The system assigns all Part II entries a serial number, and creates an accounting document for each, to transfer the various types of excise duty to the appropriate CENVAT account. Similarly, the system also creates a Part II entry when you post an outgoing excise invoice Register RG 23D Entries The system creates RG 23D entries for all receipts of excisable materials, and when you enter a goods issue, you specify which RG 23D entries the goods came from originally. When you enter a goods receipt for excisable materials, the system generates a Part I entry in Register 23D.The system creates one entry for each goods receipt, each of which is numbered with a serial number. Each entry contains a separate line item for each material in the goods receipt, and each line item has its own folio number. When you enter a goods issue, you have to specify which folio numbers are associated with it. Again, each entry has its own serial number. The excise duty associated with these items is then added to the customer invoice.

Example A purchasing clerk places an order with a vendor. When the warehouseman enters the goods receipt, the system generates the appropriate RG 23D entry automatically, as follows:

The RG 23D entry contains a separate line item for each material in the goods receipt, and each line item has its own folio number. Later that day, a second lot of goods is delivered. Again, the warehouseman enters the goods receipt in the system, and the system creates the RG 23D entry automatically.

This is the second RG 23D entry, so the serial number is 0002. The folio numbers start at the next available number, in the example, 004. Later on, a sales clerk enters a sales order. When the excise clerk selects the RG 23D entries to go with the goods issue, the system generates the following RG 23D entry:

The information is shown in two group boxes: Excise details This shows you the excise invoice type, which you can change if necessary by choosing . It also shows you how much excise duty will be charged on the sale. Balance utilization

This shows you which CENVAT accounts the excise duty will be debited to. The system automatically proposes which CENVAT accounts it is to debit the excise duty to. It first takes the RG 23 accounts, and if there is not enough credit to cover it, it debits the remainder to the personal ledger account (PLA). The cess component of excise can only be taken from the PLA. If immediate utilization is active for a series group, you can change the default utilization proposal. You can decide from which register to pay the amount. When you save the invoice, the system generates Part II entries in the appropriate registers. These excise invoices are not listed further during fortnightly payment of CENVAT. If immediate utilization is off for the series group, the system proposes the excise duty values directly in the RG 23A fields, but the postings are made to intermediate accounts for excise duty. The system does not create any Part II entries. Entries are posted into a dispatch register. When you then run the fortnightly payment program, the system picks up these invoices and allows payment of CENVAT.

Day-to-Day Activities
In order to qualify for an exemption from excise duty, all exports must be accompanied by the appropriate paperwork, including an ARE-1 document, and you must complete the export within the export period. To process and track ARE-1s, use the ARE Documents functions, following the process described under ARE-1 Processing. You can only issue an ARE-1 under a bond. The system automatically keeps track of the bond balance.

Day-to-Day Activities
When you assign an ARE-1 to a bond, the system automatically warns you of any reservations that have already been made against the bond. The system keeps track of the bond balance for you. When you post an ARE-1, the bond balance decreases automatically. In the case of running bonds, the balance increases again when you close the ARE-1. Once an excise bond is no longer of any use to you, for example, if it expires or if you have exhausted a fixed bond, you can close it. This prevents any users from using it afterwards.

Day-to-Day Activities
In order to qualify for a rebate on the excise duty, all exports must be accompanied by the appropriate paperwork, including an ARE-1 document, and you must complete the export within the export period.

Master Data
Enter your customers' deemed export licenses in the system.

Day-to-Day Activities
In order to qualify for an exemption from excise duty, all deemed exports must be accompanied by the appropriate paperwork, including an ARE-3 document, and you must complete the deemed export within the rewarehousing period. You can only issue an ARE-3 with reference to a customer's license. The system automatically keeps track of the license balance.

Master Data
When your customers obtain a deemed export license from the excise authorities, they send you a copy. You enter your customers' licenses in the system; the system numbers each license automatically. If, later on, a customer gets an extension on the expiry date of the license from the excise authorities, you can enter it there as well. When a license is exhausted, you close it.

Day-to-Day Activities
When you sell a customer some goods that are covered by a license, you create an ARE-3 to go with the goods shipment. In the ARE-3, you specify which license the goods are covered by. The system reduces the license balance accordingly. When the license balance is exhausted, you can close it.