TAXINJ_TAXINN_Soln.pdf

Solution Proposal TAXINJ -> TAXINN

Tax Procedure Migration

CUSTOMER

Table of Contents

1 1.1 1.2 1.3

Executive Summary ....................................................................................................................................... 3 Business Context ..................................................................................................................................................... 3 Solution Overview .................................................................................................................................................... 3 Approach and Risk Management ........................................................................................................................... 3

2 2.1

Process Descriptions .................................................................................................................................... 4 Procurement Process & Solution Proposal ...........................................................................................................4 2.1.1 Proposed Solution ................................................................................................................................... 5 2.1.2 TAXINJ PO line display and A/P Invoice Reversal ................................................................................9 Sales Process & Solution Proposal ...................................................................................................................... 10 2.2.1 Proposed Solution ..................................................................................................................................11

2.2

1

Executive Summary

This solution gives a proposal to migrate the tax procedure and SD Pricing procedure to ease out steps to move the open documents with minimal cut over time. Cut over time for Materials Management (MM) is more compared to Sales and Distribution (SD).

1.1

Business Context

Customers who have implemented Country Version India (CIN) in the initial stages are using a formula-based tax procedure named 'TAXINJ' which was the initial tax procedure released for India. In TAXINJ, tax codes are used to derive tax rates. Due to multiple Excise duty, Service tax, VAT and CST rates and many variations/exemptions in central/state taxes, TAXINJ customers need to use many tax codes in MM and SD, and customers are running out of tax codes as they have reached the maximum limit of tax codes (2 digits possible). Many tax codes create problems for users, as they need to keep track of several tax codes at master data level as well as transaction level. There is another tax procedure, TAXINN, which is based on the pricing condition techniques. In TAXINN, tax codes do not play a vital role in rate determination, where other logistics entities such as plant, material, chapter id, vendor, customer, regions and so on are used for tax rate derivation. A seamless migration from TAXINJ to TAXINN was not possible and customers need to foreclose open purchase orders in TAXINJ, and start with a new line item in TAXINN tax codes which is a difficult approach, considering the volume of documents.

1.2

Solution Overview

Tax procedure migration covers CIN-relevant MM and SD processes in SAP which have taxes and tax code implications. With this solution, SAP would like to propose a feasible migration from TAXINJ to TAXINN. The proposed solution will have an impact on processes such as procurement, sales, job work, stock transfers, returns, excise duty posting transactions, in logistics and financials for goods and services. Non-taxable scenarios would continue without any impact in TAXINN set up also. The solution is supported for the SAP_APPL software component and valid for release ECC 6.0 and above via consulting.

1.3

Approach and Risk Management

This solution is a consulting service to customers and should be thoroughly tested in the production copy environment for all processes with production configuration and data. This requires down time in customer production system and needs to be evaluated in consulting.

2

Process Descriptions & Solution Proposal

2.1

Procurement Process & Solution Proposal

Goods and Services procurement process in India has tax implications. Goods procurement in India is levied excise duties which are goods movement tax, and service receipts in India are levied service tax which is at the time of invoice. There are state-specific sales taxes such as VAT and CST which are calculated on top of the excise duty for goods. All taxes are defined in tax procedures and migration has an impact on the procure-topay process. Tax code triggers a taxable scenario in procurement transactions. A tax code is entered at the time of a purchase order and/or an accounts payable invoice (vendor invoice) and is associated with a tax procedure. Based on the tax configuration, relevant taxes are calculated in the procurement transactions. Major tax relevant procurement processes in India are the following. 

Domestic procurement



Imports procurement



Dealers procurement



Job work receipt



Stock transfer receipt



Debit and credit memos



Service receipt



Vendor returns

The documents involved which have a tax impact for the above process are the following: 

Purchase order/contract



Goods receipt



Incoming excise/challan postings



Invoice verification



Direct accounts payable (A/P) FI transactions with taxes

2.1.1

Proposed Solution

Following steps need to be carried out in the customers' test/sandbox system (that contains a copy of the production configuration/data) 1.

Configure TAXINN procedure as per customers' business scenario along with OB40 settings and relevant CIN settings. If you use COPA or custom specific reports depend on condition types, use TAXINJ procedure's condition types itself in TAXINN also, so that customer's mapping to COPA valuation fields and customs reports impacts can be reduced. If you are using existing condition types, you need to change the access sequence for the condition types, based on your business requirement (e.g. MWST to JTAX).

2.

In transaction OBBG, change the tax procedure from TAXINJ to TAXINN for country IN.

3.

Create TAXINN tax codes as per the customers' requirement for TAXINN procedures in FTXP.

4.

Verify/change input and output tax codes for Indian company codes level in SPRO as shown in the screenshot below, in case customers use different zero tax codes in TAXINN. Otherwise, incorrect tax codes will be posted in excise relevant accounting (PART2). This can affect the customers COPA and other accounting reports which work based on tax codes.

5.

Map the TAXINJ and TAXINN tax codes for table J_1ITCJCMAP via transaction code 'J1ITCMAP' (For more information, refer to SAP Note 827268). Leave the jurisdiction codes blank. This tax code mapping is used by the transactions J1IMGPO and J1IMGCN while updating open purchase orders and contracts.

6.

Execute transaction J1IMGPO and Extract open purchase orders/scheduling agreements. This step helps reduce downtime as the open purchase orders and scheduling agreements are downloaded into intermediate SAP tables.

7.

Execute the transaction J1IMGCN and extract contracts to the intermediate SAP tables. The steps (6&7) can be performed before cut over time.

8.

Update TAXINN tax codes at PO, scheduling agreement, service order, STO (if tax code used) lines by executing the transaction J1IMGPO. This will help avoid foreclosing purchase order items.

9.

In the same way, use transaction code J1IMGCN to update tax codes for contracts from the intermediate tables. This will help avoid foreclosing contract items. The steps (8&9) need to be performed in the cut over time.

Note The above programs take care of basic master data validation by considering only open PO items. It also handles basic tax relevant errors, updates the table J_1ITCJCUPDATE to keep log of processed documents, avoids PO items which are already updated with the program, application error logs and basic exceptions handling. Tax calculation in Direct A/P FI transactions are managed with tax codes only

2.1.2 TAXINJ PO Line Display and A/P Invoice Reversal Refer to SAP Note 2161911 for the details.

Note Do not delete TAXINJ set up from the system (J1ID, tax codes…) as system needs the same for displaying TAXINJ PO lines and A/P invoice reversals(MM side).

2.2

Sales Process & Solution Proposal

Order to cash process in India has tax implications. Sale of goods in India is levied excise duty which is a goods movement tax and service provision in India is levied service taxes which are at the time of invoice. All taxes are defined in pricing procedures but unlike procurement, tax code has a minimal role on the SD side. There are state-specific sales taxes such as VAT and CST which are calculated on top of the excise duty for goods. A tax code is required in condition record of tax condition types'. So in general, excise duties condition records do not have tax codes as they are discount/surcharge in nature, whereas VAT/CST condition types require a tax code. Major tax relevant sales processes in India are the following: 

Domestic sales



Sale to external Customer (EXP)



Dispatch from a plant (STO)



Sale from a depot (STO)



Service provision



Customer Returns



Dispatch for job work (sub-contract)



Credit and debit note to customer scenarios

The documents involved which have a tax impact for the above process are the following: 

Sales order



Goods issues/deliveries



Outgoing excise/challan postings



Customer invoices



Direct A/R FI transactions with taxes

2.2.1

Proposed Solution

Prerequisites Ensure that you have performed the following settings: 

Configured TAXINN (with A/R condition types)



Defined OB40 settings according to customers' requirement



Changed the tax procedure in OBBG

Since all your pricing procedure's condition types are not changed, the pricing procedure determination and condition types mapping to valuation fields of COPA is not impacted. Configure SD Pricing procedure with access sequences for all set of condition types. 1.

Excise Conditions: If customers are also using pricing formula/routine for excise relevant conditions in SD pricing procedure (Control via J1ID), remove the formulas in pricing procedure and configure customers' SD pricing procedures as per the business requirement.

2. Remove condition type 'UTXJ' which is used for various base value determinations, and tax code based rate determination for VAT, CST and Service Tax condition types. These have to be done according to TAXINN set up in SD Procedure, as per customers' business requirement.

3. Maintain required SD relevant access sequence for all (excise, VAT, CST, Service…) tax conditions.

4. Maintain condition records with appropriate tax rates at required access levels in the VK11 transaction for all required (Old & present items) cases for relevant taxes (Excise, Services, VAT, CST...), as per customers' business requirements.

5.

Sales tax/Service taxes: In SD, tax codes are required for all output tax condition records (transaction VK11) for respective tax condition types (non-excise).

6.

If G/L accounts are maintained based on the tax code in OB40, customers have to verify/update the same with the new TAXINN tax codes (for tax conditions VAT, CST, Service Taxes and so on) as shown in the screenshot below. Customers' need to take a call in this regard based on the requirement.

7.

If customers are using alternate VAT G/L account determination functionality, where G/L accounts are maintained based on tax codes in the J_1IT030K_V view, they have to update the same with new TAXINN tax code as shown in the screenshot below. This needs to be done based on customers' requirement.

8.

If the billing document was created in TAXINJ and not released to accounting, customers need to carry out the New Pricing Run in billing, so that the TAXINN tax code is considered. Else, they will encounter tax code error 'FICORE 704' during release to accounting.

9. If customers cancel a billing document posted in TAXINJ, they need to carry out the New Pricing Run so that tax code error FICORE 704 will not come up during release to accounting.

Note Tax calculation in Direct A/R FI transactions are managed with tax codes only Usage of tax codes or condition record for old Sales Order/Invoice to be decided at customers' end based on the requirement.