TAXINJ_TAXINN_Soln

7/17/2019 TAXINJ_TAXINN_Soln

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Solution Proposal

TAXINJ -> TAXINN

CUSTOMER

Tax Procedure Migration



Table of Contents

1 Executive Summary ....................................................................................................................................... 3

1.1 Business Context ..................................................................................................................................................... 3

1.2 Solution Overview .................................................................................................................................................... 3

1.3 Approach and Risk Management ............................................... ................................. ............................... ............ 3

2 Process Descriptions .................................................................................................................................... 4

2.1 Procurement Process & Solution Proposal ............................... ................................. ................................ ........... 4

2.1.1

Proposed Solution ................................. ................................. ................................. ............................... . 52.1.2 TAXINJ PO line display and A/P Invoice Reversal ............................... ................................. ................ 9

2.2 Sales Process & Solution Proposal ............................................................ ................................. ......................... 10

2.2.1 Proposed Solution ................................. ................................. ................................. ............................... 11



1 Executive Summary

This solution gives a proposal to migrate the tax procedure to ease procurement and sales process in SAP,

with minimal cut over time. Cut over time for Materials Management (MM) side is more compared to Sales

and Distribution (SD), which cannot be avoided.

1.1 Business Context

Customers who have implemented Country Version India (CIN) in the initial stage 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 VAT and CST rates and many variations/exemptions in differentcentral taxes, TAXINJ customers need to use many tax codes in MM, and customers are running out of tax

codes as they have reached the maximum limit of tax codes (2 digits). Multiple 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 ax 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, regions and so on are used for tax rate derivation. A seamless migration from TAXINJ to TAXINN

was not possible as customers needed 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, we would like to propose the most 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. No

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.

Relevant application components are XX-CSC-IN-MM and XX-CSC-IN-SD.

1.3 Approach and Risk Management

This solution will be provided as 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 & SolutionProposal

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 (similar to regular taxes). There are state-specific value added taxes such as VAT and CST

which are calculated on top of the excise duty. All taxes are defined in tax procedures and migration has an

impact on the procure-to-pay process.

Tax code triggers a taxable scenario in procurement. 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 the TAXINN procedure as per customers' business scenario along with OB40 settings and

relevant CIN settings. This configuration should be done at customer's end and is a pure consulting. If you

use COPA, use the TAXINJ procedure's condition types itself in TAXINN also, so that your mapping to

COPA valuation fields is not impacted.

2. Execute transaction J1IMGPO and download open purchase orders/scheduling agreements. This step

helps reduce downtime as the open purchase orders and scheduling agreements are downloaded into

intermediate SAP tables.



3. Execute the transaction J1IMGCN and download contracts to the intermediate SAP tables.

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

5.

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



6. 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 CO and other

accounting reports.

7. Map the TAXINJ and TAXINN tax codes for table J_1ITCJCMAP via transaction SM30 (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.



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 PO/SA 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.

Note

The above program takes 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, and avoids PO items which are already updated with the program, application error logs

and basic exceptions handling.



2.1.2 TAXINJ PO Line Display and A/P Invoice Reversal

Refer to SAP Note 2161911 for the details.



2.2 Sales Process & Solution Proposal

Order to cash process in India has tax implications. Sale of goods in India are levied excise duty which is a

goods movement tax and service provision in India are levied service taxes which is at the time of invoice. All

sales taxes are defined in pricing procedures but unlike procurement, tax code has a minimal role on the SD

side. There are state-specific Value Added 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' in SD. 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

Changed the tax procedure in OBBG

For detailed information, refer steps 1 to 4 in section 2.1.1

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.

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.

Maintain the required SD relevant access sequence for excise conditions.



3. Maintain the condition record with correct rate at below relevant levels in the VK11 transaction, as per

customers' business requirements. This is required for other conditions types where access sequence

UTXJ is used in TAXINJ.

4.

Sales tax/Service taxes: In SD, tax codes are required for all output tax condition records (transaction

VK12) for respective tax condition types (non-excise). If TAXINN is using the same tax code as TAXINJ

(reuse), customers do not need to make any changes at the condition record level.

5.

If customers use different TAXINN output tax codes compared to TAXINJ tax codes, they need to update

the same at SD tax condition record level. Else, they will encounter tax code error when billing document

is released to accounting.



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.

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.

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.

Documents

TAXINJ_TAXINN_Soln