Business Blueprint

Asset Pricing & Taxation

1 BUSINESS
PROCESS
OVERVIEW..............................................................................................2
2 BUSINESS
FLOW3
2.1
PRICING AND
TAXATION
PROCESS FLOW
EXPLANATION...............................................................................................................................................4
2.1.1
Tax 4
2.1.2
Pricing..........................................................................................................4
3 SYSTEM PROCESS FLOW...........................................................................6
3.1 REQUIREMENT...............................................................................................................................7
4 BUSINESS DECISIONS AND CASE SCENARIOS.........................................................7
4.1 Legal obligations, Promotions, tax audits.....................................................................................7

1 Business Process Overview

Pricing and Taxes are triggered whenever a Material / Article PO is created,
received at any of the locations.

The following reasons can trigger pricing and taxes-

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  Article creation (including nature of Material and locations)
 P.O Creation
 Pricing and Taxation
 Stock transfers
 Goods receipts
 Inter state / same state different location movement of goods
 Invoice matching and verifications
 Imports / Exports of goods
 Additional costs to be loaded on non-merchandise like BOM, Octroi,
Freight, etc.

2 Business Flow

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TAXATION

START

Create a tax master based

on the type of article being
purchased and locations of
purchase.

System to identify the type of

article being purchased.
Category/Account

Tax rate to be defaulted to

article being purchased based
on the conditions

System to select the type of tax applicable

(VAT/LST) based on location.

END

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2.1 Pricing and Taxation Process Flow explanation
2.1.1 Tax
SAP will capture the tax master records (condition table, condition records),
which will be used for the procurement process.

All articles will be by default “1” taxable where the exact tax rate from 0% to
X% will be derived from the condition tables.

Comment:
The Corporate Planning Dept will maintain the tax master for the relevant
article.

2.1.2 Pricing
Pricing consist of following elements:

 Discount
 Excise Duty
 Vat
 Service Tax
 Packing Charges
 Freight
 Octroi
 Transportation Charges
 Installation Charges will be pricing elements for purchasing.

2.1.2.1 Pricing Structure for Imports

Particulars
ZPB0 Net Purchase Price Value
P&FO Packing & Forwarding Value
Sub Total (FOB) Value
ZFR2 Frt Forgn -II (Val) Value
Sub Total (C&F) Value
ZIN1 Insurance Value Value
Sub Total (CIF) Value
LD00 Landing charge* %
Sub Total (Assessable Value) Value
JCDB Basic customs Duty %
JCV1 Counter Vailing Duty %
JECV Ecess on CVD 2% %
JECA Add Ecess on CVD 1% %
(BCD + CVD + ECess CVD + Add Ecess)

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 Copy Ass
ECEO Ecess overall 2% %
AECO Add Ecess overall 1% %
Sub Total Except Addl Duty
JADC Addit. Custom Duty %
ZFR1 Freight Local Value
ZC&F Local C & F Charges Value
ZDET Detention Charges Value
ZDEM Demurrage Charges Value
ZOTH Other Sundry exp. Value
Total Value
* We do not pay landing charges, we just calculate landing charges to calculate
the custom duty payable. It does not get added to the stock.

2.1.2.2 Pricing Structure for Local Purchase

  Particulars  
P001 Gross Price  Value
P000 Gross Price  Value
  Gross Value  Value
R000 Discount % on Gross  %
R001 Discount/Quantity v
  Net incl. disc.  Value
ZBED Basic Excise Duty  %
ZECS Basic Excise Duty  %
  Net Incl BED &Cess  Value
ZTXP Tax Exempt Portion %  %
ZTXX Deduct Exemption %  %
NAVS Non-Deductible Tax  Value
Value w/o Deductible
  Tax  Value
JEXS Taxes on the PO  Value
  Val w/o any tax  Value
  Total Tax  Value
ZPAC Packing  Value
FRA1 Freight %  %
FRB1 Freight (Value)  Value
ZOCA Asset Octroi  %
  Total for printing  Value
  Sub-Total  Value
  Total Value  Value

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3 System Process Flow
Purchase:
Four different conditions will exist for keeping tax rates where different GL
posting can be achieved (Transaction FV11):

 JVCD (VAT Deductible)

 JVCN (VAT non Deductible)
 JVCS (CST)
 JSRT (Service Tax)
 JEC3 (E Cess on Service Tax)

The tax codes and the corresponding rates for the four different condition
types are listed in the hyperlink below.

Tax Rates for different Condition Types.xls

A simplified example of deriving the condition value:

Region Supplier Number Region Article Master (for Tax Code Tax
Supplier (for exceptions Receiving exceptions) (Always rate
additional to Site “1”)
the region)

In Purchasing, parts of the purchase price can be tax exempt. E.g. Purchase
Price is 100 INR where 80 INR are free of tax and 20 INR are taxable where the
standard rate as explained above is applicable.
In purchase pricing, tax will therefore always be calculated for the taxable
amount. A new statistical condition needs to be maintained optional for
articles, which have a tax exemption amount beside the purchase price.

PP net 100 INR

PP exempts 80 INR
= Taxable PP 20 INR

 Integration with other modules

Article master
Invoice Verification
Goods Receipts
Stock Transfers
Purchase order

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3.1 Requirement
 Identify products coming from different vendors (and therefore
locations) uniquely

Comment
 Scrapping will not create automated tax posting. Manual tax handling
will be required.

4 Business Decisions and case scenarios

 Responsibility to define the tax masters will lie with Corporate Planning.
This will have an impact on the pricing and taxes, article master, GL
postings and recording.
 Tax accounting is done at P.O level or P.O article level combination.
Also specify the GL postings

4.1 Legal obligations, Promotions, tax audits

The tax returns, reporting of business overheads are all based on the pricing
and taxation.

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