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Headstrong: A Genpact company

India Localization
Demystified
Presentation Title Goes Here
Date: 8th Nov 13
Location: Hyderabad
Speakers- Vivek Bhatia and Venkat
Kompella *(Genpact)

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Table of Contents
About the speaker(s)
Project Da Vinci
Infrastructure Industry( Key Challenges)
Project Based tax transactions (O2C and P2P)
Questions
Genpact Overview

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About the speaker(s)

About the Speakers

Vivek Bhatia
Overall IT experience

12

Oracle Experience

13 Years

Skill Set

Oracle Apps Financials and Projects

Oracle Corp Experience

3 years

Qualifications

Bachelor Of Engineering
Masters if Business Administration ( Finance Full Time)
Masters In Economics and
Masters in Finance and Control

Venkat Kompella*
Overall IT experience

15 Years

Oracle Experience

12 Years

Skill Set

Oracle Apps Financials and Projects

Oracle Corp Experience

3 years

Qualifications

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Bachelor Of Technology
Masters in Business Administration ( Finance)
Project Management Professional (PMP) from PMI, USA

I have been impressed with

the urgency of doing. Knowing
is not enough; we must apply.

- Leonardo da Vinci

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India Localization in
Oracle R12

India Localization in Oracle R12

Tax Requirement

Direct Taxes

Indirect Taxes

Income tax

Tax Collected at
Source

Tax Deducted at
Source

Depreciation as
per Income Tax
Act

VAT & Sales Tax

Service Tax

Customs

Excise

Input Tax Recovery

(VAT)

Input Tax Recovery

CVD recovery and

CENVAT

CENVAT

Allocation with
Excise Duty

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Considerations for Localization Configuration

R12 : A BIGTHANK YOU ORACLE :

No Additional Patch
No additional Localization Flex Fields
Service Tax on Unmatched invoices : Reducing Redundancy
and Non Value Added Jobs

WHAT MORE CAN BE ENHANCED:

Transfer of Balances across Inventory Organizations

automatically

Pass Localization entries through SLA for all Sub Ledgers

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Considerations for Localization Configuration

Inventory Organization Setup

Tax regimes, Input credits, liability etc., are defined at the

organization level

Accounting, P&L and Balance sheet at inventory org level?

This decides if we need inventory organization as part of our CoA

and define TDS accounts as centralized or at balancing segment
level

India Localization configuration is at inventory

organization level.

Use Localization for Gross Reporting

TDS liability to be consolidated centrally or maintained as per
balancing segment

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10

Gross Reporting: Use a Combination of SLA and India

Localization
Business Requirement to have multiple receivables accounts
along with gross up of Tax to revenue and expense

Dr Receivables 1
Dr Receivables 2
Dr Receivables 3
Dr Expense (Tax)
Cr Revenue
Cr Revenue (Tax)

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11

Service tax

Service Tax
Major features of Service tax functionality provided in the Oracle
Financials for India are mentioned below:

Defining Service tax regime and the registration details of the

Organization.

Definition of Service tax type codes, as applicable.

Facilitating the settlement of Service tax liability.

Definition of rules for accounting for Service tax.

Provision to default the Service type applicable for Suppliers/Customers.
Provision to distribute the service tax credit available across inventory
organizations.

Provision to maintain and view the Service tax repository.

Reporting requirements with respect to Service tax.

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14

Service Tax Registration

Assign Tax
Type
and Account

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14

Assigning Organizations
Regime has to be assigned to all organizations to which it is applicable. Taxes defined under this
regime would default only for these organizations.

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Title
Under the Organization details, User will be able to assign the Inventory Organizations to which
the service tax regime is applicable. Also if an inventory organization is having multiple locations,
all those locations have to be assigned under this regime. Otherwise processing of Service taxes
will happen only for the assigned locations.

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16

Customer Additional Information

To be able to make transactions in Order to Cash cycle, Customer additional information setup need to
be completed for those Customers from whom service tax amount will be recovered. In this form, Service
tax registration number and the Service tax type applicable for that particular Customer needs to
provided. If Service type is defined here, then it will be defaulted in the transactions. Otherwise
Users need to manually update the service type in the transactions.

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17

Supplier Additional Information

To be able to make transactions in Procure to pay cycle, Supplier additional information setup need
to be completed for those suppliers to whom service tax amount will be paid. In this form, Service
tax registration number and the Service tax type applicable for that particular supplier needs to
provided. If Service type is defined here, then it will be defaulted in the transactions. Otherwise
Users need to manually update the service type in the transactions.

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18

Tax code definition

In Tax code definition form, Service tax type codes can be defined and the same can be used in the
transactions. It has to be noted that Service tax codes have to be defined as recoverable taxes by
specifying the credit percentage as 100. Otherwise the accounting will not happen as mentioned in this
document and those taxes will be considered for costing in Procure to pay cycle.

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19

Title
Currently the following tax types are applicable for Service tax and the same have been provided
as seeded values in the tax type field:

Service tax
Education cess on Service tax
Secondary Higher education cess on Service tax.

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20

Inclusion of Service Types

It may be noted that the user in the application can manually add service types. The need for addition of service types
arises whenever Government of India added more services vide inclusion in Finance Act. The same can be done using the
below steps:

Navigate to Oracle Purchasing > Setup > Purchasing > Lookup Codes
Query with Type as JAI_SERVICE_TYPE
Click on New and specify the code, Meaning, description and effective from date.

By doing this, User will be able to select the new service types as well in the transactions.

Service type mentioned in the Supplier additional information and Customer additional information would be used to default
automatically in transactions like Purchase Order and Receivables transaction and Sales Order respectively. This defaulted
value can be changed in those transaction forms. If this setup is not carried out and service type is not mentioned even in
the transaction forms also, then Users will not be able to perform settlement.
In Purchase Order localized form, as
shown above, Service type got
defaulted from the Supplier additional
information setup. Also the User can
change this value. Similarly in Sales
Order localized form and Receivables
transaction localized form also, User
can change the defaulted service type
values. However service type cannot
be changed when a RMA is created
with
reference to Order or Invoice. In this
case, Service type of the original order
will get copied to the RMA order and is
shown in view mode only.
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21

VAT and Service Tax on Work Orders Is it a Tradeoff?

Complex PO (self service POs) are not supported

by India Localization

Complex POs provide the features of advance recoupment,

retention and retention releases

This is a trade off between using the Complex PO and India

Localization

Is there any workaround to this?

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22

VAT and Service Tax on Work Orders

When we create complex PO there is no provision

to include the India localization taxes

When work confirmation done this is also in the self service

pages with no provision for local taxes

The work confirmation creates a receipt in the form

Query for the receipt from the localization form and attach the
required localization taxes.

Now when the invoice is created by matching to the receipt the

local taxes are included in the invoice

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23

Excise and Customs

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25

Excise Duty
Excise Duty

Excise Duty is a federal tax on manufacture of goods

Oracle Finance India localization provides solutions to meet the complex

requirements

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Excise
Define Excise Invoice Generation
This feature can be used to automate the Excise Invoice document sequence
generation - You can setup a document sequence for the combination of
Transaction Type, Order/Invoice Type and Register Type.

You can define an alpha/numeric value which would be prefixed to the number
series generated for each excise invoice.

Pre Requisites:
Setups needs to be done in define Bond register where the user needs to
associate an Order type for all transactions Order Management module and
Transaction source for all transactions from Accounts Receivable module.

The Order type and transaction source will be associated with different type
of excise removals (like domestic with excise, Bond, Export with excise etc.).

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Excise Invoice Generation contd.

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Define Sub-Inventory Locations

As a part of Localization , the sub-inventories have to be associated to a combination of Organization/Location. Excise related
transactions and records would be updated only for those sub inventories that are identified as bonded for
manufacturing organizations and as traded for trading organizations.
NAV: GEIN MMF Local Inventory > India Localization > Setup > Sub Inventory Locations

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Define Item Localization Information

The recording, recoverability and reporting of localization taxes would depend on the India Localization related information setup for the item
The updation of the Dispatch transaction into the Excise / CENVAT credit would be considered only when the Excise /Modvat is set to YES.
Accounting from Organization Additional Information
The option chosen in the Item Class attribute would be the basis on which, the type of excise credit register that has to be considered. The Trading
item is transacted in a trading item.
Here initially you can define Attribute Template and then assign item with that template.
NAV: GEIN MMF Local Inventory > India Localization > Setup > Item Setup > VAT/Excise Item Classification

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Define Tax Code and Categories

Basic, CST etc , VAT, Custom Duty

Tips:
If you can identify your
purchase and sales
transactions into clear
categories, for which a similar
set of taxes with similar
precedence and calculation
are applicable, then you can
group such taxes into a Tax
Category.

In a Tax Category you can

choose the Taxes, along with
the precedence order and
calculation basis. You can
however, manually add new
tax lines and can change,
delete, change precedence
for the defaulted lines.
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Associate Tax Categories to Item Categories

Tips
Item Category allows you to
assign Tax Categories to an
inventory items in an
Organization. You can attach
an item category to the
Additional customer/supplier
information. The Taxes
defaulted for a transaction line
would be based on the Item
Category attached to the
Supplier/customer and the Tax
Category assigned to the Item
in this category.

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31

Supplier Additional Information

Tips
Before you start using the Supplier/ supplier
site for a localization transaction, it would be
a necessary for you to define India
Localization related information for the
Supplier/ Supplier Site. The supplier
registration information, with various tax
authorities, Assessable Price List that would
be the base for the calculation of the Excise
Base Amount and default Item Category can
be defined here. The definition would be the
Supplier NULL Site and for Supplier Site.
The primarily Tax defaulting would be from
the Supplier Site. In absence of any Tax
Category at this level, the system would
pickup the value from the NULL Site.
You will also have to enter the Income Tax
and TDS related details applicable for the
Supplier Site.

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32

Bond Registers
Tips

Export of Excisable product. SEZ sales> Amount to Govt ,

Govt provides Bond e.g 1 lakh.. Shipping sales order. Tax
amt is 1000

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The calculation of excise duty and updating

of excise registers are based on the setup
made in the define bond register. Before
making this set up the user need to define
the Order types and transaction sources.
Excise transactions are classified as:
Domestic with Excise
Domestic without Excise
Export with Excise
Bond Register (Export under Bond)
Excise transactions need to be identified
based on the Organization/Location
combination and against each excise
transaction multiple Order types and
Transaction sources can be assigned. Order
type need to be assigned to excise related
transactions from Order Management
Module and Transaction source need to be
assigned for all excise related transactions
through the Receivable module.
NAV: GEIN MMF India Local Order
Management > India Localization >
Registers > Define Bond Registers

33

Additional Price List

Tips:
If the Taxable basis for the
calculation of the excise
duty is different from the
Price at which the item is
sold, the, you will have to
create additional Price
lists with the Item Excise
Assessable Price.
This price list has to be
attached to the
Customer/Customer Site
and Supplier/Supplier Site.
The assessable price
would be considered only
for the calculation of the
excise duty.

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34

Claim Cenvat on Receipt

Tips
Claim Cenvat on Receipt
NAV: GEIN MMF Local Purchasing >
India Localization > Receipts > Claim
Modvat on Receipts
To claim the Cenvat against receipt put
the Organization name, Location, and
Receipt Number. Then click on Find
Button.
.

Put the Excise Invoice Number and Date

check Claim CENVAT flag and finally
click on Claim button

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35

Transactions Overview & Register Update

Transaction Type

Impact on Excise Registers for Item Types

RMIN

FGIN

CGIN

Miscellaneous Receipt RG Update

RG 23A Part 1

RG 1

RG 23C Part 1

Miscellaneous Issue RG Update

RG 23A Part 1

RG 1

RG 23C Part 1

Cycle Count Adjustment

RG 23A Part 1

RG 1

NA

Physical Inventory Adjustment.

RG 23A Part 1

RG 1

RG 23C Part 1

Move Order Issue

RG 23A Part 1

RG 1

NA

WIP Component Return

RG 23A Part 1

RG 1

NA

WIP Assembly Completion

RG 23A Part 1

RG 1

NA

WIP Assembly Return.

RG 23A Part 1

RG 1

NA

WIP Negative Component Issue

RG 23A Part 1

RG 1

NA

WIP Negative Component Return

RG 23A Part 1

RG 1

NA

WIP Scrap Transaction

RG 23A Part 1

RG 1

NA

Staging transfer of a sales order

RG 23A Part 1

RG 1

NA

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Title

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Title

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Title

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Title

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40

Define Customs Authority

The Duty advance paid to the Customs Authority has to be booked against a Customs Authority, through a Bill of Entry.
Before you create a Bill of Entry India Localization Transaction, you should have defined a Customs Authority. You would
create a Supplier and Site for this Authority. Additionally, in the Type field on the Classification tab, choose Custom
Authorities-IND. On doing this, when defining a Bill of Entry transaction, the Supplier name would be listed in the Customs
Authority field LOV on the Bill of Entry India Localization screen. 1.Custom Rate will be 10 %, 7.5% , 5% 2. CVD
(Purchase Price +Custom Duty) 3. Cess 2% on Custom 4. SH 1 %(Custom and CVD). 5. SAD ( Applicable on all)

Define BOE Agent

It would be a pre-requisite to define a BOE Agent before you do a BOE Transaction. Navigate to the
Payables Setup and define the Clearing & agent information. The agent codes would appear in the LOV of
Agent Code field of the Bill of Entry screen.

NAV: GEIN MMF India Local Payables > India Localization > Setup > Others > BOE Agent

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41

Tips on TDS

TDS Considerations

TDS liability to be consolidated centrally or

maintained as per the inventory organization /
balancing segment

If it needs to be consolidated then defining one

tax code is sufficient

If it needs to be accounted for each balancing

segment :

Define different tax codes for each balancing

segment and assign these tax codes to the
respective suppliers so that the tax liability hits
the respective balancing segments
OR

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Update the company segment for the supplier

credit memo and IT invoices using SLA to
ensure
43

TDS on Prepayments

When prepayments are applied to an invoice the TDS deductions

are reversed and creates RTN TDS invoices

Ensure that the invoices are validated after the application of

prepayment invoice to have the TDS invoices in sync.

When the prepayment application is unapplied it created CAN RTN TDS invoices.

Application and application creates multiple RTN invoices and can lead to
reconciliation issues.

TDS Invoice DFF will carry Invoice ID against which TDS invoice is corresponding to

If the same supplier is a vendor and sub-contractor requiring TDS on subcontractor

invoices and no TDS on vendor invoices (e.g. Oracle Implementation and License
Sale by Partner)

Create two different sites for the supplier for vendor and subcontractor
Update the TDS information for the subcontractor and leave the information
for vendor blank
Invoices will be created based on the site information it will follow the TDS
applicability

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44

Appendix

Depreciation

Defining Block of Assets under different categories based

on applicable rate of depreciation

Defining Depreciation calculation criteria based on the

acquisition date of interest. 100% Depreciation on assets
acquired in first six months and 50% on assets acquired
in second half of financial year

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46

Questions ??

Oracle EAS Practice An Overview

SIZE
Over 3,000 Oracle professionals
Over 3.1 million days of Oracle
experience

Manufacturing
Discrete
Process

BFS& I
Banking & FinSvcs
Insurance

Business Services
Telecom, Media
Hospitality

EXPERIENCE
160+ go-lives in 40+ countries
Implemented and Supported
Oracle for aggregate revenue of
250 Billion USD
Support more than 175 Oracle ERP
Instances
60% resources > 6 years of
industry experience
> 80% resources trained in Lean,
Six Sigma, CMMi

EXPERTISE / SKILLS
Centers of Excellence (CoE)
dedicated for Industry Vertical
Solutions
Oracle Gold Partner
24x7 maintenance & enhancement
capabilities
Strong DNA of managing Program
Management Offices (PMO)

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Oracle ERP Suite | Oracle Database | Siebel | Hyperion + OBIEE

ERP
STRATEGY

Implementation/
Rollouts

Upgrades

Support

48

Sample ERP Client Profiles

$13B
Healthcare
Equipment
Manufacturer

$12.7B
Automotive
Manufacturer

$16B
Cable &
Telecom

$23B
Commercial
Finance
Company

$8B
Plastics
Molding
Manufacture

$8B
ETO
Turbine
Manufacturer

$12B Media
Company

$1.3B
Trading
Company

$3B
ETO
Electronics
Manufacturer

$2B
ETO
Gas Engine
Manufacturer

$1.2B
Staffing
Temp
Services

$15B
Consumer
Finance
Company

$52B
Life Sciences

$1.5B
Sub-Sea
Drilling
Manufacturer

$5B
Nulear
Energy
Construction

$2B
Commercial
Lending

$15B
A&D
Manufacturer

$14B
Consumer &
Industrial
Manufacturer

$6.4B
Software and
Technology

$1.8B
Information
Services

$3.6B
Hospitality
Loding

$200M
Telecom
Equip
Manufacturer

$2.1B
Telecom
Services

$500M
Project
Manufacturer

$3B
Renewable
Energy
Manufacturer
$6B
ETO Engine
Manufacturer

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$2B
Avionics &
Display
Manufacturer
$250M
Furniture
Manufacturer

49

Thank You

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