Vat PDF

Oracle Applications: India Localization
Oracle Application India Localization
User Reference Manual

For
Value Added Tax
KPIT Cummins Infosystems Limited

Plot No. 35/36, Rajiv Gandhi Infotech Park,Phase I, MIDC, Hinjwadi, PUNE-411057, India
Tel: +91 20 5652 5000, Fax: +91 20 5652 5001
www.kpitcummins.com
KPIT Value Added Tax 1.0 .doc Page 1 of 56

Table of Contents
Value Added Tax (VAT) ...............................................................................3
1. Background ................................................................................................ 3
Objective of VAT ..................................................................................................... 3
Where is it applicable? ............................................................................................ 3
VAT in India............................................................................................................ 4
2. Setting up VAT functionality of India Localization. ...................................... 5
Define VAT Regime.................................................................................................. 6
Define Registration Details ...................................................................................... 7
Assign Tax Types..................................................................................................... 8
Assign Tax Accounts................................................................................................ 8
Assign Organization/Locations ................................................................................ 9
Define Organization Registration Details................................................................ 10
Define Organization Tax Accounts ......................................................................... 11
Define Tax Codes................................................................................................... 12
Define Item Classification...................................................................................... 13
Define Item Attributes............................................................................................................... 14
Define Attributes Templates..................................................................................................... 15
Template Assignment ............................................................................................................... 16
Define Claim Terms ............................................................................................... 18
Define VAT Invoice Sequence................................................................................. 19
Define Supplier registrations ................................................................................. 20
Define VAT Authority ............................................................................................ 21
Define Customer registrations ............................................................................... 22
Define Journal Sources.......................................................................................... 23
3. Using VAT functionality in Oracle Application. .......................................... 24
Procure to Pay (P2P) Cycle ..................................................................................... 24
PO Localized with VAT Tax ...................................................................................................... 24
Receipt Localized with VAT Tax............................................................................................... 27
VAT In Payables ....................................................................................................................... 30
Claiming VAT ............................................................................................................................ 33
Order to Cash (O2C) Cycle ..................................................................................... 35
SO Localized with VAT Tax ...................................................................................................... 35
Shipping with VAT Tax ............................................................................................................. 38
VAT Invoice generation............................................................................................................. 40
VAT in Receivables ................................................................................................................... 42
Manual Transactions in Receivables with VAT Tax.................................................. 45
VAT Manual Entry ................................................................................................. 49
VAT Settlement..................................................................................................... 51
1. Process Records................................................................................................................ 51
2. Generation of AP Invoice .................................................................................................. 52
3. Pay Invoice of VAT Authority ........................................................................................... 54
4. Process Payment .............................................................................................................. 54
4. Standard Reports Related to VAT .............................................................. 56
India -VAT Returns Report ....................................................................................................... 56

Value Added Tax (VAT)

1. Background
Value Added Tax (VAT) is a general consumption tax assessed on the value
added to goods and services. It is collected fractionally, via a system of deductions
whereby taxable persons can deduct from their VAT liability the amount of tax
they have paid to other taxable persons on purchases for their business activities.
This mechanism ensures that the tax is neutral regardless of how many
transactions are involved.
The mechanism of VAT is such that, for goods that are imported and
consumed in a particular state, the first seller pays the first point tax, and the
next seller pays tax only on the value-addition done - leading to a total tax burden
exactly equal to the last point tax.
VAT can be computed by using any of the three methods detailed below
The Subtraction method:- The tax rate is applied to the difference between
the value of output and the cost of input.
The Addition method: The value added is computed by adding all the
payments that is payable to the factors of production (viz., wages, salaries,
interest payments etc).
Tax credit method: This entails set-off of the tax paid on inputs from tax
collected on sales.
Objective of VAT
The objective is to avoid 'cascading', which can have a snowballing effect on
prices. It is assumed that due to cross-checking in a multi-staged tax, tax evasion
will be checked, resulting in higher revenues to the government.
It is charged as a percentage of prices, which means that the actual tax burden is
visible at each stage in the production and distribution chain.
Where is it applicable?
It is a general tax that applies, in principle, to all commercial activities
involving the production and distribution of goods and the provision of services. It
is a consumption tax because it is borne ultimately by the final consumer.

VAT in India
The much awaited Value Added Tax (VAT) has been introduced in Indian
Taxation System from April 1, 2005.
Now India is a part of other 130 countries following VAT which was leaded
first time by UK in 1973.
It is said that 4 years is very short period in introducing VAT in the country
as compared to 10 years on an average by other countries.
VAT replaces the state sales tax in India.
VAT levy will be administered by the Value Added Tax Act and the rules
made there-under.
India opted for tax credit method, which is similar to CENVAT.
Tax credit method of VAT

For instance, if a dealer purchases goods for Rs 100 from another dealer and
a tax of Rs 10 has been charged in the bill, and he sells the goods for Rs 120 on
which the dealer will charge a tax of Rs 12 at 10 per cent, the tax payable by the
dealer will be only Rs 2, being the difference between the tax collected of Rs 12
and tax already paid on purchases of Rs 10. Thus, the dealer has paid tax at 10
per cent on Rs 20 being the value addition in his hands.
Purchase price - Rs 100

Tax paid on purchase - Rs 10 (input tax)
Sale price - Rs 120
Tax payable on sale price - Rs 12 (output tax)
Input tax credit - Rs 10
VAT Payable Rs 2

2. Setting up VAT functionality of India Localization.
The following setups are required for VAT functionality of India Localization.
Step 1 Required Define VAT Regime

Step 2 Required Define Regime Registration Details
Step 3 Required Assign Tax Types
Step 4 Required Assign Tax Accounts
Step 5 Required Assign Organization/Locations
Step 6 Optional Define Organization registrations
Step 7 Optional Assign Organization Tax Accounts
Step 8 Required Define VAT Tax Codes
Step 9 Required Define Item Classifications
Step 10 Required Define Claim Terms
Step 11 Optional Define VAT Invoice Sequence
Step 12 Optional Define Supplier Registrations
Step 13 Required Define VAT Tax Authority
Step 14 Optional Define Customer Registrations
Step 15 Required Define Journal Sources

Define VAT Regime

Regime would be used to define rules that would be applicable to all Taxes
assigned to it. You need to complete this setup step before you move ahead with
other setups.
Setups made for a regime would be applicable to all transactions created
from the organizations assigned to it. Information defined here would be generic
unless you assign different properties at an organization level.
For Value Added Tax regime, you need to specify value for Same Invoice No
for Excise and VAT Regimes attribute. An Yes in this field indicates that the
Excise Invoice number, wherever available would be considered as VAT Invoice
Number. If the value is set to No, setup made in the VAT Document sequence
setup would be considered for VAT Invoice number generation.

Define Registration Details

Organizations have to register with the various VAT Authorities. The
registration would be the basis for all recovering credit on input Tax, settling tax
liability and Tax Repository updates. User can setup VAT registration details using
VAT Regime.
If the VAT Registration varies by organization, user has an option to change
the default values at the organization level.

Assign Tax Types

VAT Tax Types have to be assigned to the VAT regime. All transactions with
taxes of these Tax Types assigned would be considered for VAT Repository
updates.
User can assign VAT Tax Types to VAT Regime. Balances for the Tax Types
that are assigned to the regime would be considered for settlement process.
For each Tax Type, the user can also specify GL Accounts. User would have
an option to change these Accounts for each organization.
Assign Tax Accounts

For each Tax Type, the user can also specify GL Accounts. User would have
an option to change these Accounts for each organization.

Assign Organization/Locations
Regime has to be assigned to all organizations to which it is applicable.
Taxes defined under this regime would default only for the transactions created for
these organizations.
As VAT is applicable on sale of goods, Inventory organizations and locations
are considered for VAT setup. User can assign Inventory organizations and
locations to the VAT Regime.
If the Registration details and the Tax Account details vary by organization,
the user would have a choice to change the default values.
On clicking the Organization button the Regime Organization Registration screen
will open. This screen shows the organizations that are assigned to the regime.

Define Organization Registration Details

Organizations having their operations spanning across different states
would register under each state VAT Act. In such cases, users will have an option
to define VAT Registration number for each Inventory Organization/Location
combination.

Define Organization Tax Accounts

User can choose to have different GL code combinations for each of the
organization/Location. To enable this, user will have to assign Tax Accounts for
Organization/Locations.
Unless, different accounts are setup for an organization/location, the
Accounts specified at Regime Registration level would be used for all
organizations.

Define Tax Codes

You need to define Taxes before you start using India Localization. Tax codes
would be the basis for all localization tax calculations. You should define all taxes
applicable to your organization.
The Type would be useful to recognize the relevance of the tax for updating
Registers and Certificate generation. The Type chosen would also have influence
over the behavior of other fields in this form. You can specify the Tax Rate,
surcharge, recoverability, rounding rule, expense account code, Tax (Third party)
vendor, multi-currency and effective period for the Tax.
In a multi-organization setup, Taxes defined would be specific to the
Operating Unit. On choosing the Taxes Localized option from the menu, you would
get the list of Inventory Organizations, to choose from.
If the default organization is already chosen for the session using Change
Organization window, this option shall not be available on opening the Tax Codes
window. Tax records are created for the Operating Unit of the organization chosen.
The tax defined can be used only for the Operating Unit for which it is defined.
Tax codes cannot be updated once saved. Thus, you should adopt adequate
caution while defining the taxes. You can only disable the tax by entering the End
Date.

Define Item Classification
Under VAT Regime, items have to be classified into Capital Goods and Raw
Material, Finished Goods (Non-capital Goods). User has the facility to classify the
items into these categories.
Along with classification of items, this feature also provides the user to
specify VAT applicability, recoverability and Classification code for each Item.
User can setup templates with possible Item classifications. Multiple items
can be assigned to templates at one go. This feature enhances usability and
minimizes time required to complete this setup.
Attribute Possible Attribute Value

Name Values:
This attribute defines the applicability of VAT to
items. This attribute is important in determining
whether VAT will be charged in the OM AR cycle.
Applicable 1. Yes VAT is applicable on the OM AR cycle and VAT
liability on these transactions will be accounted.
2. No VAT is not applicable for these items and you should
not attach VAT taxes at the time of transactions.
This item classification is important from the
accounting and VAT claim point of view. You can
define different accounting and VAT claim rules for
different classes of items.
1. Raw All material on which VAT needs to be claimed in PO
Materials AP cycle should b defined as Raw Materials.
Item Class 2. Capital All capital items on which VAT needs to be claimed in
Goods PO AP cycle should be defined as Capital Goods.
3. Finished All items on which VAT liability arises in the OM AR
Goods cycle should be defined as Finished Goods.
4. Other This is the residuary category. Items may be defined
Goods as Other Goods and accounting rules can be defined
for these as well.
This attribute is important in determining whether
VAT claim can be made for an item in the PO AP
cycle.
Recoverable 1. Yes Input VAT claim in PO AP cycle can be availed if this
attribute is set to Yes.
2. No Input VAT claim is not applicable if this attribute set
to No.
This is dummy attribute where users can store any
Item Folio requisite data which can be used in future for custom
needs.

Define Item Attributes
This will navigate you to the Find Item / Template / Assignment screen.
With this find window you can find:
1. Item Attributes for a single Item
2. Attribute Template for a single template
3. Template Assignments currently made
You can find an existing item for which these attributes are setup by
clicking the Find button. If you want to give attributes to a single item then you
can use the New button to navigate to Item / Template Attribute Registration
Form.

Define Attributes Templates

You can use the New button to create a new template without giving any
details in the find window.
If you have already defined a template after entering the 3 mandatory fields
above you should click on the Find button that takes you to the Item / Template
Attribute Registration screen

Template Assignment
You can create a new Template assignment for items not already assigned.
You can find template assignment for a combination of regime / organization /
template. Regime field is mandatory above. On defining a template, you should
press the Find button. You have to query find an existing template and assign
items to that.
On clicking the Find button the Template Assignment form will be opened
for existing items assignments.


Define Claim Terms

VAT taxes applicable to a purchase of capital goods can be recovered over a
period of time, as specified under the VAT Act. The VAT Claim terms enables users
to define VAT Recovery Term. These terms can be assigned to the VAT Item
Classes.
Defining claim term for VAT is an important setup in the PO AP cycle. The
claim term defined here determines the VAT claim amount in the VAT Tax claim
form.
You can define flexible claim terms for a combination of the following:
1. Regime
2. Item Class
3. Regime Registration Number
4. Organization (location)
Please note that the combination of the above has to be unique. Based on
the above setup, Claim Terms will be defaulted in the VAT Tax Claim form.
The user has the flexibility of defining timing of first claim (first installment
/ start period) the number of claims (number of installments) and the timing of
next installments (subsequent installments)

Define VAT Invoice Sequence
VAT Invoice sequence can be defined for an Order/Invoice Type. The user
can also specify prefixes for each series.
A default series would be defined automatically for the regime. This would
be applicable to the transaction Types to which no series has been defined.
VAT Invoice sequence generation depends upon the setup made for the
Value Added Tax Regime.
You have to setup whether you want to generate same invoice sequence for
VAT and Excise using the Same Invoice No for Excise and VAT Regimes attribute.
This is a mandatory setup that you need to perform irrespective of the value of
Same Invoice No for Excise and VAT Regimes attribute. For e.g. When a
shipment for Non-excisable but VATable item is made, and the value of Same
Invoice No for Excise and VAT Regimes attribute is set to YES, VAT invoice
generation program will pick up the document sequence from the VAT document
sequencing setup.

Define Supplier registrations
Tax Identification numbers would be allotted to eligible organizations
operating within the state. This identification number would be referred in all
communications with the VAT Authorities. User needs to capture these details
through Supplier Additional Information screen.
You can specify VAT Registration number for each Supplier. If this
registration number varies by Supplier Site, you can specify this number for each
Supplier Site.
Along with the VAT Registration Number you also assign a Assessable Price
list to the supplier. This price list would be used in calculating the VAT Taxes.

Define VAT Authority

Ability to define VAT Authority is needed for settlement of VAT Taxes. User
can identify a VAT authority by assigning the Supplier Type of VAT Authority
IND.

Define Customer registrations

Tax Identification numbers would be allotted to eligible organizations
operating within the state. This identification number would be referred in all
communications with the VAT Authorities. User needs to capture these details
through Customer Additional Information screen.
You can specify VAT Registration number for each Customer. If this
registration number varies by Customer Site, you can specify this number for each
Customer Site.
Along with the VAT Registration Number you also assign a Assessable Price
list to the Customer. This price list would be used in calculating the VAT Taxes.

Define Journal Sources
Journal Sources need to be defined to transfer VAT Related Accounting
entries to General Ledger.
VAT GL entries created from PO-Receiving transactions, Source would be
'Purchasing' and Category would be 'Receiving India'. For all other VAT GL entries
Journal Source would be 'VAT' with description ' VAT India'. These journal source
and categories would be seeded.

3. Using VAT functionality in Oracle Application.

Procure to Pay (P2P) Cycle
PO Localized with VAT Tax

Clicking on Open will open the PO Form
Enter the PO details and Save the Work Do not Approve the PO.
Close this window and come back to the Localized PO Screen.
Now this Form is populated with the PO Details.

Select the PO line and click on Taxes Button to attach Taxes on the PO Line.

Clicking on Taxes Button will pop up Tax Details (India Localized) Form
Select Appropriate Tax from the List of Values.

Assign precedence (0 Value means the PO Base value)
Clicking on Apply will populate the Tax amount.
Save and Close the Form.
Click on Open Button of the Localized PO Form and enter the Base Form of PO.
Approve the PO

Receipt Localized with VAT Tax
Clicking on New will populate the Base Receipt Form.
Provide the PO Number and click on Find.

It will populate the Receipt Header Form.

Click on Lines Form and Enter the Receipt Details.
Fill Up the India Receipt DFF

This will populate the Details on the Receipt Localized Form.
Click On Taxes to view the Taxes.

This is the last point where the Taxes can be amended for the Receipt.
Closing the Receipt Localized form will pop up a note, clicking on YES will
initiate the India Receiving Transaction Processor for the Accounting Entries.

VAT In Payables
You can create the AP Invoices Using any of the following functionality
PO Default
Quick Match
Pay on Receipt Auto Invoice
The reason is that the reference of PO and Tax codes attached to it/Receipt, is
required to populate the tax details on the AP Invoice.
On Completing the Pay On Receipt AutoInvoice Run Payables Open Interface

Import to create the AP Invoice.

Run India To Insert taxes for Pay On Receipt
On Completion of this concurrent Taxes are populated as Invoice Distribution
To check the Invoices


Claiming VAT
VAT Taxes applicable to purchase transactions can be recovered to set-off
the VAT liability arising from the sale of goods arising in the course of intra-state
trade. This section provides details of the VAT recovery process. VAT Tax amounts
included in the purchase transaction can be recovered on receipt of VAT Invoice
from the Supplier. This document can be received either with the receipt of
material or at a later stage. If the document is received along with the material
then, the user has an option to enter the VAT Invoice details by opening the Claim
Details window through the Receipts India Localization window.
To open the Claim Details window while creating the receipt, click on the
Claim VAT button on the Receipt India Localization screen.
Search the Receipt for which VAT is to be claimed

Claim Status of the receipt is NOT CLAIMED
Provide the Details in the Populate Defaults Region and Click on Populate
Defaults Button. This will populate the values in the Lines.
Saving the Transaction will initiate the India VAT Claim Processor to create
accounting entries for the VAT Claim. On Completion of this concurrent refresh
the Form and Check the Claim Status.
Values are populated in the Recovered Amount Field

Order to Cash (O2C) Cycle
SO Localized with VAT Tax
Clicking Open Button will open the Sales Order Form
Enter Sales Order Header and Line Details

Save the Work and Exit the Window without Booking the Sales Order to attach
Taxes on the Sales Order.

Clicking on Taxes pop up the Tax window

Assign precedence (0 Value means the SO Base value)
Click on Open Button of the Localized SO Form and Book the Sales Order.

Shipping with VAT Tax
Do the Launch Pick

On completion of the Pick Selection List Generation Concurrent, do Ship confirm
Run Interfaces

VAT Invoice generation
India - VAT Invoice Generation / Accounting has been introduced to
handle generation of VAT Invoice and pass requisite VAT Accounting entries for
VAT type of taxes from Order Management. This program captures VAT taxes in
Shipments and inserts VAT Invoice number in India Localization shipment table
and Entries in GL interface.
Please make it mandatory to Schedule this concurrent program.
VAT Invoice Number can be seen through the Ship Confirm Localized Screen.

Press CTRL+F11

VAT in Receivables
Run Workflow Background Process (if not scheduled)
Run AutoInvocie Master Program (if not scheduled)

Run India Local Concurrent For Processing Order Lines to AR (if not scheduled)
Check the AR Invoice


Manual Transactions in Receivables with VAT Tax
Clicking on Open will Open the Standard Receivables Transaction Form

Provide the Relevant Transaction Details and Click on Line Items
Provide the Relevant Details and Save the Work

Close the Window without completing the Transaction.
Search the Transaction on the Localized Transaction Form

The form is now populated with the Details of Transaction Lines, Select the
Line on which the tax is to be attached and Click on the Taxes Button.

Assign precedence (0 Value means the PO Base value)

Click on Open Button of the Localized Transaction Form
Complete the Transaction
Click on Tax Button to view the Localized Taxes.

VAT Manual Entry

Manual Entry transactions for VAT may be used for passing Adjustment
entries (both VAT repository / accounting) for VAT Recovery / VAT Liability
transactions done in the P2P and O2C Cycles. VAT Recovery / VAT Liability, VAT
Payment transactions can also be created directly using this window
This functionality is provided as a means for handling exceptional scenarios
in your business process that necessitate capturing of such transactions outside
the normal transaction cycles.
On saving the transaction system will generate a transaction number. If the
Generate Invoice Number flag is checked, system will generate the VAT Invoice
number as well. System also generates appropriate accounting entries / VAT
repository entries for the transactions.


VAT Settlement
VAT settlement process that needs to be followed:
1. Process Records
2. Generate AP invoice
3. Pay AP invoice
4. Process Payment
Settlement process should be performed before payment is made to the VAT
Tax authority and submission of returns.
1. Process Records
On giving the requisite details, press the Get Details button. Payment
Details Region will be enabled, only if the value in Debit is greater than in Credit.
On giving the requisite details, press the Process button. This will initiate
Localization Payables Open Interface Import (Payables Open Interface Import)
program, to create an AP invoice in favor of the VAT Tax authority.

On processing the records in the Settlement screen you can find out the AP
invoice number that has been generated using this screen. On finding out the AP
invoice number, you should navigate to AP and pay the invoice.
2. Generation of AP Invoice

If the Invoice Status is In Interface then Run Payables Open Interface

Import Program
Note the Invoice Number Generated in AP and Search the Invoice.

3. Pay Invoice of VAT Authority
4. Process Payment

Select the Line with Invoice Status Paid, Check the Process Payment Box and
Click on Process Payment
Now the Status Becomes Settled

4. Standard Reports Related to VAT

India -VAT Returns Report
India_VAT_Returns_Report.htm

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Oracle Applications: India Localization

Oracle Application India Localization

User Reference Manual

KPIT Cummins Infosystems Limited

KPIT Value Added Tax 1.0 .doc Page 1 of 56

KPIT Value Added Tax 1.0 .doc Page 2 of 56

Value Added Tax (VAT)

KPIT Value Added Tax 1.0 .doc Page 3 of 56

Tax credit method of VAT

Purchase price - Rs 100

KPIT Value Added Tax 1.0 .doc Page 4 of 56

2. Setting up VAT functionality of India Localization.

Step 1 Required Define VAT Regime

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Define VAT Regime

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Define Registration Details

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Assign Tax Types

Assign Tax Accounts

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Define Organization Registration Details

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Define Organization Tax Accounts

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Define Tax Codes

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Attribute Possible Attribute Value

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Define Item Attributes

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Define Attributes Templates

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Define Claim Terms

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Define VAT Authority

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Define Customer registrations

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3. Using VAT functionality in Oracle Application.

PO Localized with VAT Tax

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Now this Form is populated with the PO Details.

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Select Appropriate Tax from the List of Values.

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Receipt Localized with VAT Tax

Clicking on New will populate the Base Receipt Form.

Provide the PO Number and click on Find.

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Click on Lines Form and Enter the Receipt Details.

Fill Up the India Receipt DFF

This will populate the Details on the Receipt Localized Form.

Click On Taxes to view the Taxes.

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On Completing the Pay On Receipt AutoInvoice Run Payables Open Interface