Saturday, December 24, 2016
SAP Customers (and Consultants) in India: Are You Ready for GST?
Termed as the biggest financial reform since independence, India had been mulling about GST for quite some years., rather more than a decade. Finally, current government has mustered the courage to bring in GST (Goods and Services Tax). GST Bill is passed in Sept’16. Govt. of India is keen to deploy GST from 1st July’17. (While there is no FINAL announcement of that effect, due to constitutional compulsion it cannot be done later than 16th September 2017)
SAP customers are understandably anxious about this change. There has been a deluge of GST inputs on internet (published by SAP and others) but that is only aggravating the problem for customer. It is like drinking from a fountainhead or a fire hose! Here is an attempt to alleviate the fear, show the big picture & zoom down (to some extent).
First things first..
GST in nutshell –
Before we find out which areas in SAP will be impacted by GST implementation, we need to know some important details of GST.
· GST is a comprehensive indirect tax levied on Sale, Manufacture and Consumption of Goods and Services at the National level.
· GST would apply to all goods other than crude Petroleum, Motor spirit, Diesel, Aviation Turbine fuel and Natural gas.
· GST would apply to all services barring a few to be specified.
· Export and Direct taxes like Income Tax, Corporate Tax, Capital gains tax will not be affected by GST.
· Imports will be subject to GST, but exports will be GST-exempt.
· Where the output is GST exempt, the GST paid on the input will be a cost to the business.
· GST Tax slabs - The four GST slabs have been set at 5%, 12%, 18% and 28% for different items or services.
· To keep inflation in check, essential items including food, which at present constitute roughly half of the consumer inflation basket, will be taxed at a zero rate. The lowest rate of 5 per cent would apply to common use items.
· The peak rate of 28% will apply to luxury goods. Luxury cars, tobacco products and aerated drinks will attract an additional cess on top of the highest tax rate.
· GST in India is slated to have the following components:
o Central Goods and Services Tax (CGST) – Levied by Centre
o State Goods and Services Tax (SGST) – Levied by State
o Integrated Goods and Service Tax (IGST) - Levied by Central Government on Inter-state supply of Goods and Services
· Registration - The following existing registrations will subsume into GSTIN (GST Identification Number):
o Excise registration for Plant / Depots
o Service Tax registration
o VAT registration
There will be single registration for CGST, SGST & IGST
However, individual registration is expected to be obtained in each state of establishment.
· GSTIN – GST Identification Number. It will be 15 character (alpha-numeric) with following logic built in its numbering. First two digits represent state, next 10 digits represent PAN number, 13th digit for registration number of assesse (also called as entity code), 14th digit is Z & 15th digit is for correction number (or check digit).
Before you go for implementing GST in SAP, there are some mandatory prerequisites –
· The necessary minimum patch level for SAP Application must be SAP ERP 6.0 (600) SP26 or higher. (i.e. If you’re on SAP 4.7, you MUST first upgrade to SAP ERP 6.0 before you go for GST) Refer SAP Note number 1175384 for more details.
· You need to be having Tax Procedure TAXINN (which is condition-based). In case you’re Live on SAP with tax procedure TAXINJ (which is formula-based), you MUST first migrate to tax procedure TAXINN. Refer SAP Note/KBA numbers 2252781, 2014164, 2153807, 827268. The last two Notes talk about SAP’s standard programs for migration of open Purchase Orders & open contracts.
(Incidentally, both points mentioned above, are mini-projects. Each may take minimum 3 to 6 person-months depending on the scale & complexity involved)
GST deployment in SAP: (Areas impacted in SAP / changes to be carried out in SAP. See SAP Note. No. 240580 – FAQ on GST)
· Organization setup - Create Business Place and assign to Plants
· Tax Registration – Maintain GST Registration Number (also called GSTIN as explained earlier) at the business place level configuration à Tax Information à GST Reg. No.
· Master Data maintenance – Maintain GST registration number for each registered customer and vendor. (customer master / vendor master à Tax Information à use field ‘Tax Number 3’). Also affected will be Material Master & Services Master. Please refer SAP Notes Number 2405502 & 2385575 (Changes to master data)
· GST Tax Accounts – define for CGST, SGST & IGST separately – Business place based G/L account determination – Both for MM & SD
· Define new Condition Types under tax procedure TAXINN – e.g. JICG, JISG, JIIG for central, state & integrated GST respectively
· Maintain SD Access Sequence and MM Access Sequence
· Maintain document number range for outgoing GST invoices
· Business Processes affected (& so to be tested thoroughly after the configuration) ;
o Sales Order
o Billing document
o Purchase Order
o Goods receipt
o Vendor Invoice
o Outgoing GST invoice
o Incoming GST invoice
o Stock transfer
· Need to have GL accounts for Separate accumulation of credit and payables for
o Separate accumulation at Registration level
· Utilization of Input tax credit would be as below:
o Input CGST to be utilized against output CGST and IGST
o Input SGST to be utilized against output SGST and IGST
o Input IGST to be utilized against output IGST, CGST and SGST in the order of IGST, CGST and SGST
· Reporting – Tax Register
o The most important information to be reported to GSTN are:
- GSTR-1 (Outward supplies made by the taxpayer)
- GSTR-2 (Inward Supplies/Purchases received)
- GSTR-8 (Annual return)
· Custom-developed objects (RICEF) – It is recommended to test every form/layout, report, interface which involves fields related to taxes. Some changes may need to be carried out thru’ ABAP/4.
CXOs would also be interested in knowing how much budget should be allocated for GST implementation in SAP. Since the efforts vary greatly from organization to organization (depending on the scale and complexity involved), no number can be put here. What is common across all organizations (of all sizes) is, they would need resources with following skills for a typical SAP GST Implementation Project –
· SAP FI
· SAP MM
· SAP SD
· SAP ABAP/4
· SAP Basis
· Project Lead
The number (how many from each skill) and duration (person-weeks) would vary from case to case basis.
Good Luck & Happy Implementation!