GST Functional P2P Flow

Pre-Release Document Oracl Oracle e Financials Financi als for f or India Indi a (OF (OFI) Goods Goo ds and Ser Ser vic vi c es Tax Tax (GST (GST)) Procure roc ure to Pay Functio Funct iona nall

Author:

Vaish Vaishali ali and Som deep (P2P) (P2P) Somdeep (Reverse (Reverse Charge and ERS ERS Invoic e)

Creation Date: 21-Mar-2016 Last Updated: 02-Mar-2017 Document Ref: Version:

1A

Organization: Oracle India Private Limited.

OFI-GST Procure to Pay Flow

1

Document Control

Change Record Record

Date

Author

Versio n

Change Reference

21-Mar-16 21-Mar-16

Vaishali and Somdeep Vaishali and Somdeep Vaishali and Somdeep

1A

Initial document

1.0

Phase-I fro zen doc ument

1.1 1.1

Modified the ERS ERS invoi ce flow chart to includ e running ADS (Pa (Pay y On Receipt Receipt AutoInvoice)’ Program separately Reverse Charge Process and ERS Invoice

30-Sep-16 30-Sep-16 30-Dec-16 30-Dec-16

02-Mar-17 02-Mar-17

Somdeep

2.0

Reviewers Name

Position

Rajnish Kumar V S Baburaj

Director, Tax Development Director, Product Strategy

Name

Position

Audi Au di ence enc e

12.1 12.1 & 12.2 12.2 Impl ementati on team 12.1 12.1 & 12.2 Custo mers


2

Table Table of Cont ents Pre-Release Document .............................................................................................................. 1 Document Control .................................................................................................................. 2 Phase1 ...................................................................................................................................... 6 1 – Introduction – Introduction .......................................................................................................................... 6 2 – Scope................................................................................................................................... 6 3 – Prerequisite Setups .............................................................................................................. 6 4 – Functional – Functional Flow .................................................................................................................... 7 5 – Requisition – Requisition to Purchase Order (Pre-PO- PO Documents) .................................................... 8 5.1 Flow Diagram ................................................................................................................... 8 5.2 Create Requisition ............................................................................................................ 9 5.3 India tax details form .......................................................................................................11 5.4. Create RFQ (Request for Quotation) ..............................................................................13 5.5 Creating Quotation ..........................................................................................................15 5.6 Create Purchase Order from the th e approved Requisition....................................................17 6 – Tax recalculation logic .........................................................................................................20 7 – Tax – Tax on receipts ...................................................................................................................20 7.1 Flow Diagram ..................................................................................................................20 7.2 Receipt Creation ..............................................................................................................21 8 – Tax Accounting on Receipts................................................................................................25 8.1 Accounting for Receipt Routing - Direct Direct Delivery and Standard Routing ........................27 8.1.1 Flow Diagram Diagram ............................................................................................................27 8.1.2 Direct Delivery – Recoverable Tax ............................................................................29 Tax ............................................................................29 ....................................................................29 8.1.3 Direct Delivery – Non-Recoverable Tax Tax ....................................................................29 8.1.4 Standard Routing - Recoverable Tax ........................................................................30


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8.1.5 Standard Routing - Non-Recoverable Tax .................................................................30 9 – PO/Receipt – PO/Receipt Matched AP invoice .........................................................................................31 9.1 Flow Diagram ..................................................................................................................31 9.2 Process and Accounting ..................................................................................................31 10 – 10 – Standalone Standalone AP Invoice ......................................................................................................35 10.1 Flow Diagram ................................................................................................................35 10.2 Process and Accounting ................................................................................................35 11 – 11 –Tax Tax Recovery Accounting (Interim) ....................................................................................37 11.1 Flow Diagram ................................................................................................................37 11.2 Process and Accounting ................................................................................................38 12 – 12 – Third Third Party Invoices ..........................................................................................................44 12.1 Flow Diagram ................................................................................................................45 12.2 Process and Accounting ................................................................................................46 13 – 13 – Costing Costing Effect – Effect – Accounting Accounting Entries ..................................................................................50 13.1 Average Costing................................................................................................................50 13.2 Standard Costing ...........................................................................................................51 Phase2 .....................................................................................................................................53 14 – 14 – Introduction Introduction .......................................................................................................................53 15 – 15 – Scope................................................................................................................................53 16 – 16 – Reverse Charge ................................................................................................................53 16.1 Model Law.........................................................................................................................53 16.2 GST Functionality of Reverse Charge ...............................................................................54 Flow Diagram ........................................................................................................................55 16.4 Configuration:....................................................................................................................56 16.5 HSN/SAC Code:................................................................................................................60 16.6 Linking of Reporting Code value to 3rd party p arty Registration: ................................................61


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16.7 Prepayment:......................................................................................................................62 16.8 Standard Invoice ...............................................................................................................64 16.10 Period Ending Process: ...................................................................................................66 16.11 Accounting...................................................................................................................69 17 – 17 – ERS ERS Invoice ......................................................................................................................69 17.2 Process and Accounting ................................................................................................71 16 – 16 – Summary...........................................................................................................................73 Summary...........................................................................................................................73 17 – 17 – Call to Action .....................................................................................................................74


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Phase1 1 – Introduction The Procure to Pay cycle (P2P) is vital to an organization as in this process the organization buys and receives goods or services from its vendors and m akes necessary payments. This business process covers the process of requesting, purchasing, receiving, paying for and accountin g for goods and services.

2 – Scope This document provides the details of Functional flow for ‘Oracle Financials for India’ (OFI) Procure to Pay cycle from GST point of view along with accounting entries. Note: This document provides the details of Functional flow for ‘Oracle Financials for India’ (OFI) Procure To Pay cycle from GST point of view along with accounting entries. Note: The current content has been compil ed in r eference eference to the frozen scope of the Phase-I deliverables deliverables (Ref: (Ref: GST Phase -1 Deliverables.docx)

3 – Prerequisi rerequisi te Setups Setups For the P2P cycle to work in the new GST architecture, the below setup needs to be defined Regime 



Tax types



Tax rates



Tax Categories



Tax Rules



Tax Defaulting basis



Item Classification



Claim term



Common Configuration



First and Third party Registration


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Flow Diagram To start with, this document facilitates with a flowchart which will all ow the users to get an outline of the setup flow for Procure to Pay Cycle. Some of the steps outlined in this flowchart are required and some are Optional. Required step with Defaults means that the setup functionality comes with pre –seeded, default values in the application. However, to ensure a successful setup, you need to review those defaults and decide whether to change them to suit your business needs. If you need to change the default values, you should perform the corresponding setup step. You need to perform Optional steps only if you plan to use the related feature.

Regime Registration R

Tax types (R)

Tax Defaulting basis (R)

Document sequence (O)

Define Item Classification (R)

Tax Rules (R)

Third Party Registration (R)

First Party Registration (R)

Tax rates (R)

Tax Categories (R)

Define Claim Terms R

Common Configuration (R)

Note: - In The above flow diagram R standard for ‘Required’ and O stands for ‘Optional’

4 – Functional Flow The P2P cycle comprises of the following steps, Create Requisition (Localization taxes – applied)

Create RFQ (Localization taxes – Applied)

Receipt creation (Localization taxes – Applied) Taxes are freezed Once Once receiving is done

Create Payable InvoiceLocalization taxes from receipts are copied to Invoice


Create Quotation (Localization taxes – Not Applied)

Create Purchase Order (Localization taxes – Applied)

Invoice Payment

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5 – Requisi tio n to Purchase Order (Pre-P (Pre-POO- PO Docum Docum ents) Every organization that operates a business has to purchase material such as raw materials services etc. The procurement process of any organization consists of many steps lik e material requirement planning, creation of purchase requisition, requisition, receiving quotations from various suppliers etc. Please refer to the the following section for details

5.1 Flow Flow Diagram

Create Requisition Enter Header/Line Info

Navigate to Tools India Tax Details. Tax category is defaulted based on defaulting mechanism defined

Create RFQ

 Tax

category is defaulted from requisition

Create Purchase Order and Approve

Navigate to Tools India Tax Details. Tax category is defaulted from requisition to Purchase order


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5.2 Create Create Requisit ion A purchase requisition is an internal internal request to purchase a material / service which will will have details of certain quantity of material or service on a certain date which is required b y the organization. To create requisition navigate to Responsibility  Oracle Purchasing

Requisitions  Requisitions

Enter Requisition Header:

The header holds the general information about the requisition that is related to all the lines. Choose the requisition type (here it is purchase requisition). Preparer is the default person who is creating the requisition and cannot be changed. You can give the description in the description field. Enter Requisition Line:

In the requisition line, select the item that you wanted to purchase and enter the quantity and need by date. In the Source details tab, you can input detailed information. You can give a specific note to the buyer which might give particular information related to this purchas e. RFQ required check box denotes that the purchase of the item requires a request for q uote. Requisitions can be added in any currency set up in EBS by identifying the currency code and exchange rate type on currency tab


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Click on distribution button and enter the charge account

Close the form and save your work. Click the ‘Approve’ button to submit this requisition for approval. Now navigate to Tools Defaulted.

 India

tax details form. T he India tax details form will show the tax category

For more information on the tax defaultation logic refer the ‘OFI-GST- Tax Defaultation flow’ document.


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Tax Category is defaulted

Notes:



Unlike earlier we will will no longer have Localized forms in the new GST GST solution and to view the tax details the navigation is Tools India tax details Tax category category defaulted based on tax defaultation logic can be manually Overridden at each each document level until the document is approved.

5.3 5.3 India tax details f orm

SL No

Field

Functional Description

Query/Enabled

1

Organization

Inventory Organization name

No

2

Location

Inventory Organization Location

No

3

Document Number

PO number

No

4

Revision / release Number

5

Currency

PO currency

No

6

Amount

PO line amount

No

7

Tax amount

Total tax amount

No

No


11

8

Total Amount

Total PO amount

No

9

Line Number

Po Line number

No

10

Item

Item Code

No

11

Item Description

Descript of the item attached to PO

No

12

Tax category

Tax category Defaulted based on defaulting Mechanism

Yes

13

Tax rate name

Tax type attached to the tax category

No

14

Tax type

Tax type attached to tax category

No

15

Tax point basis

Determines the point in which tax accounting is done. Gets defaulted from Tax type setup

No

16

Precedence

Gets defaulted from tax category setup

No

17

Tax conversion date

Date on which tax is calculated

No

18

Tax rate

Tax rate defined at tax rate setup

No No

19

Tax amount

Amount calculated for each tax type

No

20

Recoverable amount

Tax amount which can be recovered. Get populated only if the tax type is a recoverable

No

21

Recoverable

Get populated only if the tax type is a recoverable

No

22

Inclusive

Get populated only if the tax type is a inclusive

No

23

Self Assessed / reverse charge

Gets defaulted from tax type

No

24

Party name and Party type

Gets defaulted from PO

Yes


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5.4. 5.4. Create RFQ RFQ (Request (Request for Quotatio n) A Request for Quotation Quotation (RFQ) is a formal formal request sent to the the suppliers to find the pricing and other information for an item or items. Based on the information supplied, the supplier quotes a quotation against the RFQ RFQ form. form. In Oracle EBS, RFQ’s can be auto created from an existing Purchase Requisition or can be a fresh RFQ. Navigation to Auto create the RFQ is Responsibility  Oracle Purchasing (USA)

 Auto

Create and then query query the Requisition number

Your Requisition summary is shown in the next screen. Check box your Requisition line and in the Document Type, select RFQ and click Automatic button to Auto Create RFQ RFQ.. It will navigate to a new window. Here the RFQ Type is Standard RFQ and click create button

Select the line against which RFQ needs to be

Select the RFQ

In the next window, RFQ is auto created from an existing Purchase requisition.


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Click Suppliers button and enter the details of the Suppliers to whom you want to send this RFQ.

Click on Terms button and add payment terms and freight terms. Click Price Breaks button for entering pricing information for the RFQ. Now from the Tools

India tax details form, we can see that tax tax category is defaulted


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Tax category is defaulted

Save the transaction.

5.5 Creating Quotation A quotation is a supplier’s r esponse to RFQ. Now we will create quotations based on the response from the suppliers with relevant to RFQ which we have created in step 5.4.

To create a quotation from the RFQ, first query the RFQ. The below picture shows the completed RFQ.

Tools Copy Document


15

In the next screen, enter the details of quotation sent by the supplier. Click OK button.

Repeat the same steps if you want to create multiple quotation for multiple suppliers. Once the quotation is created, system will show the below m essage

Change the status of the quotation to Active and approve the quotation.


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Change status to active

5.6 Create Purchase Order from the approved Requisition Purchase Order (PO) is the formal request to a vendor to suppl y certain materials or services. A PO can be created with reference to a requisition or RFQ or another PO. Responsibility  Oracle Purchasing

 Auto

Create and then then query the Requisition number

Select Document type as ‘Standard PO’


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Your Requisition summary is shown in the next screen. Check box your Requisition line and in the Document Type, select standard PO and click Automatic button to Auto Create PO PO.. By clicking Automatic button, a standard PO is created created based on the details provided in the the Purchasing requisition. You can select Supplier either in the New Document form or in the Purchase Order form

Click on ‘Create’ Button to confirm the PO creation

After clicking on the Create Create button in the above screen a Standard PO is created as follows


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In the shipment form, Shipment number, Org, Ship-to, UOM, Quantity and Need-by-date are shown by default. These fields can be edited as needed. Even in the more tab and distribution details tab, the default values will be populated from requisition. Now, Navigate to Tools

 India

tax details.

The default tax category is automatically defaulted here

Tax category is defaulted from requisition level

Now approve the PO. No accounting entry happens when a PO is created. Note:

Unlike earlier we will no longer have Localized forms in the new GST solution and to view the tax details the navigation is Tools  India tax details


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recalculation logi c 6 – Tax recalculation As per the current current architecture, the tax defaultation defaultation engine should recalculate the taxes at at every document level. However if the tax is a lready defaulted / manually overridden at parent document level, then the same tax category gets defaulted for further documents until unless there is some change. If the master document does not have the tax category attached, then based on the tax defaultation logic the tax category will get defaulted at each document level .

7 – Tax on receipts Once the PO is sent to the s upplier, the supplier sends the goods to the organization. The goods now have to be received in Oracle.

7.1 Flow Flow Diagram Select the PO line Enter Inventory details

Navigate to Tools India Tax Details. Tax category is defaulted from PO level

Check on ‘Confirm ‘Confirm taxes’ Check box to freeze the tax category and it is mandatory to check

Navigate to Receipt form and Save the receipt

‘Receiving Transaction processor’ program will be fired and it will process Base / Localization tax details


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7.2 Receipt Receipt Creatio Creatio n Navigation for creating a receipt is Responsibility  Oracle Purchasing

 Receiving  Receipts

Enter the PO number and click Find button

Select the line against which receipt needs to be created

Shows the PO details against which receipt is created

Check the Lines you want to receive and enter the sub inventory details In the lower part of the screen, Purchasing displa ys the following detail information for the current shipment line: Order Type, T ype, Order Number, Source, Due Date, Item Description, Hazard, Destination, UN Number, Receiver Note, and Routing. Now if we navigate to Tools

 India

tax details, we can see that tax category is defaulted here also.


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Tax category defaulted

Now we have to click on ‘confirm taxes’ check box to freeze the tax category. Once this check box is checked, overriding the tax category is not possib le. Note: 





If a receipt is saved without checking the ‘Confirm Taxes’ check box, the Receiving T ransaction Processor program will end in error and no receipts will be created. In GST solution ‘India Receiving Transaction’ Processor program will not be triggered and h as no relevance. Unlike earlier we will will no longer have Localized forms in the new GST GST solution and to view the tax details the navigation is Tools India tax details

Once the check box is checked, below message will appear


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‘Confirm Taxes’ check box needs to be checked to freeze the taxes before receipt creation

Confirmation message once the taxes are freezed

Click on Header and save the receipt to get the receipt number

Once the receipt is saved, system automatically triggers the “Receiving Transaction Processor” (RTP) concurrent. Unlike earlier, now “India Receiving Transaction Processor program” will not be fired. The base Receiving Transaction Processor concurrent itself will process the India localization tax details.


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Receiving transaction processor program is fired after receipt creation and it will create / process both base receipt detail as well as Localization tax details

Once the RTP concurrent is completed, in the Receiving transaction W indow we can see that receipt processing has already happened


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Receipts 8 – Tax Accountin g on Receipts Based on the tax point basis, tax types like recoverable / non-recoverable, different routing method adopted, different accounting entries will get generated at different stages. The accounting entry generated after the receipt creation and this is the core accounting Event

Ac co un t

Receiving Inventory

Debit

Credit

Line Amount

Receipt Inventory AP Accrual

Line Amount

For the India tax details, the belo w lines are inserted in GL_INTERFACE GL_INTERFACE table after the Receiving transaction processor program is completed.


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The below script can be used extract data from GL_INTERFACE GL_INTERFACE Select gcc.segment1, gcc.segment2,gcc.segment3,gcc.segment4,gcc.segment5,gi.code_ combination_id,gi.entered_dr,gi.entered_cr,gi.user_je_category_na me,gi.reference10 from gl_code_combinations gcc, gl_interface gi where gi.date_created like sysdate and gi.code_Combination_id = gcc.code_Combination_id and reference10 like '%Receipt number%';

Below accounting entry is generated for each tax t ype Event

Ac co un t

Receiving Inventory

Debit

Credit

Tax Amount



Tax Amount

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8.1 8.1 Accou nting for Receipt Receipt Routing - Direct Delivery Delivery and and Standard Standard Routin Routin g 8.1.1 Flow Diagram Create PO

Receipt

Routing set to

Direct Delivery

Standard Routing

Navigate to Tools India Tax Details. Attach Category recoverable or Nonrecoverable

Navigate to Tools India Tax Details. Attach Category recoverable or Nonrecoverable

Navigate to Receipt form and select the PO line for receipt creation

Navigate to Receipt form and select the PO line for receipt creation

Navigate to Tools India Tax Details. Check ‘Confirm taxes’ check box.


‘Receiving Transaction processor’ program will be fired and it will process Base / Localization tax details. Both Receiving and Delivery transaction will be created.

Lines are inserted in GL_INTERFACE table for tax accounting (refer query mentioned in Chapter 8 to extract the data)

‘Receiving Transaction processor’ program will be fired and it will process Base / Localization tax details. Only Receiving transaction will be created.


Perform the Receiving transaction by navigating to Purchasing Receiving  Receiving transactions


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When a recoverable tax category is attached, in India tax details form (both at PO and receipt level) the Recoverable check box will be checked and recoverable amount will be populated.

Recoverable check box is checked and Recoverable amount is calculated. Note: 

For a tax type to to be recoverable, the below below setup has to be in place -

Recoverable check box needs to be checked at Tax type Setup

-

Recoverable option needs to be set to ‘Yes’ in item classification setup

-

Claim term has to be defined for the Tax type.

If any of the above setup is missing, then the tax type will be treated as a non-recoverable tax. When a non-recoverable tax category is attached, in India tax details form (both at PO and receipt level) the Recoverable check box will be unchecked and recoverable amount will not be populated.


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Recoverable check box is unchecked and Recoverable amount is not calculated.

8.1.2 8.1.2 Direct Deli Deli very – Recoverable Tax The accounting entry generated in GL_INTERFACE is Event

Ac co un t

Debit

Tax Interim Recovery

Credit

Tax Amount

Receipt Inventory AP Accrual A/c

Tax Amount

8.1.3 8.1.3 Direct Deli Deli very – Non-Recoverable Tax Tax The accounting entry generated in GL_INTERFACE is Event

Ac co un t

Receiving Inventory

Debit

Credit

Tax amount



Tax amount

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8.1.4 8.1.4 Standard Standard Routin g - Recoverabl e Tax Tax The accounting entry generated in GL_INTERFACE is Event

Ac co un t

Debit


Credit

Tax Amount


Tax Amount

8.1.5 8.1.5 Standard Routi ng - Non-Recoverable Tax The accounting entry generated in GL_INTERFACE is Event

Ac co un t

Receiving Inventory

Debit

Credit

Tax Amount


Tax Amount

Note: 

The non –recoverable tax amounts need to be added to item cost. So after delivery transaction, lines MTL_MATERIAL_TRANSACTIONS NS (MMT) and MTL_TRANSACTION_ACCOUNTS (MTA). are inserted in MTL_MATERIAL_TRANSACTIO

For more information on queries that can be used to find out the details of t he lines inserted in the MMT and MTA tables, refer document 1065343.1. 

Period End Accrual functionality which which is not supported in current architecture will will not be supported supported even in GST solution.


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O/Receipt ceipt Match Matched ed AP inv oice oic e 9 – PO/Re In oracle payables an invoi ce can be created by using the purchase order / receipt information from purchasing system to enable online matching with invoices. Invoiced or billed items are matched to the original purchase orders / receipt created to ensure that i nvoice is created only for goods or services you ordered and/or received.

9.1 Flow Diagr am Create Invoice  Match Action ‘Receipt’

Click on Match option

Select

receipt  Click on Match button

Line / distribution details are defaulted from Recei Recei t level level to to Invoi Invoice ce

Navigate to Tools India Tax Details. The tax category is defaulted from Receipt to invoice

Since Tax point basis was Delivery, the taxes are freezed in India Tax Details form

Validate and Run Create accounting

9.2 9.2 Process Process and Ac counti ng Create Payables invoice Responsibility: Payables responsibility to create an AP invoice Navigation: Invoice Entry Invoices Create an Invoice for supplier against whom PO /receipt is created. Invoice Header In invoice header level, select the operating Unit, invoice type and enter the PO number i.e. 65 in our example. Once you select the PO number, supplier name and Site automatically gets defaulted from the PO.


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Matching Receipt to the invoice

To create a receipt matched invoice, the match type in Invoice header should be “Receipt”.

Match Action is set to ‘Receipt’

We shall not enter the invoice line / distribution details as this will come automatically from matching the invoice with Receipt.


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The next step would be to Click on Match button in Invoice work bench a nd query for the Receipt which we are intending to match to the invoice and click on find.

Query the Receipt

Select the line which needs to be matched to the invoice and click on Match button

Click on ‘Match’ button to default distribution details from receipt to Invoice


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Now we can see that the line details and Distribution details at invoice level is automatically populated from PO / receipt.

Tax Defaultation Now if we navigate to Tools  India tax details, we can see that Taxes which are defaulted at receipt are defaulted at invoice level as well

Tax category from Receipt got defaulted to Invoice

Tax Point basis is set as ‘Delivery’

Now validate the invoice and run Create accounting. Accounting entry generated

The accounting class for the tax type is set as ‘Miscellaneous’


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Invoi ce 10 – Standalon e AP Invoice Standalone AP Invoices will be raised for non-item based expense or service activities and they will not have any reference to any purchasing documents lik e PO, receipt etc. These invoices are directly created in invoice work bench by manually entering the supplier details and distribution details. As Item information information is not available for such invoices, Item-based Item-based taxes will not be applicable for standalone invoice.

10.1 10.1 Flow Diagram Enter the Header details like invoice type, Supplier Name, site etc

Click on Line Items and fill the line level and distribution details

Naviga Navigate te back back to Header Header.. Tools Tools India Tax details

Pick the Organization and location. The same is required for adding taxes/tax defaultation if any

Validate and Account the invoice

Lines are inserted in GL_INTERFACE GL_INTERFACE table for tax accounting (refer query mentioned in Chapter 8 to extract the data)

Tax details can be viewed in India Tax Details form / View accounting (Accounting class ‘Miscellaneous Ex ense’

10.2 10.2 Process Process and Accoun ting Responsibility: Payables responsibility to create an AP inv oice Navigation: Invoice  Entry  Invoices In invoice header level, select the operating Unit, invoice type, Supplier name and site d etails etc. Now navigate to Line level details and enter the Line and distribution Details


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Now navigate to Tools

 India

tax details

Enter the Organization and Location details

Tax category defaulted

The tax point basis is ‘Invoice’ Based on the tax default rule we have setup, the ‘P2P testing 2’ tax category is defaulted automatically. Below we can also see the Taxes attached to the ‘P2P testing 2’ category.

Once the Organization and location details are entered, save the transaction and navigate back to invoice work bench and validate and Account the i nvoice. The accounting entry generated at this stage is

Tax lines are generated with accounting class as ‘Miscellaneous Expense’


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Recovery Accoun ting (Interim) (Interim) 11 –Tax Recovery Users have the flexibility of selecting the Tax Point Basis (TPB) while defining the T ax Types based on which the accounting will happen at differently. In the same way the recovery process can also be done at different stages based on the Tax Point Basis. T hey are

11.1 11.1 Flow Diagram Create PO Enter header / line details

Navigate to Tools India Tax Details. Attach tax category with Recoverable tax type and TPB as Delivery

Navigate to Receipt form and select the PO line line for recei recei t creati creation on


‘Receiving Transaction processor’ program will be fired and it will process Base / Localization tax details


Navigate to Tools India Tax Details. From Menu open

Enter the claim details and click on  populate values

Select the lines which needs to be processed  Enter claim term details click on Process option


The processed line status is changed from ‘Pending Recovery’ to ‘Recovered’


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11.2 11.2 Process Process and A ccount ing Once the receipt accounting is done, for a receipt with recoverable taxes, The accounting entry is generated in GL_INTERFACE is Event

Ac co un t


Debit

Credit

Tax Amount


Tax Amount

Once the receipt accounting is done, to process recovery amount, navigate to


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Now in India tax details form navigate to

Tools Process Claims


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In the Claim details form enter the tax invoice number and tax invoice date and enter the Action as ‘Recover’ Enter the tax information Details

Once the above details are entered click on ‘Populate Values’ button which will populate the tax invoice number and tax invoice date to all the tax lines

Click on ‘Populate values’ button to default the Tax invoice information details to each line level. Post that each line will have the tax invoice number, date information entered at header level.

Now select the tax line which you want to process or you can also choose Select all option if you want to process all the tax lines. Also before processing the field ‘Intended Use’ needs to be populated.


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Enter Intended use option Manufacturing or Non Manufacturing

Once the above information’s are entered, click on ‘process’ button. Below confirmation message will be shown

Confirmation message for Recovery Processing Now we can see that Status of the tax line is changed from Pending Recovery to Recovered


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The line status is changed rom ‘Pending recovery’ to f rom ‘Recovered’ In the above case, only 50% of the tax amount is recovered and other 50% is pending for recovery on next month. That is because of the claim term ‘GST Claim Term’ Setup. As the setup of claim term GST Claim Term’ is

Also, the once the recovery recovery is processed, The accounting entry is generated in GL_INTERFACE is


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Event

Ac co un t

Tax Recovery Recovery

Debit

Credit

Recovered Amount


Recovered Amount

Note: 

Interim recovery to recovery – currently recovery process is manually done via process recovery option and this will be an Interim Solution. We are checking the feasibility to automate the entire process.


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12 – Third Party Invoices Third party invoice functionality provides provision to pay to the Vendor other than the PO Vendor. This will be required for paying the services offered by other Vendors related to that PO. An approved Invoice for the Non-PO Vendor will be created automatically when the invoice is created via payable open interface.

For using the third party invoice functionality, the tax type attached to the PO should have the

‘Update vendor on transaction’ check box should be checked at tax type definition.


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12.1 12.1 Flow Diagram Create PO  Enter header and line information

Navigate to Tools India Tax Details. Attach tax category with ‘Update vendor on transaction’ check box checked

Navigate to Receipt form and select the PO line for re ceipt creation

Navigate to Tools India Tax Details. Change the party Name and party site at tax type level  Click apply. Click on ‘Confirm taxes’ Check box

Four concurrent requests are triggered    

Receiving Transaction Processor ADS (Pay On Receipt AutoInvoice) Third party Payables Open Interface Import Payables Open Interface Import


Payables Open Interface Import – Imports Invoice for Item line for PO vendor and Third party Payables Open Interface Import - Imports Invoice for tax line for Non PO vendor

Validate and Account both Standard Invoice and Third party Invoice


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12.2 12.2 Process Process and A ccount ing Create a purchase order with tax type which has ‘Update vendor on transaction’ check box checked at tax type setup.

In Receipt form, before saving the receipt navigate to Tools  India tax details. Change the ‘Party Name’ and ‘Party site’ to a new vendor and click apply button to save the changes

Change the Party Name and Party Site to a Non PO vendor

Click Apply to save the changes Note:

The third party vendor details can also be updated at PO level and if it is updated at PO level, the same gets defaulted to receipt level as well. Now click on confirm taxes check box to freeze the tax details


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Now once the receipt is saved, s ystem automatically fired the below concurrent

Below concurrent are fired

In the above request set, the program ‘Third party Invoices - Payables open interface Import (Payables Open Interface Import)’ creates the Third party invoice against the Non –PO vendor and ‘Payables Open Interface Import’ program creates the invoice against the vendor in the PO. The output of the ‘Third party Invoices - Payables open interface Import’ shows invoice for ta x amount has been created against the third party vendor.


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Invoice created against Third party vendor

The output of ‘Payables Open Interface Import’ program shows the invoice details created against the PO vendor.

Invoice created against PO vendor

Now in invoice work bench, when queried, the invoice created against PO vendor will show the Item + tax amount in India tax details form even though invoice line level only item line amount is reflected.


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Below accounting is created for the third party invoice


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13 – Costing Effect – Accounting Entries 13.1 13.1 Average Cost Cost ing In a average costing organization, the below accounting is generated for A. Recoverable Taxes After receipt Accounting Event

Ac co un t

Interim recovery A/c Receipt

Debit

Credit

Tax Amount

Inventory AP Accrual A/c

Tax Amount

After Recovery Event

Ac co un t

Tax Recovery

Debit

Credit

Tax Amount

Receipt Tax Interim Recovery

Tax Amount

In case of recoverable taxes, the MTL tables will not be impacted / hit with the tax amount.

B. Non Recoverable Taxes After receipt Accounting Event

Ac co un t

Receiving Inventory

Debit

Credit

Tax Amount



Tax Amount

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Once the delivery transaction is done, MTL_TRANSACTIONS_INTERFA MTL_TRANSACTIONS_INTERFACE CE table gets updated with nonrecoverable tax amount and the same gets added to item cost. Accounting entry at that stage will be Event

Ac co un t

Material

Debit

Credit

Tax Amount

Receipt Receiving inventory

Tax Amount

13.2 13.2 Standard Standard Cos ting tin g In a standard costing organization, the below accounting lines are inserted in GL_INTERFACE GL_INTERFACE table once the Receiving transaction is completed A. Non-Recoverable taxes

Accounting entry for PO receiving Event

Ac co un t

Receiving Inventory

Debit

Credit

Tax Amount


Tax Amount

Accounting entry for Delivery transaction is Event

Receipt

Ac co un t

Purchase Price Variance

Debit

Credit

Tax Amount

Receiving Inventory

Tax Amount

Note: In case of standard costing Organization, the MTL tables will not be impacted / hit with the tax amount.


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B. Recoverable taxes

After receipt accounting, accounting, the accounting entry generated generated in GL_INTERFACE GL_INTERFACE is Event

Ac co un t

Interim Recovery

Debit

Credit

Tax Amount

Receipt Receiving Inventory

Tax Amount

Once the recovery is done, the accounting entry generated in GL_INTERFACE is Event

Ac co un t

Recovery

Debit

Credit

Tax Amount

Receipt Interim Recovery

Tax Amount

Note: 



There is no relevance of PO destination in GST architecture. Whether the destination is ‘Expense’ or ‘Inventory’ the accounting treatment will be same.

The accounting accounting impacting on costing and OPM OPM remains same same as it is in current current architecture. architecture.


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Phase2 14 – Introduction The Procure to Pay cycle (P2P) is vital to an organization as in this process the organization buys and receives goods or services from its vendors and m akes necessary payments. This business process covers the process of requesting, purchasing, receiving, paying for and accountin g for goods and services. The OFI functionality lets you satisfy all business needs related to Tax calculation required for a Reverse Charge Transaction and ERS Invoice.

15 – Scope This document provides the details of Functional flow for ‘Oracle Financials for India’ (OFI) Procure to Pay cycle from GST point of view along with accounting entries. Note: This document provides the th e details of Functional flow for ‘Oracle Financials for India’ (OFI) Reverse Charge and Pay On Receipt (ERS) cycles from GST point of view along with accounting entries. Note: The current content has been compiled in reference to the frozen scope of the Phase-2 deliv erables (Ref: GST Phase -2 Deliv Deliv erables.doc x)

16 – Reverse Charge 16.1 Model Law “Reverse charge’’ means the liability to pay tax by the recipient of supply of goods or services instead of the supplier of such goods or services in respect of such categories of supplies as notified under sub-section (3) of Section 8. The concept of Reverse Charge existed earlier under the Service Tax provisions for services like W orks Contract, Manpower, Manpower, Goods transport Agencies, Legal mechanism has been introduced both f or services etc., However, under the GST, Reverse charge mechanism Goods and Services. Services . Accordingly, all other provisions of this this Act and CGST CGST Act, as applicable, will apply to the recipient of such goods and / or services, as if the recipient is the supplier of such goods and / or services i.e. for the limited purpose of such transactions, the recipient would be deemed to be the ‘supplier’ Section 12( 12(3) 3) talks about Time of supply of Goods, wherein for Reverse Charge cases, the time of supply would be the earliest of the following dates: (a) The date of the receipt of goods , or (b) The date on which the payment is made, or (c) The date immediately following thirty days from the date of issue of invoice by the supplier:


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While the above said concept is already prevalent under the Service T ax regulations, the concept is altogether new under the Excise and especially VAT, where predominantly the point of determinants were removal from factory and sale. Section 13 (3) (3) talks about Time of Supply of Services, wherein for Reverse Charge cases, the time of supply would be the earliest of the following dates (a) The date on which the payment is made, or (b) The date immediately following sixty days from the date date of issue of invoice by the supplier

In case, it is not possible to determine the time of supply of services under the above said options, the time of supply shall be the date of entry in the books of account of the recipient of supply.

16.2 16.2 GST GST Functi onali ty of Reverse Reverse Charge As per the Model law requirement, we need to capture the Reverse Charge on Prepayment . Below are the salient features of the Reverse Charge functionality on Prepayment:   





‘Self Assessed’ Assessed’ on Prepayment. We need to calculate the tax as ‘Self (Servi ces) codes in Prepayment. There is the requirement to capture the HSN (Goods) o r SAC (Servi Also, we need to account the liability of Reverse Reverse Charge on Prepayment. Prepayment. GST GST laws specify that it Reversal versal entry ins tead of Net Net Off entr y on Prepayment application t o standard should be Re invoice with Reverse charge taxes. Need to have the Repository update on the Reverse Charge taxes of Prepayment as well as the accounting. The Ac co un ti ng of Rever se Ch arg e tax es t o t he Per io d En d Pr oc ess in g C on cu rr ent which has been introduced as a part of Model law feature. This will avoid m ultiple accounting adjustments happening in the invoice life cycle and will consider the net consolidated value in the period end process.


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Flow Diagram Configure HSN/SAC Code in the seeded Reporting Type

Create a Prepayment Invoice having Reverse Charge Taxes attached to it and HSN/SAC code attached

Validate and Pay the Prepayment Invoice

Create a Standard Invoice having Reverse Charge Taxes attached to it and same HSN/SAC code attached as well

Validate the Standard Invoice

Apply the Prepayment Prepayment to Standard Invoice Invoice based on lines having same HSN and SAC codes

Repository will get updated

Run the Period End Process in ‘Save’ and then in ‘Final’ modes


Lines are inserted in GL_INTERFACE GL_INTERFACE table for tax liability accounting

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16.4 16.4 Configuration : Regime: Regime Type: Transaction Tax Tax Authority: GST Tax Authorit y

Tax Type: Self Assessed/Reverse Charge: 'Y'

Mandatory checkbox for Reverse Charge Taxes


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Tax Rate:


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Tax Category:

Third party Registration:


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Tax Rule: Define the Tax Rule based on business requirement

Claim Term:


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16.5 HSN/SAC Code: 1. 2. 3. 4.

HSN Code is meant for Goods. For inventory item(reporting item(reporting code only for item) SAC Code Code is meant for Services. For For non inventory item(reporting code for both 3rd party and item) New seeded seeded Reporting Types are introduced to capture the details. These Reporting Types are User configurable. At transaction transaction level we we have the the flexibility to to modify the HSN/SAC HSN/SAC code defaulted from 3rd Party Registration or Item Classification

Seeded Reporting Types for HSN and SAC codes. 1. 2. 3.

SAC Code for Non Inventory Item: GST_SAC_CODE_ITEM SAC Code for 3 rd Party: GST_SAC_CODE_TP HSN Code for Item: GST_HSN_CODE


Entity is 3 rd party which means we will have to attach the Reporting Code value to the 3 rd party Registration. Likewise, if Entity is Item then the Reporting Code value to be attached to Item Classification.

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Attached the Reporting Code value to the Third

16.6 16.6 Link ing o f Reporting Code value to 3rd party Registration:


party Registrations

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16.7 16.7 Prepayment: In prepayment we have the provision to attach the Reverse Charge taxes unl ike the current architecture.

In the current architecture the “India Tax Details” UI was not

Defaulted from Third Party Registration

enabled but here its enabled

though the field has the flexibility to change the value

Organization and Location is mandatory

Defaulted from Tax Type setup


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Validate and Pay the Prepayment:


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16.8 16.8 Standard Invo ice

Mandatory

SAC Code should be same as that of PP invoice


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Note: 







When you are going to create a Reverse Charge for a Prepayment you are accounting the tax liability. Again when you create the AP invoice for which the TPB is set, you are going to calculate for the full value and when the Prepayment is applied, the system will check if the SAC/HSN SAC/HSN codes are same in both b oth documents and if those are same then it will allow you to trigger an offset entry for the Reverse Charge which is calculated on PP. If SAC SAC code is entered, HSN code will be disabled. So both SAC and HSN codes are mutually exclusive. Prepayment can have 2 lines having multiple HSN/SAC codes, only the adjustment will be by grouping of HSN/SAC codes. Application will be done at line level by grouping of HSN/SAC codes. So the system will allow to appl y those lines of prepayment where HSN/SAC codes are same. Prepayment VALIDATE, Standard Invoice VALIDATE and Prepayment Prepayment APPLICATION does not not create any accounting. Only period Ending process will create ac counting and update the repository.

16.9 Prepayment Application


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16.10 Period Ending Process:   

Data should get populated into the Repository (table jai _rg m_r eco ver y_l in es) once the prepayment is applied to the Standard invoice account ing Based on the data populated, the Period Ending Process shall create the account in GL For Standard Standard invoic e there will b e a record inserted int o the repository table with liabilit y account and for Prepayment also there will be a liability account . Once Once the Prepayment Prepayment is applied to Standard Standard Invoi ce, there will be a negative Reversal Reversal entry against liability to adjust the prepayment application.


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Period Endin g Process is introduced for the period ending A new concurrent program: India - Period process. There are 2 valid modes of running the period end process a. Save - In this mode, the invoices will be prepared for GSTN and the user can view those details and they can upload the information to the GSTR b. Final - In this mode all the records will be locked and the accounting will get created in GL

Running the program in Save mode:

The status of the Repository against the transaction can be found out by the column: REPORTING_STATUS_FLAG which will be marked as ‘S’ when the program is run in Save m ode


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Running the program in Final mode:

The status of the Repository against the transaction can be found out by the column: REPORTING_STATUS_FLAG which will be marked as ‘RF’ (Ready to File) when the program is run in Final mode. Once it’s filed, the system system will not allow any adjustment adjustment to the invoice. So the user can go and take the data and file it to GSTN At th is po in t o f t im e the t he L IAB ILITY ILIT Y Ac co un ti ng wi ll get gen erat ed. So w it h t he Per io d en d Pr oc ess in Final mode the system will generate Liability accounting and Adjustment accounting in GL


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16.1 16.11 1 Acc ountin g Once Period End Process Program is completed The accounting entry generated in GL_INTERFACE is Event

Period End Process

Ac co un t

Liability

Debit

Credit

Tax Amount

Suspense

Tax Amount

17 – ERS Invoice Payment on Receipt enables the user to automatically create standard, unapproved invoices for payment of goods based on receipt transactions. Invoices are created using a combination of receipt and purchase order information that eliminates duplicate manual data entry. It automatically creates invoices with multiple items and distribution lines, and includes tax. Payment on Receipt is also k nown as Evaluated Receipt Settlement (ERS).


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17.1 Flow Diagram Create PO for Supplier / Supplier site which has ERS Invoice setup

Navigate to Terms  Set ‘Pay on’ option to ‘Receipt

Navigate to Tools India Tax Details. Tax category is defaulted based on defaulting mechanism defined

Create a receipt Check the ‘Confirm taxes’ check box

Receiving Transaction Processor program will be triggered

Lines are inserted in GL_INTERFACE table for tax accounting (refer query mentioned in Chapter 8 to extract the the data data

Run the ADS ‘ADS (Pay On Receipt AutoInvoice)’ Program

ERS invoice is imported to Payables

Validate the ERS invoice and run create accounting


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17.2 17.2 Process Process and Accoun ting Create a purchase with Pay on option set to ‘Receipt’. Once the PO is approved, create a receipt. Once the receipt is saved, ‘Receiving Transaction Processor’ program will be triggered automatically. After successful completion of ‘Receiving Transaction Processor’ program, run the ‘ADS (Pay On Receipt Autoinvoice) program:-

 



Receiving Transaction Processor ADS (Pay On Receipt Receipt AutoInvoice) Payables Open Interface Import

Once receiving transaction processor program is completed The accounting entry generated in GL_INTERFACE is Event

Ac co un t

Receiving Inventory

Debit

Credit

Tax Amount


Tax Amount

The output of payable Open interface program, the ERS invoice number which got created will be displayed


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ERS invoice number which got imported to payables

When we query the invoice number in invoice work bench and navigate to Tools  India tax details form, the tax category has defaulted from receipt level.

Tax category is defaulted from Receipt. Since confirm taxes check box is checked at receipt level, the fields are freezed at invoice level


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Once the invoice is validated and Accounted, the below accounting entry is generated by navigating to Tools

Notes: 1.

For both Recoverable Recoverable and Non recoverable taxes, the tax lines will will hit the AP Accrual Expense Account 2. For ERS invoices, the TPB should always be set at ‘DELIVERY’

16 – Summary The above document will provide the below benefits:      

Transaction flow in different stages of P2P in Oracle GST solution. Summary accounting entries generated at each stage Major difference between the current current India India Localization structure and the GST solution. This document will help you understand understand the different scenarios / transaction transaction flows in P2P cycle Reverse Charge Process ERS Invoice


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17 – Call to Action This is not the final document and further changes shall be incorporated as a nd when there are any further updates from Product Management / Development teams in regards to the changed features/functionality or pending product clarifications, if any. You can also refer the documents in GST Info Center (Documentation Tab) released as part of Phase2 deliverables. E-Business Suite Release 12: India Goods and Service T ax (GST) Info Center (Doc ID 2176820.2)


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GST Functional P2P Flow

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