This chapter covers the following topics:
All of the set ups described below are explained in detail in the Oracle Financials for India Implementation Guide. Refer to the corresponding topics in the Oracle Financials for India Implementation Guide for setting up details.
The Procure to Pay (P2P) cycle is vital to an organization as in this process the organization buys and receives goods or services from its vendors and makes necessary payments. This business process covers the process of requesting, purchasing, receiving, paying for and accounting for goods and services.
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 topic 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.
Prerequisite Setups
For the P2P cycle to work in the new GST architecture, the below setup needs to be defined:
Regime
Tax types
Tax types
Tax rates
Tax Categories
Tax Rules
Tax Defaulting basis
Item Classification
Claim term
Common Configuration
First and Third party Registration
A tax regime associates a common set of default information, regulations, regime type, fiscal classifications, tax calendar, tax authority, and registrations to one or more taxes with the same tax requirement rounding rule within this regime. Definition of tax regime is classified as the parent setup for 'Regime to Rate' configuration. The tax settlements and reporting are generally performed at regime level.
You can use the tax regime setup window to define tax regime code and name which is user configurable so that it can be easily understood and change.
If any regime is merged or taxes regime are scrapped or user has defined it wrongly etc., you can end date it.
You can assign the regime type as transaction and withholding, so this regime's tax type will use for transaction tax or withholding tax calculation.
You can assign the tax calendar to determine the tax recovery schedule in tax recovery management. For example, if your define specific claim term, claim schedule as next financial year, first day, this day will derive from the tax calendar's first day of next financial year. You can assign the tax authority to updating the repository and also in generation of the tax authority invoices for settlement or at the time of validation for TDS taxes.
You can assign the conversion rate type at regime level which will default to each tax line accordingly. You are requiring setup the rounding rule which have setup driven at regime level with date effectively.
If you want to add more attribute for the regime setup, reporting code is necessary for you to setup.
Under the proposed India GST regime, it is recommended to create one GST regime. The regime configuration will be common for all business organizations across one Legal entity.
Prerequisite
Before you can setup tax regime, you may need to complete one or more of these tasks:
Tax authority: need you setup the tax authority as supplier meanwhile it have the tax authority classification. (Mandatory)
Tax calendar: available calendar setup in General Ledger. (Optional)
Conversion Rate Type: defaulted conversion rate type. (Optional)
You define Tax types based on their compliance requirements. Whenever a new tax type is introduced, you can define new tax types with an end date when it is no more required or subsumed to another tax type. Map the Tax Type to a Tax regime with one too many parent child relationship between a tax regime and tax type. Set up details for the taxes of a tax regime. Each separate tax type in a tax regime includes records for the attribute and accounting that are used to calculate and report on the tax.
Tax types are defined carefully considering the compliance requirements for your organization. Classify the tax type as recoverable whenever a new tax type is created. This helps in taking the recovery of the taxes in the Purchase to Pay flows and though recovery management.
Configure tax type applicable to abatement. In abatement the tax can be a portion of the normal tax or tax can be computed on portion of the invoice. You can classify the tax type applicable for offset. Offset means the tax liability can be adjusted or cancelled off against the tax credit of any other tax type by setting up.
You define tax as reverse charge or self-assessed tax. In self-assessed tax the tax liability is on the buyer and not on the seller. Credit for such taxes is taken on payment to supplier or making payment to tax authority. In case of Order to Cash flows it is not charged to customer and update liability and in case of Purchase to Pay flows it will not be paid to supplier.
You classify tax type as reportable only. If tax type is classified as reporting tax then it does not update liability, recovery, Receivables, Payables or generate any accounting entries. Use reporting tax type mainly for sales under bond register or exports under letter of undertaking or for export sales.
You can enable the withholding tax applicable to let this tax type to use for withholding tax calculation only if this tax type's regime is withholding tax regime.
You are able to input the ledger operating unit, inventory organization and location could choose and assign the account combination for each tax type.
You can define the reporting code to better analysis or distinguish the attribute in tax type setup for reporting purpose.
Prerequisite
Complete one or more of these tasks before setting up tax type:
Set up tax regimes. (mandatory)
Set up ledgers, operation unit, inv organization and location, accounts. (mandatory)
Reporting code. (optional)
Set up tax rates for your tax regime and tax type for specific operating unit. Determine the tax rate type. The tax rate types have percentage based, unit of measure, adhoc or adhoc unit of measure tax rate types. Define tax recovery rates to claim full or partial recovery of taxes paid, if the tax type selected is applicable for recovery.
Classify tax rates based on the status, tax rates are classified or grouped based on the rates like high, standard, low, zero etc. You can define recovery rate at the tax rate level. Classify tax rates as inclusive tax. You can also define the exceptions for form tracking propose, using for tracking the form C transaction and so on. You can define the normal rate and also associate the abatement, if the tax type selected is enabled for allow abatement.
You can find the accounting information default from tax type, and allowed for changing at the tax rate level. You can end date the tax rate, recovery rate, accounting information for your change proposes.
Prerequisite
Complete one or more of these tasks before setting up tax:
Set up tax regimes. (mandatory)
Setup tax type. (mandatory)
Reporting code. (optional)
Tax Category is a mandatory setup to enable tax defaulting and automatic calculation at the transaction line level. Tax Categories are based on the taxes that are applicable to determine transaction and Tax Base Amount calculation.
You assign tax regime, tax type, tax rate to a tax category. Define upto 10 precedence and you can change the value at the transaction time. You attach operating unit to the tax category. Also, assign the item class to item category, at transaction time, specific item class defaults the tax category.
Prerequisite
Complete one or more of these tasks before setting up first party tax profiles:
Setup Operating unit. (Mandatory)
Setup item related information. (Mandatory)
Setup item classification. (optional)
Setup tax regime, tax type, tax rate. (Mandatory)
Taxes are default based on the item category assigned at the Customer or Supplier site level or from the Customer or Supplier Null Site or from the Tax Category which is assigned to a specific item class.
Prerequisite
Complete one or more of these tasks before setting up first party tax profiles
Setup Operating unit, inventory org and location. (Mandatory)
Setup item related information. (Mandatory)
Setup tax category. (Mandatory)
Taxes default based on the Ship From and Ship To along with the item classification, reporting code and so on.
Define your own item classifications to fulfill multiple industry requirements. These attributes decides if credit is taken on the item or it is a tradable item. Item attributes are seeded values as they determine the applicability of recoverable tax.
The item attributes is same across all the regimes.
List of item classification are:
Capital Goods Imported-IND
Capital Goods Indigenous-IND
Captive Consumption Imported-IND
Captive Consumption Indigenous-IND
Finished Goods for Imported-IND
Finished Goods Indigenous-IND
Others for Domestic Market-IND
Others for Export/Import -IND
Raw Material Imported-IND
Raw Material Indigenous-IND
List of item attributes seeded are:
Applicable
Recoverable
Abatement
TARIFF_NO
Status
Tax Calculated at Source item classification are mapped through Reporting Codes if there is a TCS solution.
Prerequisite
Complete one or more of these tasks before setting up first party tax profiles:
Set up Operating unit or inventory + location. (Mandatory)
Set up item related information (Mandatory)
Set up tax regimes. (Mandatory)
Set up tax reporting types. (optional)
Setup party involved in your transaction, parties include:
First Party: All legal entities, legal establishments, and operating units in your organization that have a transaction tax requirement.
Third Party: Your customers and suppliers and their locations.
Under first party or third party, each tax regime using transaction processes need to associate to it, which means operating unit and inventory and location owning tax content.
Testing