Geography Tax Determining Factor

Tax Determining Factors (TDFs)

TDFs are categorized into logical groupings called tax determining factor classes. Each tax determining factor class contains determining factor names that constitute the contents of the class.

This table outlines TDF details required to fulfill the given scenario:

Attribute	Value	Comments
Tax Determining Factor Class	Geography	This determining factor allows the use of First-Party Tax Registration Number and Ship from and Bill to locations as criteria in the tax determination process for Inbound and Outbound transactions as per event class given in the tax applicability rule.
Tax Determining Factor Name	State	This determining factor name checks for the state involved in a location.

Attribute

Value

Comments

Tax Determining Factor Class

Geography

This determining factor allows the use of First-Party Tax Registration Number and

Ship from and Bill to locations as criteria in the tax determination process for

Inbound and Outbound transactions as per event class given in the tax applicability rule.

Tax Determining Factor Name

State

This determining factor name checks for the state involved in a location.

Tax Applicability Rule Creation for Inbound Transactions (Purchase Transaction)

To enable Tax Applicability Rule Creation for Inbound Transactions (Purchase Transaction), follow these steps:

Create Tax Determining Factor Sets

Create Tax Condition Sets using these attributes:

This table displays the attributes for Tax Condition sets:

Attributes	Values	Comments
Tax Condition Set I (GST1 Applicable)
Tax Condition Set Code	GST1_TCS_PUR	User Discretion
Tax Determining Factor Set Code	GST_TDF	Tax determining factor set that you created
Operator	Not equal to determining factor	Determining Factor
Value	Ship from	Consider Ship from state
Tax Condition Set II (GST2/GST3 Applicable)
Tax Condition Set Code	GST2 &3_TCS_PUR	User Discretion
Tax Determining Factor Set Code	GST_TDF	Tax determining factor set that you created
Operator	Equal to determining factor	Determining Factor
Value	Ship from	Consider Ship from state

Create Tax Rules using these attributes:

This table provides the tax applicability rules for GST1 and GST2.

Attributes	Values	Comments
Tax Applicability Rule (GST1)
Rule Code	GST1_Purchase	User Discretion
Tax Regime	GST	Select the regime from the LOV.
Tax	GST1	Select from the LOV.
Event Class	Purchase transaction	Select from the LOV. This rule applies to all purchase transactions.
Tax Determining Factor Set Code	GST_TDF	Tax determining factor set that you created.
Tax Conditions
Tax Condition Set Code	Result	Comments
GST1_TCS_PUR	Applicable	GST1 applies if the First-Party Registration Number state <> Ship from location.
Tax Applicability Rule (GST2)
Rule Code	GST2_Purchase	User Discretion
Tax Regime	GST	Select the regime from the LOV.
Tax	GST2	Select from the LOV.
Event Class	Purchase transaction	Select from the LOV. This rule applies to all purchase transactions.
Tax Determining Factor Set Code	GST_TDF	Tax determining factor set that you created.
Tax Conditions
Tax Condition Set Code	Result	Comments
GST2&3_TCS_PUR	Applicable	GST2 applies if the First-Party Registration Number state = Ship from location.
Tax Applicability Rule (GST3)
Rule Code	GST3_Purchase	User Discretion
Tax Regime	GST	Select the regime from the LOV.
Tax	GST3	Select from the LOV.
Event Class	Purchase transaction	Select from the LOV. This rule applies to all purchase transactions.
Tax Determining Factor Set Code	GST_TDF	Tax determining factor set that you created.
Tax Conditions
Tax Condition Set Code	Result	Comments
GST2&3_TCS_PUR	Applicable	GST3 applies if the First-Party Registration Number state = Ship from location

Tax Applicability Rule Creation for Outbound Transactions (Sales Transaction),

To enable Tax Applicability Rule Creation for Outbound Transactions (Sales Transaction), follow these steps:

Create Tax Determining Factor Sets using these attributes:

This table displays the attributes for Tax Determining Factor Sets:

Attributes	Values	Comments
Tax Determining Factor Set Code	GST_TDF2	User Discretion
Tax regime Code	GST	Select the GST Regime.
Tax Determining Factor Class	Geography	This factor uses the location where the transaction occurred.
Tax Class Qualifier	First Party Tax Registration Number	Compares the First-Party Tax Registration location with Ship from location.
Tax Determining Factor Name	State	Geography type as State

Create Tax Condition Sets using these attributes:

This table displays the attributes for Tax Condition sets:

Attributes	Values	Comments
Tax Condition Set I (GST1 Applicable)
Tax Condition Set Code	GST1_TCS_SAL	User Discretion
Tax Determining Factor Set Code	GST_TDF2	Tax determining factor set that you created.
Operator	Not equal to determining factor	Determining Factor
Value	Bill to	Consider Bill to State
Tax Condition Set II (GST2/GST3 Applicable)
Tax Condition Set Code	GST2 &3_TCS_SAL	User Discretion
Tax Determining Factor Set Code	GST_TDF2	Tax determining factor set that you created.
Operator	Equal to determining factor	Determining Factor
Value	Bill to	Consider Bill to State

Create Tax Rules using these attributes.

This table displays the attributes and values to create tax rules:

Attributes	Values	Comments
Tax Rate Rule I
Rule Code	GST1_sales	User Discretion
Tax Regime	GST	Select the regime from the LOV.
Tax	GST1	Select from the LOV.
Event Class	Sales transaction	Select from the LOV. This rule applies to all sales transactions.
Tax Determining Factor Set Code	GST_TDF2	Tax determining factor set that you created.
Tax Conditions
Tax Condition Set Code	Result	Comments
GST1_TCS_SAL	Applicable	GST1 applies if the First-Party Registration Number state<> Bill to location.
Tax Rate Rule II
Rule Code	GST2_sales	User Discretion
Tax Regime	GST	Select the regime from the LOV.
Tax	GST2	Select from the LOV.
Event Class	Sales transaction	Select from the LOV. This rule applies to all sales transactions.
Tax Determining Factor Set Code	GST_TDF2	Tax determining factor set that you created.
Tax Conditions
Tax Condition Set Code	Result	Comments
GST2&3_TCS_SAL	Applicable	GST2 applies if the First-Party Registration Number state=Bill to location.
Tax Applicability Rule (GST3)
Rule Code	GST3_sales	User Discretion
Tax Regime	GST	Select the regime from the LOV.
Tax	GST3	Select from the LOV.
Event Class	Sales transaction	Select from the LOV. This rule applies to all sales transactions.
Tax Determining Factor Set Code	GST_TDF2	Tax determining factor set that you created.
Tax Conditions
Tax Condition Set Code	Result	Comments
GST2&3_TCS_SAL	Applicable	GST3 applies if the First-Party Registration Number state=Bill to location.

Create Tax Rate Rules using Product Category Fiscal Classifications

For the given scenario, inventory categories are used as product fiscal classifications. This table outlines TDF details required to fulfill the given scenario:

Attribute	Value	Comments
Tax Determining Factor Class	Product inventory linked	This determining factor class allows the use of a product fiscal classification as a tax determining factor to create tax rules.
Tax Determining Factor Name	Product Fiscal Classification Type	This determining factor name uses the Oracle ERP Cloud inventory catalog, category, and item functionality to derive an inventory category from an item populated in a transaction line.

To create Tax Rate Rules using Product Category Fiscal Classifications, follow these steps:

Create Tax Determining Factor Sets using these attributes:

This table displays the attributes for Tax Determining Factor Sets:

Attributes	Values	Comments
Tax Determining Factor Set Code	GST_PCFC	User Discretion
Tax regime Code	GST	Select the GST Regime.
Tax Determining Factor Class	Product inventory linked	This factor class allows you to use product fiscal classification as a tax determining factor to create tax rules.
Tax Class Qualifier	Level 1	Tax rate rules will be configured at level 1.
Tax Determining factor Name	GST_RATE	Define product fiscal classification.

Create Tax Condition Sets using these attributes:

Attributes	Values	Comments
Tax Condition Set I
Tax Condition Set Code	GST_HSN_18	User Discretion
Tax Determining Factor Set Code	GST_RATE	Tax Determining factor set created above
Operator	Equal To	Inventory Category values matches with
Value	AA	Tax Condition Set will apply if the Level 1 PC is AA
Tax Condition Set II
Tax Condition Set Code	GST_HSN_9	User Discretion
Tax Determining Factor Set Code	GST_RATE	Tax Determining factor set created above
Operator	Equal To	Inventory Category values matches with
Value	BB	Tax Condition Set will apply if the Level 1 PC is BB

Create Tax Rate Rules using these attributes.

This table displays the attributes and values to create tax rate rule 1:

Attribute	Value	Comments
Rule Code	GST1_RATES_TS	User Discretion
Tax Determining factor Set Code	GST_RATE	The tax determining factor set code you created earlier.
Tax Regime Code	GST	Select from the LOV.
Tax	GST1	Select from the LOV.
Set as Geography specific rule	Enable
Location Type	First-Party Tax Registration Number	Geography from the First-Party Registration Number location.
Parent Geography Type	Country
Parent Geography name	India
Geography Type	State
Geography Name	Telangana	The rule is applied when the tax jurisdiction on transaction is Telangana.
	Tax Conditions
Tax Condition Set Code	Result	Comments
GST_HSN_18	TS_GST1_RATE18%	If the first two digits of the category code are AA, then tax engine defaults tax rate as TS_GST1_RATE18%.

This table displays the attributes and values to create tax rate rule 2:

Attribute	Value	Comments
Rule Code	GST2_RATES_TS	User Discretion
Tax Determining factor Set Code	GST_RATE	The tax determining factor set code you created earlier.
Tax Regime Code	GST	Select from the LOV.
Tax	GST2	Select from the LOV.
Set as Geography specific rule	Enable
Location Type	First-Party Tax Registration Number	Geography from the First-Party Registration Number location.
Parent Geography Type	Country
Parent Geography name	India
Geography Type	State
Geography Name	Telangana	The rule is applied when the tax jurisdiction on transaction is Telangana.
	Tax Conditions
Tax Condition Set Code	Result	Comments
GST_HSN_9	TS_GST2_RATE9%	If the first two digits of the category code are AA, then tax engine defaults tax rate as TS_GST2_RATE9%

This table displays the attributes and values to create tax rate rule 3:

Attribute	Value	Comments
Rule Code	GST1_RATES_TS	User Discretion
Rule Code	GST3_RATES_TS	User Discretion
Tax Determining factor Set Code	GST_RATE	The tax determining factor set code you created earlier.
Tax Regime Code	GST	Select from the LOV.
Tax	GST3	Select from the LOV.
Set as Geography specific rule	Enable
Location Type	First-Party Tax Registration Number	Geography from the First-Party Registration Number location.
Parent Geography Type	Country
Parent Geography name	India
Geography Type	State
Geography Name	Telangana	The rule is applied when the tax jurisdiction on transaction is Telangana.
		Tax Conditions
Tax Condition Set Code	Result	Comments
GST_HSN_9	TS_GST3_RATE9%	If the first two digits of the category code are AA, then tax engine defaults tax rate as TS_GST3_RATE9%

This table displays the attributes and values to create tax rate rule 4:

Attribute	Value	Comments
Rule Code	GST1_RATES_TN	User Discretion
Tax Determining factor Set Code	GST_RATE	The tax determining factor set code you created earlier.
Tax Regime Code	GST	Select from the LOV.
Tax	GST1	Select from the LOV.
Set as Geography specific rule	Enable
Location Type	First-Party Tax Registration Number	Geography from the First-Party Registration Number location.
Parent Geography Type	Country
Parent Geography name	India
Geography Type	State
Geography Name	Tamil Nadu	The rule is applied when Tax jurisdiction on transaction is Tamil Nadu.
	Tax Conditions
Tax Condition Set Code	Result	Comments
GST_HSN_18	TN_GST1_RATE18%	If category code first two digits are AA then tax engine defaults tax rate as TN_GST1_RATE18%

This table displays the attributes and values to create tax rate rule 5.

Attribute	Value	Comments
Rule Code	GST2_RATES_TN	User Discretion
Tax Determining factor Set Code	GST_RATE	The tax determining factor set code you created earlier.
Tax Regime Code	GST	Select from the LOV.
Tax	GST2	Select from the LOV.
Set as Geography specific rule	Enable
Location Type	First party tax registration Number	Geography from the First-Party Registration Number location .
Parent Geography Type	Country
Parent Geography name	India
Geography Type	State
Geography Name	Tamil Nadu	The rule is applied when Tax jurisdiction on transaction is Tamil Nadu.
	Tax Conditions
Tax Condition Set Code	Result	Comments
GST_HSN_9	TN_GST2_RATE9%	If the first two digits of the category code are AA, then tax engine defaults tax rate as TN_GST2_RATE9%

This table displays the attributes and values to create tax rate rule 6:

Attribute	Value	Comments
Rule Code	GST3_RATES_TN	User Discretion
Tax Determining factor Set Code	GST_RATE	The tax determining factor set code you created earlier.
Tax Regime Code	GST	Select from the LOV.
Tax	GST3	Select from the LOV.
Set as Geography specific rule	Enable
Location Type	First party tax registration Number	Geography from the First-Party Registration Number location .
Parent Geography Type	Country
Parent Geography name	India
Geography Type	State
Geography Name	Tamil Nadu	The rule is applied when Tax jurisdiction on transaction is Tamil Nadu.
Tax Conditions
Tax Condition Set Code	Result	Comments
GST_HSN_9	TN_GST3_RATE9%	If the first two digits of the category code are BB, then tax engine defaults tax rate as TN_GST3_RATE9%

Transaction Simulation in the Procure-to-Pay Cycle (Inbound Transactions)

Vision India-south BU procured materials for it’s Telangana INV from Vision Corporation Ltd located in Mumbai, and this transaction is subject to the GST1 based on applicable tax rules.

Line	Item	HSN ( Product Fiscal Classification)	Unit Price	Quantity	Line Amount	Bill To	Ship To	First-Party Tax Registration Number	Supplier Site / Ship From Location
1	A (Inventory Item)	AA1234	INR 1.83	1000	INR 1,830.0 0	Vision IndiaSouth	Telangana _INV	36AA543786IZ	Mumbai
2	B (Inventory Item)	AA3456	INR 2.63	1000	INR 2,630.0 0	Vision India South	Telangana _INV	36AA543786IZ	Mumbai
Total in INR	4,460.0 0

Line

Item

HSN ( Product Fiscal Classification)

Unit Price

Quantity

Line Amount

Bill To

Ship To

First-Party Tax Registration Number

Supplier Site / Ship From Location

1

A

(Inventory

Item)

AA1234

INR 1.83

1000

INR

1,830.0

0

Vision

IndiaSouth

Telangana _INV

36AA543786IZ

Mumbai

2

B

(Inventory

Item)

AA3456

INR 2.63

1000

INR

2,630.0

0

Vision

India South

Telangana _INV

36AA543786IZ

Mumbai

Total in INR

4,460.0

0

This table outlines the tax calculation in Oracle ERP Cloud procure-to-pay flow from the perspective of the buyer Green Corp.

Activity	Tax Determination	Accounting
Create a Purchase Order (PO)	Ship from location (Mumbai) and First party Tax Registration number (location of LRU- Telangana) is different therefore GST1 tax will be applied as per the above define applicability rules. Tax rate will be applied as 18% since the selected product fiscal classification level 1 is equal to AA. You can see the detail tax lines calculated on purchase order as per the defined Tax rules and default tax rules on applicable tax. You can define Tax Recovery rate rules also with “Intended use” determining factor and recovery rate applied on calculated tax accordingly. Here we are assuming 60% is recoverable and 40% is Nonrecoverable for the case study.	No Accounting Impact
Create receipt for above Purchase Order and run Receipt Accounting Distributions	All tax determinants flows from purchase order to receipt upon receipt creation. As Allow Delivery Based Taxes on Invoice is enabled with TPB as Invoice and TPD as the receipt date at COTO for Payables, tax distributions for Non-recoverable tax (802.8*40%=321.12) are created and added to the item cost.	Receiving inspection DR- 4460 Non recoverable tax DR-321.12 Accrual CR- 4781.12
Create Payables Invoice Matched to a above PO Receipt		AP invoice is created with reference to PO which are receipt matched. Taxes are recalculated as TPB is Invoice with TPD as the receipt date and account recoverable taxes (802.8*60%=481.68) For users who are allowed to change the invoice price, the application considers Invoice Price Variance (IPV) and Tax Rate Variance (TRV) and account the variance to cost of the item. The application derives the tax accounts from tax rate level as we configured the Tax Account Assignment at Tax Rate level. In this approach, you can maintain the tax account per jurisdiction as tax rates and their applicability is based on tax jurisdiction. This enables you to fulfill the GST reporting requirements and track the tax account balance as per jurisdiction Payables Accrual DR- 4781.12 GST1 Recovery DR- 481.68 Supplier Liability CR- 5262.80

Activity

Tax Determination

Accounting

Create a Purchase Order (PO)

Ship from location (Mumbai) and First party Tax Registration number (location of LRU- Telangana) is different therefore GST1 tax will be applied as per the above define applicability rules.
Tax rate will be applied as 18% since the selected product fiscal classification level 1 is equal to AA.
You can see the detail tax lines calculated on purchase order as per the defined Tax rules and default tax rules on applicable tax.
You can define Tax Recovery rate rules also with “Intended use” determining factor and recovery rate applied on calculated tax accordingly.
Here we are assuming 60% is recoverable and 40% is Nonrecoverable for the case study.

No Accounting Impact

Create receipt for above Purchase Order and run Receipt Accounting Distributions

All tax determinants flows from purchase order to receipt upon receipt creation.
As Allow Delivery Based Taxes on Invoice is enabled with TPB as Invoice and TPD as the receipt date at COTO for Payables, tax distributions for Non-recoverable tax (802.8*40%=321.12) are created and added to the item cost.

Receiving inspection DR- 4460

Non recoverable tax DR-321.12

Accrual CR- 4781.12

Create Payables Invoice Matched to a above PO Receipt

AP invoice is created with reference to PO which are receipt matched. Taxes are recalculated as TPB is Invoice with TPD as the receipt date and account recoverable taxes (802.8*60%=481.68) For users who are allowed to change the invoice price, the application considers Invoice Price Variance (IPV) and Tax Rate Variance (TRV) and account the variance to cost of the item. The application derives the tax accounts from tax rate level as we configured the Tax Account Assignment at Tax Rate level. In this approach, you can maintain the tax account per jurisdiction as tax rates and their applicability is based on tax jurisdiction. This enables you to fulfill the GST reporting requirements and track the tax account balance as per jurisdiction

Payables Accrual DR- 4781.12

GST1 Recovery DR- 481.68

Supplier Liability CR- 5262.80

Tax Line	Rate Name	Rate	Tax Amount	Recoverable Tax	Nonrecoverable Tax	Tax Regime	Tax Name	Tax Status	Tax Jurisdiction	Place of supply	TPB $TPD
1	TS_GST1 _18%	18	802.80	481.68	321.12	GST	GST1	Standard	Telangana	FP TRN-location (TS)	Invoice & Receipt date