Manage Location-Based Transaction Taxes

In India, the applicability of GSTs may be based on intrastate and interstate supplies. The intrastate supply of goods or services is when the location of the supplier and the place of supply are in the same state.

The interstate supply of goods or services is when the location of the supplier and the place of supply are in different states.

Interstate and Intrastate Trade Case Study

GST1 is levied on the supply of any goods and services in the interstate trade. GST2 and GST3 are levied on the supply of any goods and services in the intrastate trade. If the supplier and the customer are located in different states, it is considered as interstate trade, and GST1 is applicable on the transaction.

If the supplier and the customer are located in same state, it is considered as intrastate trade, and GST2 and GST3 are applicable on the transaction.

Enterprise Structure

This table displays the enterprise structure details for the case study example Vision India:

Legal Entity	Management BU	Inventory Organizations and Location	Legal reporting Unit	Tax Registration Number	Comments
Vision India	Vision IND- SOUTH	Telanagana_INV	TS_LRU	36AA543786IZ	For global procurement and internal material transfers between these Inventory Organizations, you must: Define PCBUs and assign them to respective Inventory Organizations. Associate LRUs to PCBUs.
		Tamil Nadu_INV	TN_LRU	35AA985796AZ

Note: If you maintain your Enterprise Structure as Management BU per Tax Jurisdiction (State), then you can assign LRUs to the Management BU.

Associate Legal reporting Units to Inventory Organizations

Here's an example to associate legal reporting units to inventory organizations:

Task	Manage Associated Business Entities
Legal Entity	Vision India
Legal Reporting Unit	TS_LRU
Type	Inventory Organization
Name	Telangana_INV
Country	INDIA
Address	Hyderabad
Start date	XXX
End date	XXX

This table displays the enterprise structure details for the case study example Vision India:

Task	Manage Associated Business Entities
Legal Entity	Vision India
Legal Reporting Unit	TN_LRU
Type	Inventory Organization
Name	Tamilnadu_INV
Country	INDIA
Address	Chennai
Start date	XXX
End date	XXX

Tax Regime	Tax Jurisdiction	Tax Status	Tax	Tax Rules Defaults	Tax Rate	Tax Account Assignment
GST	Telangana (Geography Type: State Parent Geography Type: Country)	Standard	GST1	Place Of supply: First Party Tax Registration Number. Tax Applicability: NOT Applicable Tax registration: Ship from Party Tax Point Basis Delivery Refer Note 1	TS_GST1_RATE18% (Assign Tax Jurisdiction as Telangana while defining tax rate )	Rate Level 1. Tax Liability: 01.555.00.000 2. Tax recoverable Account: 01.556.00.000
			GST2		TS_GST2_RATE9%	Rate Level 1. Tax Liability: 01.666.000 2. Tax recoverable Account:01.667.00.000
			GST3		TS_GST3-RATE9%	Rate Level: 1. Tax Liability: 01.676.00.000 2. Tax recoverable Account: 01.668.00.000
	Tamil Nadu (Geography Type: State, Parent Geography Type: Country)	Standard	GST1		TN_GST1_RATE18% (You must assign Tax Jurisdiction as Tamil Nadu while defining tax rate.)	Rate Level: 1. Tax Liability: 01.444.00.000 2. Tax recoverable Account: 01.445.00.000
			GST2		TN_GST2_RATE9%	Rate Level: 1. Tax Liability: 01.446.000 2. Tax recoverable Account: 01.447.00.000
			GST3		TN_GST3-RATE9%	Rate Level: 1. Tax Liability: 01.448.00.000 2. Tax recoverable Account: 01.449.00.000

You can define default tax rules to be considered at each tax level when no specific tax rules are defined. Set up the Tax Point Basis as Delivery at Tax or Tax Rate Level. You must enable Allow Delivery Based Tax Calculation on Invoice with TPB as Invoice and Tax Point Date (TPD) as Receipt Date for Payables using the Configuration Owner tax Options.

You can:

• Calculate Inbound Transactions Taxes as per the prevalent tax rates on Goods Receipt Date and account the Recoverable Taxes on the Payables invoice.
• Calculate Outbound Transactions Taxes as per the prevalent tax rates on Shipping Date and account the Tax Liability on Receivables invoice.
• Set up the default place of supply as First-Party Tax Registration Number so that respective Tax jurisdiction, Tax rates, and Tax Accounts can be derived as per the location of Legal reporting unit assigned to the Inventory Organization/management BU during transaction processing, which will be the place of supply.

Set up the default tax registration as Ship from Party. The Third-Party Tax Registration Status can be verified to compute the regular taxes and self-assessed taxes.

Tax Rules Configuration

For GST1, the tax definition has a tax rule default setting which designates the place of supply as the First-Party Tax Registration Number location. The GST1 tax applicability is based on whether or not the Ship-From location state does not equal First-Party Registration Number location state. In this case, you can define a tax applicability rule that validates the transaction line and determines the GST1 applicability.

For the GST2 and GST3 tax, the tax definitions have tax rule default settings that designate the place of supply as the First-Party Tax Registration Number location. The GST2 and GST3 tax applicability is based on an evaluation of whether or not the Ship-From location state equals the First-Party Tax Registration Number location state. In this case, you can define a tax applicability rule that validates the transaction line and determines the intrastate taxes applicability.

The tax applicability rule may be vary for inbound transactions and outbound transactions in this case users must define tax applicability rule based on event class attribute for purchase transaction and sales Transaction.

Tax rate rules must be defined based on Product Fiscal Classification to apply the tax rate as per HSN codes. These tax rate rules should define the geography specific rule as per given regime to rate structure.