Arun Kumar VC , Senior General Manager, Enterprise Solutions, HTC Global Services
SAP, a major software supplier in India, provides well-knit integrated modules that improves business efficiency of any industry. Majority of the manufacturing companies are using SAP system toprecisely calculate the duties for the inward and outward movement of goods. To adhere with the Government policies, companies have to report their tax structure to the relevant authorities. To support accurate tax calculation, SAP has provisioned the companies with Country Version India (CIN). CIN has to be activated in the System for Duty – Tax related calculations.
SAP’s Tax Procedures
For calculating the taxes, SAP has two types of Tax determination procedures – TAXINJ and TAXINN. Only one among the two tax procedures needs to be used in the SAP system. SAP has stopped the support for issues that are arising on usage of TAXINJ tax procedure. With the Goods and Services Tax (GST) to be implemented in India shortly, it is mandatory for companies to either implement TAXINN or migrate their tax procedure from TAXINJ to TAXINN. SAP India has already made changes in the software to accommodate GST and companies need to get the prerequisites ready for implementing GST. Migrating to the latest tax structure helps to:
- Establish a common infrastructure that includes document and file management. This helps in efficient tax calculation
- Build a user-friendly interface for both tax payers and tax administrators to ease accessing
- Enable the organizations to easily modify the tax structure when there is a change in the tax regime
- Simplify the tax calculating procedures with applications, based on the latest government guidelines
Need for TAXINN
TAXINN procedure is the prerequisite for GST implementation. Hence, companies using TAXINJ tax procedure need to migrate to TAXINN tax procedure and then GST has to be implemented. While TAXINJ is formula based, TAXINN is condition based. A standard routine (set of specific standard coding) is used in the formula based TAXINJ tax procedure for tax calculation purposes. Whereas, conditions are used in the TAXINN tax procedure.
Significance of TAXINN
There are several advantages in the tax calculation using TAXINN of which the primary is control of tax codes. In TAXINJ tax procedure, a tax code will be for a specific tax percentage. When the Government implements a new policy or changes the existing policy in the tax percentage, a new tax code has to be created. Creation of new tax codes for every policy will result in a large number of tax codes, which becomes difficult to control. Whereas, in the TAXINN tax procedure when there is a change in tax percentage according to Government policy, the same tax code can be used with the validity date. This ensures that there are lesser and controllable limit of tax codes when the TAXINN tax procedure is used.
Migration from TAXINJ to TAXINN
The migration from TAXINJ to TAXIN includes: Preparation on affected scenarios mostly in Sales and Purchase, required system configurations, methodical testing, changes in master data, correcting ABAP objects, and conversion of open purchase related documents. SAP has also given a specific tool to convert the open Purchase Orders/Contracts for the migration. An important point to be noted in this migration is, there will be no changes in the processes for Material Management and Sales and Distribution modules in SAP.
Challenges faced while Migrating from TAXINJ to TAXINN
During migration, the changes are performed only in the background – configuration changes alone will be made in the TAXINJ to TAXINN migration. This migration process involves application of notes provided by SAP. Nearly 20 to 30 Notes are required to be applied during the migration process. The number of notes depend on the exact SAP version that the company is presently using. The applications of notes require SAP technical expertise. The proper implementation of notes would ensure that the processes are run without errors after migration. Unless the SAP Partner has the required experience in the application of notes, the project will not be successful. Unsuccessful implementation of tax migration project results in conflicts/confusions/bugs.
Since most of the processes happen in background the user will notice very minimal changes after the migration. They might require minimal training from the SAP experts to handle the system effectively.