GST on SAP Modules :Things to know before SAP Implementation

Everyone want’s to know impact of GST on SAP Modules, before implementing SAP with some basic knowledge, we herewith discuss GST impact in SAP with easy to understandable way.

Impact of GST on SAP Modules

GST impact in SAP

How drastic the changes were was one of the company’s biggest concerns about the transition to GST. The IT department changes are particularly dramatic. The transition to GST has been easier for those who used SAP since most records are digitized today. The transition process was found extremely difficult by those who used SAP with manual ledgers or certain digital tools. The first step would be to streamline its IT department for such a company. Putting everything within the scope of SAP and dismissing heritage tools and practices make perfect sense. In fact, you need to streamline all of your apps and software programs and stop using anything that isn’t needed to successfully use SAP in this post – GST times.

You will start seeing the impact of GST on sales, procurement, stock transfer and subcontracting, but this is not an exhaustive list. You also need to train your employees to use SAP after GST properly. Make sure that they are integrated with SAP when using other applications. Once integration with other applications has been successfully completed, invest in a good technical backup service to save all records. It helps to remember that multiple returns must be filed by GST – compliant companies and a manual procedure is simply no longer possible.

What is GST (Goods and Service Tax)?

GST (Goods and Service Tax) is a value-added tax imposed on most goods and services sold for domestic purposes and paid by consumers. It’s what the government says to tax one Nation like one market. GST is the Indian Government’s trailblazing initiative in the latest Indian business scenario.

According to the GST rule, all Indian companies were required to agree with tax regulators and accept Goods and Services Tax (GST) that eventually replaced previous financial regimes such as VAT, service tax, CST and others. The reason why GST was implemented was to bring central and state taxes under one umbrella and eliminate the confusion that had previously reigned. Of course, GST offers both companies and regulators a wealth of benefits. It was also a concern for companies, however, as they need to update their ERP and other tools in order to comply with GST. All businesses had to move overnight to GST, and most businesses were unfortunately not ready. Even today, many companies are struggling to cope with the GST transition using the SAP ERP system and lack of preparedness is one of the main reasons for this.

Upgrade SAP and Get it Ready

SAP India is preparing for GST related changes in its products. Obviously, the exact nature of the changes would not be explicit until the GST law actually passes. There are, however, certain prerequisites that can now be met before GST enters into force.

Companies would first need to upgrade to the relevant SAP version. As part of this readiness, businesses would also need to deploy an upgrade pack and service package. SAP ERP 6.0 (600) SP26 or higher is the minimum level of patch required for SAP application, for GST. GST on SAP Modules impact every want to know how it impact business when run SAP.

SAP’s GST – related changes are based on the tax determination concept of TAXINN. The SAP system will have to be migrated from TAXINJ to TAXINN by companies that still use the TAXINJ tax determination concept. Companies yet utilizing TAXNIN idea of tax determination will have to migrate the SAP system from TAXINJ to TAXNIN. TAXINN is a condition based technique while TAXINJ is a formula based technique. The Migration of the SAP system from TAXINJ to TAXINN is a smaller task in itself, which can take in between three and six months, depending on the complexity.

The following specific changes would also need to be made by businesses.

Master Data Set-up
Destination Set-up
Tax and pricing changes
RICEF’S

Master Data Set-up

Master Data Set-up: Create or update the vendor, customer, material and service master list. The master data will have a significant impact on GST, and successful GST migration and implementation requires the preparation of the master data well before the start date of GST.

Destination set – up: Create a business location for each operating area and assign it to plants. The GST tax regime has a “place of supply” to determine taxation.

Tax and Pricing changes: Set up the required changes in tax procedures and pricing procedures.

RICEFs: Make sure there are the necessary forms, layouts, and changes to EDIs are set up. Once available, upload the required programs well in advance. Upload the specified programs well ahead of time, as soon because it turns into available.

Since the final GST law is not yet enacted, and the rules yet to be framed, SAP has been releasing SAP notes based on the draft Model GST law SAP has already released Notes for DDIC changes, Screen Changes, Master Data and transaction data, and some other facets of GST.

SAP has published SAP notes on the basis of the draft model GST law, SAP has already published notes on DDIC changes, screen changes, master data and transaction data, and other aspects of GST.

The complete list of SAP Notes for GST released can be found here.

GST on SAP Modules how Connect GST Registration

Online Support/Integration Backend

Businesses with GST registration must connect SAP to GSTIN, the online portal that serves as a central console for all activities such as tracking transactions, credits for input and output, returns and tax payments. To upload the invoice to the GST network, SAP would provide the necessary interfaces.

Make Required Tweaks To The Business Process

Companies would also need to make some changes to their business procedures, if not already following the recommended procedures, and such changes would need to be reflected in the ERP suite.

Some of the necessary tweaks would be:

Reconfiguring tax calculation procedures based on the new rules
Fine – tuning all tax-related outward and inward business processes
Adoption of sequential invoice numbering
Adhering to the new reporting and printing structure

The list of options is exhaustive and the specifics are entirely dependent on the industry, the complexities of business operations and the total number of legal entities involved in the business. Definitely, flawless implementation would require intensive training.

Here are some of the changes that are mostly based on the Model GST Law for which businesses need to be prepared and their business processes need to be tweaked.

Deploy an Input Credits System: GST levies and collects tax on the legal basis of the input tax credit method at each stage of sale or purchase of goods or services. On the purchase of goods or services, GST registered companies may claim a tax credit at the value of GST they pay.

GST’s main task is to adjust the input credits available to purchase inward goods and services against selling goods and services. The existing system is a hodgepodge of various input and output accounts for different taxes such as VAT, CST, service tax, various excise duties, additional customs duties, CVD, etc. The complicated CENVAT credit rules will no longer be needed to factor these different input and output accounts.

The wide variety of central and state indirect taxes, such as Service Tax, Tax, Tax, Value Added Tax, Central Sales Tax, Central Excise Duty, Octroi and Entry Tax, Extra Customs Duty (CVD), Special Additional Customs Duty (SAD), Central and State surcharges and ceases, and more, will be subsumed into three taxes: SGST and CGST on intrastate supply of goods and services and IGST (to centre) for interstate supplies.

SGST input is available for setting against SGST output and IGST output.
CGST input is available for setting against CGST output and IGST output.
Input IGST is permitted for setoff against output IGST, CGST, and SGST.
Cross – setoff between goods and services is also permitted.

Under GST, all accounting systems would only require six credit collection accounts and set off.

Get The Tax Base And Rate

The first step is to determine the tax base or whether the product or service is covered by GST. However, most products are subject to GST, with the notable exclusion of petroleum products. Post GST, almost all transactions except salaries, banking receipts and payments will be covered by GST.

The next step is to determine the tax rate. The GST Council recently set the tax rate for 1211 items in 98 categories of goods. The standard GST rate of 18 percent applies to most items, although 5 %, 12%, and 28 % are applicable. Businesses need to be doubly sure of the rate at which their products and services apply. There is also a minimum threshold of 20 Lakhs turnover to be considered.

SAP is the marketplace leader in ERP solutions, but the solution is best as good because of the implementation. Keeping gaps in the value chain can eventually result in the system breaking down and going awry, and the resulting mess can even cause the closure of operations. Before GST finally kicks in, make sure to cover all bases now.

Hope everyone understand before implementing SAP things to know the GST on SAP Modules.

GST’S Impact in SAP? Before Implementing SAP, Essential Things Need to be Known