on 05-06-2013 7:37 AM
Dear experts,
Why ship to party needed tax determination in india, why not for sold to party, please give me few disccussions
Thanks and Regards
Rajesh..
Hello,
Let me give a another example:
A Customer (Sold-to-Party) is a very large Corporate Group & it has many Plants (Ship-to-Party) all over the country. Now typically Corporate Office is based in tier I city & all the Order are placed from this office. But the good ae supposed to be delivered to Plant that are based in differnt states of the Country.
Now each of these States will have their own reporting / taxation requirements. Thus the Taxes are determined based on destination of the goods i.e. region of Ship-to-Party & not of Sold-to-Party.
It may also happen that Sold-to-Party is based in a region that is not liable to Taxes (say a Special Economic Zone) but its Plant is located in the area based in area are normal taxes rates are applicable. Thus Tax are always determined based on Ship-to-Party.
Thanks,
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Hi,
In many causes one sold to party has many ship to parties and these ship to parties may located in different states. When taxes come in to picture we need to consider ship to parties, because taxes depend on where we are shipping goods. If the goods sold within the state VAT will be applicable and if sales happen between states CST will be applicable.
For every customer we have only one sold to party, so we have only one address. If we consider sold to party have different ship to parties in different states, then also system will consider sold to party location for calculating sales taxes (though technically ship to parties for that sold to party may be different).
Based on the above scenario how does the system identify which tax is applicable for the different ship to parties?
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Hi,
The answer to your question is based on different business scenarios which differs from company to company in different industries.
For example, normally we will have only one sold to party and its associated partner functions like ship to party, bill to party and payer maintained for one customer/sold to party only. hence we can maintain tax information about that sold to party in the customer master and while order processing system will pull the tax info from the master data of the sold-to-party.
But, When there are multiple ship to parties for one sold to party, instead of maintaining tax info in sold to party customer master, we will maintain tax information for individual ship to party in their respective customer master and since all these ship to parties are tagged with one sold to party in partner determination so during sales order processing system automatically fetches the tax data from these ship to parties master data to calculate individual tax for each ship to party.
The basic logic in tax is it is applicable with different percent on where the goods despatched and it is not important that who have ordered and from which state.
In many business cases, sold to party would be in one state and ship to party would be in another state in which case, you should not see the sold to party state but to validate ship to party state where the goods are entering and sold in the local market
G. Lakshmipathi
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This is how the company understands whether the customer has to pay local sales tax or value added tax a big thing if you are a legal tax paying company in India.
It not only tells the customer how much tax he has to pay for the goods that have been sent to his delivery address.
but it also important for the tax records of the company. so that the company knows who much tax returns are owed to them by the government for VAT.
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Hi,
Any kind of sales need to pay Tax to the authorities either it can be DOMESTIC SALES or INTERSTATE sales transaction ( In INDIA)
So ship to party Address will have the shipping details on how and where the goods to be sent like ROUTE and COUNTRY/REGION
in SAP We have to determine the Tax based on the DESTINATION COUNTRY and DEPARTURE COUNTRY
Departure country will be Plant from whether the delivery is initiated
Destination country will be ship to party country to which delivery is sent
Main reason for considering Ship to Party is the SHIP TO PARTY will have the country destination zone as Delivery document is created with Ship to party as main partner function
regards,
santosh
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Why ship to party needed tax determination
Material Tax Status | Customer Tax status (Ship-to Party Country) | Taxable/Not Taxable |
---|---|---|
Liable for Taxes | No Tax (US) | Not Taxable |
Liable for Taxes | Taxable (INDIA) | Taxable |
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Delivering plant is determined from the shipto party and this is mandatory for Tax determination .
Tax is determined by Country/Delivering Plant/Region of Delivering Plant/Region of Ship to Party/Material/Customer . If your sold to party and ship -to- party is different then system will determine taxes based on delivering plant mentioned in the ship-to-party.
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Hi Rajesh,
As you know In India the tax is imposed based on the sales we carryout.
Find below examples:
Scenario 1:
Plant/sales office/distribution location is at Karnataka and your receiving party also in Karnataka in this case VAT (local tax) is applicable.
Scenario:
Plant/Sales office/Distribution/ is in Karnataka but the receiving party is in Maharashtra: In this case CST (Central sales tax) is applicable.
Now, how do system identifies above sales? to meet this requirement: We use plant region code and ship to party region code. Say for e.g. Plant region is 10 and ship to party region is 10 then the tax is VAT. If Plant region is 10 and ship to party region is 13 then CST is applicable.
Note: Few of my implementations we have only plant but, each sales location has its shipping point, so, in this case, instead of using plant region code we used shipping point region code.
I hope I answered your question.
Regards, Sai Krishna.
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