on 04-25-2014 5:50 AM
Hi Experts,
I have a scenario, where my company which is a manufacturing company is purchasing raw materials from a vendor. The vendor sends the items directly to a Sub Contractor. The vendor is paid with Excise. Now, the subcontractor gets the raw materials delivered to its warehouse. He takes the cenvat credit. He will process the items and the processed item to my company. It will charge the amount for processing and my company will pay the bill amount and the net excise amount to SubContractor. I heard in case of Sub Contracting, the sub contractor gets a 180 days rebate of Cenvat. Is it true?
I want to know how Cenvat process works in Sub Contracting. If any changes are required for the process or this process is fine. If anyone can give any suggestions as to how to process this in SAP. Also, do we have to create the Sub Contractor as a separate plant?
Hi Nabin,
The 180 days concept is as defined in taxation norms& rules and is carried in India. If 180 days has passed you have to reverse the excise credit.
The reason for this close monitoring has to do with India's tax law. Under excise law 57F4, when you send materials to a subcontractor for processing, you are not required to pay any excise duty, even though the materials have left your premises & good receipt of subcontracting material is also with zero tax. However, if the materials have not been returned to you within a given length of time specified by the law (180 days), you will have to reverse any excise credit that you posted when you purchased the materials.
For the process you have mentioned you have to address the sub con vendor by putting the tick in sc vendor in delivery address tab in PO.
Vendor X providing your raw material M but you want him to transport material to your subcontracting vendor for further process. For this you have to raise PO but in delivery tab tick SC vendor Y(mention your subcontracting vendor Y code here). After that you do GR for the process. When you do GR for this material - Vendor the system transfer's material to Vendor Y by 101 O (this you can confirm from vendor's acknowledgement/bill). Then after GR - Post MIRO normally & Pay to vendor.
Not required to create a separate plant as subcontractor.
Also i would suggest you to search the forum as you will get lot of links for the process you have told.
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Thanks for the reply. Can you suggest few links, I had thorough check on this scenario, but was unable to relate to mine.
However, I would like to know, what configuration setting needs to be followed for Cenvat in this scenario?
Secondly, what exactly means by Cenvat credit availed by the Sub Contractor since the payment is done by the party who purchases the items?
Once the Sub Contractor sends the items, then we deduct the Cenvat paid by us and the Cenvat from subcontractor and pay the balance.
How this is mapped in SAP?
Kindly suggest.
Hi,
I believe you have already done the CIN settings. If you have done it then you might have come across nodes Business Transaction inside which you will find subcontracting and you will come across terms like movement type groups and sub contracting attributes.
Learn the IMG activity Documentation for it. You will get a clear picture.
Check and Revert.
SS
Avoid copy pasting from other source which is strictly prohibited in SCN. Part of your suggestion has been copy pasted from a standard SAP documentation. All your suggestions should be on your own.
G. Lakshmipathi
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