7 TDP Excise Duty

&KDSWHU
7DULIIV'XWLHVDQG3HUPLWV7'3
DVSDUWRI,62LO'RZQVWUHDP
+LJK/HYHO6XPPDU\
The objective of TDP within R/3 IS-Oil Downstream is to incorporate
functions specific to the oil industry for the handling, calculation, and
posting of excise duty values in the R/3 System.
The IS-Oil System provides:
q Excise duty (ED) handling from order entry through to invoice
generation. Calculation of excise duty liabilities and receivables are
made on each movement of dutiable product. Duties can be calculated
based on multiple units of measure, including temperature-corrected
quantities.
q Maintenance of the dutiable status of materials. Changes in the quantity
of taxable inventory are calculated on each movement of dutiable
product. The ED-paid inventory values of dutiable products are held
separately from the book value of the inventory.
q Functionality for maintaining and using different tax rates for the same
product, depending on the intended use of that product. It is possible to
handle duty calculations for material moved between different plants
with different tax rates.
q Licenses, exemptions, and allowances are taken into account in duty
calculations.
.H\)XQFWLRQ%HQHILWV
By integrating excise duty handling in Purchasing, Materials Management,
and Sales the R/3 IS-Oil Downstream component helps oil companies to
calculate their excise duty liabilities correctly, and avoid fines or penalties
that might result from incorrect calculations for the payment of taxes.
The key function benefits are as follows:
Specifically, the TDP application area ensures that both the functional and legal &RQVLVWHQW([FLVH'XW\
requirements governing excise duty are met. TDP covers the identification and +DQGOLQJLQ
calculation of excise duty liabilities and claims, which occur whenever there are 3XUFKDVLQJ0DWHULDOV
movements of dutiable materials between ED-paid and ED-unpaid locations or
vice versa. ED-paid represents undbonded/tax product where the excise duty
0DQDJHPHQWDQG6DOHV
tax is paid. Ed-unpaid represents bonded/untax product where the excise duty
tax is not yet paid.

7DULIIV'XWLHVDQG3HUPLWV7'3DVSDUWRI,62LO'RZQVWUHDP
&RVW(IIHFWLYH/HJDO The TDP application area integrates excise duty handling techniques in
&RPSOLDQFHIRU7D[ Materials Management, Sales and Distribution, and Financial applications
DQG'XW\/LDELOLWLHV thereby leading to consistency in the handling of excise duties.
$XWRPDWLF'HIDXOWDQG This functionality automatically proposes certain excise duty parameters
7UDQVIHURI([FLVH'XW\ and transfers these parameters among applications, thereby reducing the
3DUDPHWHUV data input effort required by users and reducing the risk of data
transcription errors.
,PSURYHG&DVK)ORZ TDP enables each unit of oil material to be identified as either ED-paid or
ED-unpaid stock. This enables a business to track changes in ED-paid stock
separately from ED-unpaid stock, and to select stock for issue based on its
duty status. This gives companies flexibility in managing their exposure to
excise duty tax and hence the flexibility to manage their cash flows
accordingly. This is critical in countries where the value of the excise duty in
inventory is greater than the value of the material itself.
.H\,62LO)XQFWLRQV6XSSRUWHGE\WKH
,62LO'RZQVWUHDP7'3&RPSRQHQW
The following TDP oil industry-specific functionality is provided within the
R/3 IS-Oil Downstream System:
&DOFXODWLRQDQG3RVWLQJRI([FLVH'XW\
Within the downstream oil industry there is a requirement to be able to
calculate and report on excise duty values whenever a movement of dutiable
material occurs from a ED-unpaid to an ED-paid location or vice versa. In
addition, it is necessary to capture the financial implications of material
movements between ED-paid locations. Material movements between ED-
unpaid locations have no financial implications with regard to excise duty
identification.
)LJ3RVWLQJRI([FLVH'XW\
The TDP application area builds on Core R/3 by defining the rules necessary
for excise duty calculations, and by providing the mechanism to calculate and
post these excise duty values in real time.
Examples of some of the posting rules that are provided by TDP include:

q Tax liability postings for movements of dutiable material from an ED-

unpaid to an ED-paid location
q Tax claim postings for movements of dutiable material from an ED-paid
to an ED-unpaid location
q Excise duty value of stock to be calculated separately from the material
value and to be posted to a separate balance sheet account
q On consumption of dutiable materials, the excise duty value of a stock to
be calculated separately from the material value and to be posted to a
separate consumption account. Relief against inventory is posted against
the excise duty value in the stock account
q Excise duty value differences to be calculated and posted whenever
movements of dutiable materials occur, where two excise duty rates may
apply
$670$3,%DVHG([FLVH'XW\+DQGOLQJ
The Core R/3 System provides the function for holding stock in one unit of
measure (the “base” unit of measure). The R/3 IS Oil Downstream
Hydrocarbon Product Management (HPM) application area enables users to
hold stock in additional units of measure based on ASTM/API conversions
from the base unit of measure. There are multiple standard unit of measure
views for a given material to cover different requirements for purchasing,
pricing, stockkeeping, etc. In addition, quantities are also provided in the
excise duty unit of measure. These units of measure are user-definable (for
further information, see the chapter on HPM).
The TDP application area utilizes these extra quantity units of measure to
provide users with the ability to specify which of the various units of
measure are used to calculate excise duty values on relevant material
movements.
([FLVH'XW\+DQGOLQJIRU3URGXFW([FKDQJHV
TDP integrates excise duty handling techniques with the specialized invoice
processing functions developed for oil product exchanges in the R/3 IS-Oil
Downstream Exchanges (EXG) application area. This enables the invoicing
of excise duty values, even where material and/or fee amounts are not
invoiced.
$GMXVWPHQWVIRU&KDQJHVLQ([FLVH'XW\5DWHV
It is possible to capture the difference in excise duty values resulting from
changes in duty rates between accruing the liability and invoicing the
customer, and then to record the financial implications of such differences in
an appropriate manner.
TDP enables users to specify how differences in excise duty values between
the accrual of the liability and the invoicing of cost to the customer are

handled. Differences can be handled as a windfall gain or loss which is

posted to the income statement, or handled as an additional excise duty
liability or claim and posted to the balance sheet.
.H\,62LO)XQFWLRQV6HUYHGE\WKH&RUH56\VWHP
$XWRPDWLF7UDQVIHURI([FLVH'XW\3DUDPHWHUV
IRU3XUFKDVH6DOHVDQG3URGXFWLRQ2UGHU3URFHVVLQJ
The Core R/3 System provides the framework to automate data transfer
within and between the different functional modules such as Materials
Management, Sales and Distribution and Financials. The TDP application
area extends this functionality by providing for the automatic proposal
(default) and transfer of excise duty parameters within purchase, sales, and
production orders. A separate process then uses those parameters to
calculate the excise duty values, and posts the relevant financial documents
on a real-time basis.
A basic framework upon which functionality for the handling, calculation
and posting of excise duty values can be built, is provided by the R/3 Core
System, for example, the ability to split valuated materials. Enhancements
provided by IS-Oil TDP include the identification of the excise duty status of
a material.
Within the downstream oil industry there is a requirement to be able to track
dutiable material as either ED-unpaid stock or ED-paid stock. This is
necessary to enable ED-unpaid and ED-paid stock to be separately
controlled and valuated, and also to provide the ability to select stock for
issue based on its excise duty status.
6SHFLILF)XQFWLRQDOLW\IRU1RUWK$PHULFD
Certain functions have been identified which are relevant to the North
American market. A customer can be exempt from certain taxes depending
upon a variety of factors such as material, material group, customer,
customer group, mode of transportation, origin, destination, and type of tax.
The customer has to present his exemption license and the number must be
entered into the system. When the exemption license expires, the customer
must pay the excise tax until a new license is provided.
Condition types have been created for federal, state, county, and city excise
tax rates. An interstate excise tax table defines tax rates for movements
between states. Taxes can be charged either by the state of origin or
destination.

'HWDLOHG'HVFULSWLRQRI%XVLQHVV)XQFWLRQV6XSSRUWHG
E\WKH,62LO'RZQVWUHDP7'3&RPSRQHQW
This section describes in further detail how TDP handles excise duties. The
excise duty values calculated and posted within R/3 IS-Oil Downstream can
be summarized as:
q Liabilities to pay excise duty to the tax authority of a specific country
q Tax Claims for returns from the tax authority
q Excise duty value associated with the quantity of ED-paid inventory
held in ED-paid locations
q The costs of excise duty associated with the consumption of duty-paid
inventory
q Excise duty accounting differences generated by specific circumstances
q Excise duty postings associated with gains and losses of product during
a two-step transfer
The business parameters which control how excise duty values are posted
include the following:
q The excise duty status of the material being moved; whether the material
is held or moved to an ED-unpaid or an ED-paid location
q To which excise duty tax group the material belongs
q The mineral oil content of a particular material, that is, the percentage of
the product deemed liable for duty
q For what the material will be used, such as for a process of manufacture
or for use as a fuel
q The locations involved in a movement; certain locations within a country
may apply excise duty at reduced rates
q The defined purpose of the movement itself, such as a goods issue to
scrap the material
q The date on which the movement takes place
In the following subsections, the business functions within the downstream
oil industry which determine how excise duty values are calculated are
described together with the TDP functionality which are provided to
calculate these values. Examples of the postings which may result from the
TDP functionality are also given as appropriate.

%DVLF3ULQFLSOHVRI([FLVH'XW\+DQGOLQJ
Excise Duty Status
([FLVH'XW\6WDWXV The excise duty status of a dutiable material (ED-unpaid or ED-paid stock)
and the nature of the tax movement determine the nature of the accounts to
which postings are made. For example:
q Whenever oil-based material is moved internally from a ED-unpaid
location to an ED-paid location, it is necessary to pay excise duties to the
authorities and an excise liability is incurred.
q When oil-based material is supplied from an ED-paid location by a
vendor and becomes part of the company inventory at an ED-paid
location, the company must record an increase in the excise duty
inventory value associated with its ED-paid stocks.
A license number can be stored for each storage location, where ED-unpaid
stock is held. This license can be printed on delivery documents involving
ED-unpaid stock.
It is important that oil material can be identified as either ED-unpaid or ED-
paid stock. This enables a business to track changes in ED-paid stock
separately from ED-unpaid stock and to select stock for issue on the basis of
its dutiable status. It is also critical that the excise duty value of inventory be
held separately from the underlying value of inventory. To make this
possible each material is associated with at least two “valuation types”
(valuation records). A valuation type is a sub-record for the material which
holds the total inventory value and quantity for the material of that type.
Either a batch number or a valuation type must be given for every material
movement to allow the system to update the physical and financial balances
for ED-unpaid and ED-paid materials. The update of the physical stock
balance, the financial balances for the material cost of inventory, and for the
ED value of inventory occur online and real time.
The material master record requires the following information for an excise
duty material:
q The excise duty tax group to which the material belongs. This is a user-
definable value and allows materials to be treated in the same way for
excise duty purposes. The excise duty group to which a material belongs
partially determines the excise duty rate which applies to a movement of
the material.
q The mineral oil content of the material. This determines what
percentage of the quantity of the moved material is deemed liable to
excise duty.
The excise duty status of a particular quantity of inventory is defined in the
valuation record.
Total stock on hand at each “plant“ (which could represent a tank farm,
refinery, etc. in R/3 IS-Oil Downstream) is held in multiple units of measure
in the material master record. In the valuation record, the total quantity of
ED-paid inventory is stored in the excise duty rate unit of measure.

The unit of measure used for the excise duty rate is defined for the excise
duty rate in the Excise Duty Rates table.
Excise Duty Postings ([FLVH'XW\3RVWLQJV

Tax Liabilities
Tax liability postings can be specified according to:
q The nature of the material: Materials with different tax groups may be
treated differently.
q The business function of the movement: The R/3 System represents the
business function of a movement by using an internal transaction/event
type (goods receipt, issue, transfer, etc.) and a movement type specified
by the user for each movement of material in the system. A movement
type can distinguish an issue for scrapping material from an issue of
materials for use in production, for example.
The following general accounting rules are followed by the TDP
functionality when determining the type of financial posting that is to be
made:
q An excise duty liability is generally posted for material movements from
Tax Status “ED-unpaid“ to Tax Status “ED-paid“ ,that is, from an ED-
unpaid to an ED-paid location.
q An excise duty claim is generally posted for material movements from
the Tax Status “ED-paid“ to the Tax Status “ED-unpaid“, that is, from an
ED-paid location to an ED-unpaid location.
It is possible to specify that excise duty claims be posted to a separate
account from that used for excise duty liabilities.
Tax Inventory
When dutiable material is received into valuated inventory, a debit posting
is made to an account representing the “excise duty of inventory“. When
dutiable material is issued from valuated inventory, a credit posting is made
to an account representing the “excise duty of inventory“.
All postings to inventory accounts representing the value of stock are made
without excise duty, online, at the time the material movement occurs.
Although the “excise duty liabilities“ account may have postings made to it
with a reduced rate of excise duty, the “excise duty of inventory“ account
always has postings made to it with the full rate of excise duty for the
material. This ensures that a meaningful revaluation of the excise duty value
of inventory can be conducted whenever there is a change in the applicable
excise duty rate.
Excise Duty Value at Consumption

For all material received as ED-paid product directly to consumption, the
excise duty value is posted to a separate cost account in the system. The
same is true where ED-paid inventory is issued to a department of the
company for consumption.

Excise Duty “Accounting Differences“

There are several circumstances where, due to the nature of the downstream
oil business, excise duty accounting differences may require the excise duty
calculation and posting process to calculate and post balancing financial
entries. The following are some examples:
q Movements where a relief/reduction in excise duty applies. Such as,
when oil is sold to a customer from ED-paid stock with a reduced excise
duty rate.
)LJ([FLVH'XW\³$FFRXQWLQJ'LIIHUHQFHV´
In the example, 10,000 liters of oil product are sold to a customer with a
reduced excise duty rate. A reduction in rate is specified using a special code
- the handling type - during the transaction. The system determines that a
handling type of “03” implies a reduced excise duty rate of 500.00 DM per
1,000 liters at 15 degrees Celsius (ASTM calculations are ignored). This
occurs during the processing of the material document for this transaction.
The excise liability which is posted as “excise duty cost of goods sold”
reflects the reduced rate. However, the reduction in excise duty inventory is
posted with the full rate of excise duty for the material. The full rate of excise
duty is found by reading the excise duty rates table with a masked handling
type - i.e. “XX“.
The difference between the “excise duty cost of goods sold“ and the excise
duty value of inventory posting is posted to a “relief/reduction“ account.
This difference may be treated as a liability in some countries, or as a
loss/gain in others. The financial account which is used to post this
difference is controlled via a company-level parameter, which can be
configured by users as appropriate.

q Internal “plant-to-plant“ transfers of material. For example, oil product

is sent from a refinery to a depot for storage prior to sale.
In this case, several differences may arise:
m Excise duty rates at each plant may be different (possible in
countries, such as Italy, where preferential rates of duty are applied
in certain districts). Also in certain countries, a movement of duty-
paid stock from one location to another location with a higher excise
duty rate is treated as a liability.
m During a two-step transfer (where material is issued from one plant
and held as “intransit“ until received at the second plant), excise
duty rates at the receiving plant may change during the course of the
transfer. In some countries, such differences may be regarded as
liabilities.
m Differences between excise duty liabilities booked and excise duty
billed may occur both on the procurement side and on the sales side.
For example, a company may book liabilities based on the quantity
of oil product loaded on a truck measured in liters at 15 degrees
Celsius. However, it is acceptable to bill customers for excise duty
measured in ambient liters. In such a situation, a difference will
arise between the excise duty liability recorded and the excise duty
billed to the customer.
m Similar differences could arise on the purchasing side if a duty-
inclusive price is quoted to a buyer based on a different rate than
that used by the company to value its duty-paid inventory.
Excise Duty Associated with Product Loss or Gain

During transfer of oil product between locations, the quantity of oil product
issued may differ from the quantity of product received. There may be a
physical loss or gain. A physical loss may be due to measurement, spillage,
leakage, etc.
Excise duty postings which are made for transfers where quantities are
monitored at issue and receipt (the two-step transfers) cater to both the
scenarios described above. An “excise duty loss or gain“ is posted for the
dutiable quantity lost or gained.
Excise Duty Rate Determination
Within R/3 IS-Oil Downstream, it is possible to control the excise duty rate ([FLVH'XW\5DWH
applied to a movement of material based on a set of parameters, such as: 'HWHUPLQDWLRQ
q According to the physical location (refinery, depot, tank farm, tank, ship,
truck etc.) from which dutiable material is issued, or according to the
location at which material is received.
q By the nature of the material
Different material groups may be given different rate structures within
R/3 IS-Oil Downstream.

q With respect to the end use of the product

A handling type associated with a movement of material can be used to
denote the intended use of the material. In such cases, excise duty rates
vary according to the handling type used for a particular movement.
)LJ([FLVH'XW\5DWH'HWHUPLQLDWLRQ$FFRUGLQJWR+DQGOLQJ7\SH
q The date from which the excise duty rate is valid.
The calculation process selects historic excise duty rates - from entries
within the excise duty rates table - based on the posting date of the
goods movement document within the system.
q According to the end use of the product. It is possible for users to define,
whether a specific movement of material is to be made with a handling
type (a code which defines the end-use of an oil material). Handling
types are, in turn, used to specify the excise duty status from which a
material is bought, or the status to which it is sold. License numbers (to
document relief or exemption from duty) may also be required for
certain handling types.
)LJ5DWHVLQ([FLVH'XW\7DEOHYDOLGIURP

Posting of Excise Duty

It is possible to control whether an excise duty liability or excise duty claim 3RVWLQJRI([FLVH'XW\
is posted for a particular materials movement.
Defaults of Excise Duty Parameters

One of the aims of TDP is to reduce unnecessary data entry by proposing 'HIDXOWVRI([FLVH
key excise duty parameters for purchase orders and sales orders. Other key 'XW\3DUDPHWHUV
functions within the R/3 System, for example, the control of production
processes using “production orders“ also use the default excise duty
parameters.
([FLVH'XW\+DQGOLQJIRUWKH3XUFKDVLQJ)XQFWLRQ
Standard Purchase Orders
TDP functionality allows the control of excise duty liability postings by 6WDQGDUG3XUFKDVH2UGHUV
company/purchase order type. Different purchase order types within the
R/3 System have different identification codes. These codes can be used to
help modify the tax movements allowable within the R/3 System. Thus a
goods receipt to a standard purchase order (type NB) within the R/3 System
for a ED-unpaid to ED-paid movement may be configured to provide excise
liability postings, whereas a goods receipt to a specialized purchase order
may result in no liability posting being recorded.
The key data required for excise duty within the purchase order is defaulted
into the order from master records and tables.
The handling type from the company/purchase order type is superseded by
defaults held in the purchasing information record (the purchasing
information record holds data concerning the purchase of a specific material
from a supplier). The Handling type is mandatory for purchase order items
for dutiable material.
The excise duty status from which the material is bought, or to which it is
sold (from an ED-unpaid location or from an ED-paid location), is defaulted
from the handling type.
The excise duty status of the stock when it is received is determined by the
valuation type which it is given when it is moved into stock. The valuation
type is a label which determines the dutiable status of material and is carried
with the material through every material movement.

Purchase Prices Inclusive of Excise Duty

3XUFKDVH3ULFHV,QFOXVLYH Where purchases of taxable material include excise duty, it is possible to
RI([FLVH'XW\ define purchase order prices so that the system calculates a valid price for
the material net of excise duty liabilities. This net price is used to valuate the
material on entry to stock or on consumption. It is important to hold the net
price in these circumstances so that the material purchase price history can
be maintained. Incoming invoices can be split to separate excise taxes from
materials to reflect different terms of payment.
)LJ,QYRLFH6SOLWWLQJ
An additional condition in the purchase order item defines the excise duty
rate to be used to calculate the excise duty portion of the gross price. Two
main types of conditions are allowed:
q External excise duty rates: These select an excise duty rate automatically
by reading the Excise Duty Rates table in the system using excise duty
parameters within the purchase order item.
q Internal excise duty rates: These allow the user to specify the rate of
excise duty applicable within the gross price using price condition
records. The user can then accept the price proposed by the system or
enter a price manually.
The system deducts the excise duty portion from the gross (duty-inclusive)
price to give a valid net price for the material. At the time the goods receipt
is posted, the system posts the net material cost to inventory (or expense).
The excise duty portion is calculated and posted to an excise duty value of
inventory (or excise duty expense) account.

The offset financial entry to the above financial entries is the accrual for the
payable (net material cost or excise duty) and is posted to the “goods
receipt/invoice verification“ clearing account. This account is cleared in the
invoice verification process, when the invoice for the total cost (material plus
excise duty) is recorded. It is possible to clear excise duty values separately
from the material values.
When the invoice is received for the purchased material, the system
proposes the total value of the accrued material and excise duty cost for
matching. The quantity of material for which the value is matched is also
displayed. However, quantities are only displayed in the purchase order
unit of measure, which may not be the excise duty tax rate unit of measure.
The excise duty rate used for the accrual calculation is not displayed.
Receipts of Dutiable Material Free of Charge

In certain circumstances, oil product may be delivered free of charge while 5HFHLSWVRI'XWLDEOH
excise duty is still payable on the delivery. Note that pure exchanges of 0DWHULDO)UHHRI&KDUJH
material are not covered by this scenario: the process of accounting for
materials and fees in exchanges is covered in depth in the chapter on
Exchanges.
For example, a supplier may deliver gasoline from an ED-unpaid location to
an ED-unpaid tank. On receipt, the product is found to be contaminated and
is returned. The supplier offers a replacement product, but has to provide
the material from a ED-paid stock. The product is purchased “free of
charge“ but excise duty is still payable. If a purchase order is raised for the
replacement supply, it is possible to define a net price of zero and a gross
price which reflects the excise duty cost per unit of material. Conditions,
used to define the excise duty rate, are used as in the example in the section
“Purchase Prices Inclusive of Excise Duty”. This provides a workable
solution for free-of-charge deliveries which incur excise duty. The postings
would be as follows:
)LJ3RVWLQJVIRU)UHHRI&KDUJH'HOLYHULHV,QFOXVLYHRI([FLVH'XW\

Subcontracted Purchase Orders

6XEFRQWUDFWHG Within the R/3 System it is possible to specify that material be provided to a
3XUFKDVH2UGHUV third-party (contractor) who will use the material to create a separate, final
product. This business process is handled within SAP R/3 System through
the use of “subcontracted orders“. In the standard system, these provide the
ability to track material components at the supplier’s premises during the
production process. Subcontracted orders are also used to automatically
calculate the inventory (or consumption) value of the final material based on
the net values of the component materials provided and the cost of
“manufacture“ of the final product. When material is issued to the
subcontractor, it is treated as company-owned stock at a new location (i.e.
materials supplied to vendors). In R/3, this stock is managed at a plant level,
because the stock is not stored on the company’s premises but rather at the
vendor’s site. Component materials are deemed consumed at the point that
the finished material is received as part of company-owned stock.
)LJ7\SLFDO6XEFRQWUDFWLQJ6FHQDULR
Such orders might, for example, be used in the oil industry to monitor and
account for issues of material to a third-party refinery with the aim that a
final blended product be returned.
TDP provides a mechanism for calculating and controlling excise duty
postings during the process of third party “manufacture“ at a subcontractor.

The excise duty postings made at the time of issue of material to a subcontracted
order, and at the time of receipt of the finished product, are entirely user-
definable. The figure below gives one example of how the system can be
configured for subcontracted orders.
)LJ([DPSOHRI&RQILJXUDWLRQIRU6XEFRQWUDFWHG2UGHUV
Materials provided to a subcontractor are issued to him. For goods issues,
the valuation type from which the materials are issued provides the excise
duty “from“ status of the materials. No financial postings of excise duty
liability or excise duty inventory occur for this transaction. In the figure
above, the following material movements would take place:
q Material “A” is issued: ED-unpaid ½ ED-paid
No excise duty liability posted. Material is moved from unrestricted
stock in the issuing plant, and the stock of material provided to vendor
at the plant level is increased.
q Material “B” is issued: ED-paid ½ ED-paid
No excise duty liability posted. Material is moved from unrestricted
stock in the issuing plant, and the stock of material provided to vendor
at the plant level is increased. The net effect on excise duty inventory is
zero.
When the finished material is received into stock, all excise duty entries are
posted for this material transaction. Materials consumed in the production
process are considered as follows:
The excise duty status “from“ of the component material comes from the
valuation type associated with the material at goods issue to the subcontracted
order.

The excise duty status “to“ for the consumption posting is derived from the
Tax Status “from” defined in the purchase order (i.e. the Tax Status of the
vendor). In the above figure, postings for consumption of materials
provided are as follows:
q Material “A” is consumed: ED-unpaid ½ ED-paid
From row 3 of the sample table set up in the figure “Example of
Configuration for Subcontracted Orders”, it can be seen that no excise
duty claim is posted for the consumption of ED-unpaid material. No
reduction of excise duty inventory occurs.
q Material “B” is consumed: ED-paid ½ ED-paid
From row 4 of the sample table set up in the figure “Example of
Configuration for Subcontracted Orders”, it can be seen that an excise
duty claim is posted for the quantity of material consumed. A reduction
in excise duty inventory is posted.
A separate excise duty calculation is made for the receipt of the finished
product:
q Material “C” is received into stock: ED-unpaid ½ ED-paid
From row 5 of the sample table set up in Figure 13, it can be seen that an
excise duty liability is posted for the quantity of finished material
received into stock. An increase in excise duty inventory is recorded.
The difference between the excise duty liability posted for the receipt of
material into ED-paid stock and the excise duty claims posted for
consumption of duty-paid material represents the net liability to the excise
duty authorities.
Third Party Orders

7KLUG3DUW\2UGHUV It may be necessary to buy oil products for delivery:
q To a third party manufacturer
q To a customer
Special order types or item categories are used for such purchases. In the
standard system, no goods receipt is recorded, as materials do not pass
through the company’s inventory. In order to post excise duty liabilities for
purchased material, it is necessary to record a valuated goods receipt for the
material. This results in the accrual of excise duty liabilities for the goods
receipt, but will not result in an update to inventory accounts. The figure
below depicts a typical third party order scenario.

)LJ7KLUG3DUW\2UGHU6FHQDULR
Supplier´s Consignment Stock Held at Company Premises
The R/3 IS-Oil Downstream Exchanges application area deals with complex 6XSSOLHU·V&RQVLJQPHQW6WRFN
scenarios where agreements exist to lift product from other companies’ +HOGDW&RPSDQ\3UHPLVHV
stock. For details of this functionality, see the chapter on Exchanges.
However, it is also possible that our company may wish to make a straight
purchase from a supplier on a consignment basis. Supplier’s consignment
stock is defined as stock which remains the supplier’s property while on our
premises, but which will become our company’s stock at the moment we lift
the product. We are assumed to have an unlimited right to draw off as much
oil product from the consignment stock as is available in the tank.

TDP provides the following solution for processing excise duties.
)LJ3URFHVVLQJRI([FLVH'XWLHV
Material can be received at the company’s premises (as supplier’s stock)
with the same excise duty status with which the material was issued. The
system only allows receipts to ED-unpaid consignment stock from an ED-
unpaid location at the supplier’s premises, or receipts to ED-paid
consignment stock from an ED-paid location at the supplier’s premises.
Receipts from Purchase Orders

5HFHLSWVIURP3XUFKDVH2UGHUV In line with all material movements, permissible movements for receipts of
oil product (and the resulting financial postings) can be controlled using the
entries in the excise duty/Tax Status table. The financial postings shown
below are examples.
Materials can be received directly to a storage tank (ED-unpaid or ED-paid)
and regarded as available product, or can be received to special “blocked“
stocks where quality inspection may take place. Blocked stocks are treated as
“non-available“ and may not be reserved or issued. Alternatively, oil
products may be purchased for immediate consumption at receipt.

Receipts to inventory: excise duty postings covering a variety of scenarios for

receipts from purchase orders to available inventory might look as follows:
)LJ([FLVH'XW\3RVWLQJV
Receipt to blocked stock: Dutiable material can be held as blocked stock
with an excise duty status. Excise duty postings take place for the situation
in which the material is received to blocked stock. Blocked stock can be
valuated, which means that movements to and from blocked stock can
create the required excise duty postings.
)LJ5HFHLSWWR%ORFNHG6WRFN

Receipts to consumption: If a non-stock oil material is purchased with the

intention that the costs associated with procurement be charged to expense
on receipt, the excise duty portion of the cost is separately expensed. Cost
accounting postings for excise duty values can go to a separate cost center,
and can be distributed among user departments. Postings are as follows:
)LJ&RVW$FFRXQWLQJ3RVWLQJVIRU([FLVH'XW\
Multiple Excise Duty Rates (Tax Elements) for a Purchase
0XOWLSOH([FLVH'XW\ It is possible that a number of excise taxes are applied to a single goods
5DWHVIRUD3XUFKDVH movement of taxable material. For example, in some countries, additional
environmental taxes may be levied on movements of oil product. R/3 IS-Oil
Downstream offers the capability to:
q Specify up to six “tax elements“ relating to a single movement of taxable
material. All tax element excise rates must be based on the same taxable
rate unit of measure and must be based on the same dutiable quantity
for the movement. Likewise, all tax elements must share the same
validity period. Tax elements are defined in the excise duty Rates table.
The cumulative value of excise duties are displayed on the main screen.
q Charge each tax element to a different account.
([FLVH'XW\+DQGOLQJIRU3URGXFWLRQ
Standard Production Processes
6WDQGDUG3URGXFWLRQ3URFHVVHV Oil companies may wish to handle a scenario where materials are combined
in a productive process to produce a new, finished material. A typical oil
scenario might be the blending of oil product at a refinery to produce a new
material.

Materials issued to a production process may be oil materials or non-oil

materials, or a mixture of the two. For oil materials, it is possible to control
whether it is permitted to issue ED-unpaid product to the production
process by the type of the material. When a material with an excise duty
status is used, the user can obtain information about the tax.
The TDP functionality assumes that during production, the process takes
place as either an “ED-unpaid process“ or an “ED-paid process“. In other
words, the production order carries an excise duty status. This is the status
to which raw materials are issued. It is also the excise duty status from
which the final product is received.
The final material created in production may be either an oil product or a
non-oil product. If the material is an oil-product, excise duty liabilities and
excise duty inventory are posted for the receipt of the final material to stock.
To summarize, excise duty postings (excise duty liabilities and adjustments
to excise duty inventory) are made on the basis of the tax movements which
occur:
q For the issue of component materials to the production process
q For the receipt of the final product to inventory
)LJ,VVXHRI*DVRLOIURPD'XW\SDLG6WRFN
In the figure above, it is permitted to issue a gas oil from an ED-paid stock in
the production process. The issue is treated as a “ED-paid to ED-unpaid“
movement and an excise duty claim can be posted. It is also permitted to
issue heavy fuel oil from ED-unpaid stocks for use in production. The issue
is treated as an “ED-unpaid to ED-unpaid“ movement and no excise duty
liabilities are posted. Again, it should be stressed that allowable movements
and excise duty liability postings are completely controlled by the user
through the configuration of key tables.
Once the final product (a light fuel oil) is produced, the receipt to stock
occurs from ED-unpaid production to an ED-paid inventory, excise duty
liabilities are calculated for the final material.

([FLVH'XW\+DQGOLQJLQ,QYHQWRU\0DQDJHPHQW)XQFWLRQ
Overview: Inventory Movements
,QYHQWRU\0RYHPHQWV Dutiable material can be received to inventory, managed within inventory,
and issued from inventory using a series of movement types defined in the
R/3 System. Some of these possible movements have been described above.
As already discussed, it is possible to control allowable excise duty
movements (from ED-unpaid to ED-paid location, etc.) in terms of the
business purpose of the movement. Within the R/3 System, the business
purpose of the movement is defined by a combination of event type (issue,
receipt, transfer etc.) and movement type (receipt to blocked stock, issue to
scrapping etc.).
All control of excise duty status with material movements is set in the Excise
Duty/Tax Status table. Users can freely define the excise duty postings
(liabilities and changes to excise duty inventory) associated with a
movement of material.
In addition to standard movement types, it is possible for users to define
their own movement types within the R/3 Core System.
Standard inventory movements to which excise duty postings can apply
include:
Receipts to inventory:
q From purchase orders
q Without purchase order
q To blocked stock
q From blocked stock to available stock
q Returned material from customers
Examples of postings for receipts from purchase orders are given in the
section “Receipts from Purchase Orders”. The R/3 System also offers
movement types to receive stock without a purchase order. Excise duty is
posted in the same way as for receipts from orders. Postings to blocked stock
are discussed in the section “Receipts from Purchase Orders” and in the
section “Returns of Material by Customers”.
Movements within a single depot or other location, for example:
q Material to material movements (used for re-branding the product)
q Movements of material from unvaluated stocks (e.g. vendor-owned
stock) to valuated stocks
If at any point stock which does not belong to the company (e.g. customer
stock held at the company depot) is transferred to the company‘s ownership,
excise duty postings take place based on the Tax Status the material is
moved from and to (material movements between physical sites).
See section “Movements of Material” for an explanation of alternatives and
excise duty implications.

Issues of material from inventory:

q Issues to consumption
q Issues for scrapping
q Issues to production
q Issues to subcontracted orders
If ED-paid material is issued, the excise portion of the material value is
expensed separately from the net material cost and at a separate time. The
cost accounting posting for excise duty is made to a separate cost center
from which a distribution of the cost may be made.
Issues of ED-paid stock to scrap result in an offset posting to a “scrapped
material“ cost account. For this purpose, the excise duty value is to be
posted to a separate “excise duty scrapped material” account.
Revaluation of Excise Duty Value of Inventory when

Excise Duty Rates Change
Excise Duty Rate Changes 5HYDOXDWLRQRI([FLVH'XW\

A requirement exists in certain countries to revaluate ED-paid inventory 9DOXHRI,QYHQWRU\ZKHQ
when the excise duty rate for the material changes. If excise duty rates ([FLVH'XW\5DWHV&KDQJH
increase, the company may face an additional liability for the increase in
excise duty value of stock. Conversely, if excise duty rates decrease, the
company may be able to request an excise duty claim for the decrease in
excise duty value of stock. Companies can decide whether or not they wish
to conduct a revaluation process for ED-paid inventory.
A change in excise duty rates is initiated when a new entry is added to the
excise duty rates table. Changes to excise duty rates may involve changes to
one of the following:
If ED-paid inventory revaluation is switched “on“ in the control table, and
an additional entry for a plant and material tax group is added to the excise
duty rates table, it is necessary to conduct a tax inventory revaluation. It
must be remembered that ED-paid inventory is always valuated at the full
excise duty rate for the plant and material, whenever the ED-paid material is
moved to or out of stock.
Mechanism for Revaluation

The principal aims in designing a revaluation mechanism are:
q To guarantee the integrity of a tax rate revaluation. A single set of
ASTM parameters is required so that the stock quantity on hand can be
converted to the excise duty rate unit of measure prior to excise duty
revaluation. In order to obtain this set of parameters, and also to provide
an agreed quantity for the revaluation, a stock-taking must take place in
the system. This need not be a physical count, however. Functionality is
provided to allow “logical“ stock counts to be performed, where the
book quantities are proposed as the counted quantities.

q To maximize the ability to post material movements during

revaluation. In order to guarantee the integrity of the quantities to be
revaluated, all material movements for the particular material and stock
segment level combination that is the subject of a count are disallowed in
the time period between the posting of the stock count and the posting
of the stock count difference. For example, if the stock count is related to
a normal material item at a storage location, then material movements
for that particular combination of material and storage location are not
allowed. If on the other hand, the count is related to a special stock, then
material movements involving at the individual material stock segment
level are disallowed.
Assume a “future“ rate is added to the excise duty Rates table for Depot 01
and excise duty Group C4. A movement is posted with a posting date within
the validity period of the new rate. The system updates a future quantity
and a future value field in the valuation record.
Where an historic rate of excise duty applies for the posting date (and a tax
revaluation has taken place), the system posts any liability with the excise
duty rate applicable for the historic rate. However, because inventory
revaluation has taken place, any posting to excise duty value of inventory is
made at the current rate. An excise duty difference is posted.
q To provide a flexible approach: The approach supports the flexibility of
tax rate definition. A more simplistic approach would have limited the
ways in which excise duty rates could be defined. Revaluation of ED-
paid inventory is an optional feature and can be switched on and off at
the plant level, according to legal requirements.
Separate field groups track quantities posted in a period where a “current“
tax rate is in force and of quantities relating to a “future“ rate of taxation.
The process of revaluation rolls all “future“ quantities into the “current“
quantity field. The way in which the process operates may be illustrated in
the following figure:

)LJ3URFHVVRI5HYDOXDWLRQ
Each time a material movement of dutiable material takes place, the posting
date of the material movement is compared to a “check date“ held in the
material valuation record. This determines whether “current“ or “future“
quantities are updated in the valuation record.
Stock-taking transactions have been changed to allow the option of posting
stock-taking with or without the posting of a tax rate change.
If ED-paid inventory is to be revaluated, stock-taking must first take place.
The postings that will arise are as follows:
q Excise duty inventory account (differences from stock-taking only)
q Excise duty losses/gains from stock-taking
q Excise duty differences from the tax rate change
q ED-paid inventory account (differences from tax rate change)
Stock-Taking
ED-paid Product 6WRFN7DNLQJ
It is possible within the R/3 System to adjust the duty-paid inventory
account to reflect any addition to, or reduction from the quantity of duty-
paid inventory recorded as a result of stock-taking. When a revised
inventory count is entered into the SAP R/3 System, the following postings
occur:

)LJ,QFUHDVHLQ('SDLG,QYHQWRU\6WRFNWDNLQJ
)LJ5HGXFWLRQLQ('SDLG,QYHQWRU\6WRFNWDNLQJ
ED-unpaid Product
As a general rule, changes in the recorded quantity of ED-unpaid product as
a result of stock-taking do not result in excise duty postings.
However, some countries (notably Belgium and France) operate a system of
allowances for stock losses. Losses of ED-unpaid product above a certain
allowance result in excise duty liability for the portion above the allowance.
Gains of ED-unpaid product within an allowance may be sold without
liability to excise duty.
TDP deals with the use of allowances for gains/losses of ED-unpaid
product, prior to excise duty claims or liabilities being recorded. These
allowances are defined in a table, which calculates the excise duty values
and creates the postings.
Customer Stock
&XVWRPHU6WRFN Where an oil company acts as the facilities manager for a depot, it may be
the case that other oil companies choose to store product at the same depot.
The facility manager needs to control the quantity of a product which
“customer“ oil companies can lift.
The facility manager is responsible for the payment of excise duty for lifted
quantities of ED-unpaid stock which is to be moved to an ED-paid location,
whether these quantities are the facility manager’s own stock or another oil
company’s stock. The facility manager may be able to bill the excise duty
charge to the company that owns the stock in certain circumstances.
Customer stocks are unvaluated in that stock values are not recorded in the
company’s books, whereas the company‘s own stocks are valuated. When a
third party stock is moved, the customer stock number must be included in
the movement. Excise duty liability postings are still made when a customer
quantity is moved from a ED-unpaid location to an ED-paid location.

0RYHPHQWVRI0DWHULDO
Internal Transfers of Material
Dutiable material may be moved between company-owned locations with ,QWHUQDO7UDQVIHUVRI0DWHULDO
implications for excise duty postings.
The full R/3 IS-Oil Downstream solution for inter- and intra-company
transfer of material is covered by the Transport and Distribution (TD)
application area. TD enables scheduling, loading, delivery confirmation and
load balancing to be handled for all methods of transport. For a full
description of functionality in this area, please refer to the chapter on TD.
Excise duty values are calculated and posted for each relevant material
movement.
However, some companies may not wish to use the TD functionality, or may
wish to interface specialized distribution systems to the R/3 System. For this
reason, TDP functionality ensures that excise duty handling takes into
account standard R/3 System functionality to handle transfers of material
between locations. The technique used by a company to track material in
transit between two locations varies based on the company’s requirements
and the nature of the method of transport, e.g. pipeline versus truck. Three
broad scenarios can be identified:
q One-step transfers: In this scenario, the material movement is recorded
in the system as an “instantaneous“ transfer from one location to
another. There is no provision for intransit stock tracking and no
possibility to record gains or losses. These transfer types are suitable for
“local“ transfers, such as tank to tank, tank to truck, or truck to tank.
q Two-step transfers: In this scenario, material is first moved from one
location to “intransit” storage and thus in a separate movement from
intransit storage to the receiving location. Intransit stock quantities can
be monitored by “tracking number” (equivalent to a shipment) and
gains and losses can be calculated per shipment. This functionality is not
in the standard R/3 System and is developed as part of the HPM
application area as detailed in the chapter on HPM.
q One and two-step transfers against a “transport“ order. This provides
the same basic functionality as described above, but adds the use of a
transport order to record the “sale“ of material from one plant to
another. A delivery note is created for the order and contains projected
loading and delivery dates.

Excise Duty Values for Two-Step Transfers without TD Integration

([FLVH'XW\9DOXHVIRU General Posting Rules for Excise Duty Values
7ZR6WHS7UDQVIHUVZLWKRXW q Excise duty liabilities (arising when taxable material is moved out of or
7',QWHJUDWLRQ to an ED-unpaid area): If the receiving location is ED-unpaid, liabilities
are posted for the goods receipt only. If the receiving location is ED-paid,
liabilities are posted for the goods issue only.
q Excise duty relief/reduction (arising when taxable material is moved
with a reduction in duty): If the receiving location is ED-unpaid,
relief/reduction is posted for the goods receipt only. If the receiving
location is ED-paid, relief/reduction is posted for the goods issue only.
q Excise duty rate differences (arising when the tax rate applicable at the
sending plant is different from the tax rate at the receiving plant): Tax
differences are only posted for the goods issue only. Differences are
only posted where a transfer takes place between two ED-paid locations.
q Excise duty rate changes (arising when a change in tax rate takes place
for the receiving plant between the time the material is issued from the
sending plant and received): Tax changes are only posted for the final
receipt once the gain or loss for the total transfer is known.
q Excise duty gain/loss (associated with a physical gain or loss of duty-
paid product) is posted for the final receipt of all product associated with
a shipment (transport number).
Posting Rules for Material Quantities

Quantities in transit are updated at the plant level. Unrestricted use stock
and total stock quantities are updated at a lower level.
To facilitate the handling of gains and losses, the quantity in-transit may be
negative. The balance of the quantity in transit against a single transport
number must be reduced to zero when the gain and loss postings are
completed.
Examples of Excise Duty Postings

In the examples shown below, the following assumptions have been made:
q Excise duty rates at both plant 01 and plant 02 are the same
q Excise duty rates do not change during the cycle of the plant-to-plant
transfer
q A single issue and a single receipt are made
q The price of material at plant 01 and plant 02 is identical

q Issue unit of measure, stock unit of measure and tax rate unit of measure
are identical
q Issue and receipt take place on the same day: 01.01.97
Changes in quantities are shown below the line in each “T“ account.
)LJ('XQSDLGWR('SDLG0RYHPHQWZLWK/RVV

)LJ('XQSDLGWR('SDLG0RYHPHQWZLWK*DLQ
In the example below, the following assumptions have been made:
q Excise duty rates between plants can vary
q Excise duty rates are assumed to change during the cycle of the transfer
q Reduced rates of excise duty are applicable
q The price of material at plant 01 and plant 02 is identical
q Issue unit of measure, stock unit of measure and tax rate unit of measure
are identical

)LJ([FLVH'XW\5DWHV7DEOHIRUWKH([DPSOH%HORZ
)LJ('XQSDLGWR('SDLG0RYHPHQWZLWK/RVV'LIIHUHQW([FLVH'XW\7D[
5DWHVDW'LIIHUHQW3ODQWV5HOLHI5HGXFWLRQ5DWHRI([FLVH'XW\('7D[5DWH
&KDQJH'XULQJ7UDQVIHU

Handling of Gains and Losses

Excise duty gains or losses are posted for the associated inventory gains and
losses. Gains and losses are attributed to the receiving plant. A periodic
calculation of gains and losses by analysis of transport number is possible.
The transfer cycle would be closed manually after user criteria have been
met (for example that no further movement has taken place against a
transport number in the last ten days). At this point a final goods receipt is
posted with a zero quantity, and the final delivery indicator is set.
([FLVH'XW\+DQGOLQJLQWKH6DOHVDQG'LVWULEXWLRQ
Movements of dutiable materials within the Sales and Distribution need to
be considered for their potential excise duty impact. Examples of the factors
that need to be taken into account include:
q The Tax Status of the product to be sold: This is determined in the
system by the selection of a valuation type or batch, from which material
is deemed to be taken (see section “Excise Duty Status”). This is entered
in the scheduling or load confirmation function of R/3 IS-Oil
Downstream.
q Whether the customer has authorization to buy the product at a
reduced rate of excise duty: Licenses are maintained in master data
tables. During order entry, a license (if required) is defaulted from this
master data, if it satisfies the matching criteria for the order line. To
make sure that the right license type is determined, there must be a
connection between the license type and the condition type in the
pricing procedure.
q The end use that the customer puts the product to and whether this
use requires autorization from the excise authorities: A “handling
type” code signifying the end use of the product sold may be stored in
the customer record, or the sales information record. This information
may also be entered directly in the order.
q The Tax Status of the location where the customer puts the product,
ED-unpaid or ED-paid: The excise duty status at receipt by the customer
is defined by the handling type.
q The date of the material movement: Valid from dates are defined for
excise duty rates.
q The total product cost, if excise duty is included in the total price:
excise duty rates are set out in an excise duty rates table. If the user
wants to specify an excise duty rate which is different from the one used
to record the liabilities, they can do so by using the price condition
records. The standard pricing procedure proposes an excise duty value
for the ordered quantity in all sales quotations and orders. See the
section entitled “Excise Duty Handling in Sales Orders”.

Excise Duty Handling in Sales Orders

The R/3 System offers many forms of “sales order“. It is possible to raise ([FLVH'XW\+DQGOLQJLQ6DOHV
quotations, orders, contracts, scheduling agreements and deliveries in the 2UGHUV
system.
Defaults for excise duty handling are passed to the sales order from
customer records or from sales information records. Data can be taken from
the customer, payee or consignee in the order.
In all sales orders, the excise duty value associated with an order for ED-
paid stock can be calculated and displayed. A standard R/3 System pricing
procedure is used to calculate excise duty within a specific order. Similar to
the functionality provided for purchasing, two types of price condition are
allowed:
q External Excise Duty: These select an excise duty rate automatically by
reading the excise duty rates table in the system using excise duty
parameters within the sales order item.
q Internal Excise Duty: These allow the user to specify the rate of excise
duty applicable within the gross price via price condition records. The
user can then accept the price proposed by the system or enter a price
manually.
The system adds the excise duty portion to the material price to give a valid
gross price for the material. For goods issues, the system posts the net
material cost to inventory (or expense).
This concept means that if users want to use the same excise duty rates in
the billing as was used in the liability posting, one set of reference data for
the duty rates needs to be maintained, namely the excise duty Rates table.
Conversely, if users want to specify alternative rates, they can do so by
creating price condition records. The figure below portrays this scenario.
)LJ3ULFH&RQGLWLRQ5HFRUGV
For the manual price conditions a series of “price condition“ records may be
defined for excise duty rates. Such records indicate an excise duty rate for a
quantity of material. Each price condition record has a user-defined “key“.
Two key structures are provided with the R/3 IS-Oil Downstream System.
The keys in each case are:
Other fields in the condition record are:
q Validity period
q ASTM/API unit of measure (base for excise duty calculation)

q Duty rate (per duty quantity)

q Duty quantity
The condition record mirrors the set-up of the Excise Duty Rates table that is
used for excise duty handling in the R/3 Materials Management function.
During order creation, the system searches for excise duty condition records
with a key structure which matches the data in the order. If found, the excise
duty rate is applied to the material quantity and the calculated value is
added to the total order cost.
Tax Elements
7D[(OHPHQWV It is possible to have several excise duty tax rates associated with a sale of a
material. Additional excise and environmental taxes may be levied on a sale.
This scenario mirrors the one described for the purchasing function. Tax
elements for excise duty calculations in the Sales and Distribution function
are the same as those defined for the Purchasing function, i.e. they are held
in the excise duty rates table. In addition, users can define tax elements in
price condition records, if they do not want to use the same rates as those
used for the liability posting.
Up to six excise duty tax elements can be defined. The set-up of excise duty
tax element price conditions in the Sales and Distribution function should
mirror the set-up of tax elements within the excise duty Rates table.
The standard functionality for condition records ensures that calculated tax
elements for an SD document can be stored as separate condition types. In
addition, it is possible to post each excise duty element separately to the
general ledger.
Excise Duty Handling in Sales Invoices

([FLVH'XW\+DQGOLQJ When creating a sales invoice, it is possible to pull over the prices (and
LQ6DOHV,QYRLFHV excise duties) defined in the order without further revision. However, it is
also possible to “reprice“ in the invoice, a process which reevaluates some or
all of the condition records associated with an order and redefines the price
of the product if conditions have changed. The mechanism for recalculating
excise duty in the invoice is identical to that used in sales orders. However,
certain key criteria in the calculation of excise duty are different:
q The quantity used for the excise duty calculation in the invoice may be
the ordered quantity, the loaded quantity or the confirmed (delivered)
quantity
q The date used for pricing in the invoice (and hence selection of excise
duty rate) may be: the date invoice is entered in the system, the date of
loading, the date of delivery, etc.

Licenses: Relief and Exemption Handling
Overview /LFHQVHV5HOLHIDQG([HPSWLRQ
Authorities responsible for the collection of excise duties will often issue +DQGOLQJ
licenses or permits to traders and require that the license reference numbers
be quoted whenever dutiable material is moved.
In R/3 IS-Oil Downstream, excise licenses can be created, maintained and
displayed. The presence of a license affects the processing during movement
of dutiable product, where license type “rules” are used in the determination
and possible exemption/reduction of the amount of excise duty calculated.
A number of different license types are available in the system (described
below) and it is possible for a user to create new license types with reference
to an existing license type.
The license types indicate a different processing method and the use of a
different selection of the license master data. The major differences in
processing are that:
q Excise duty (Europe) and pre-paid permits (Singapore) deal with both
movement tax and customer invoicing implications
q North American methods are concerned with the tax determination and
licencing issues, at the time of invoicing only
q Vendor licenses are held for record purposes
License Master Data

It is possible to create, change or display licenses.
Excise Duty License Types

Customers who buy dutiable oil products may have an exemption certificate
(for a specific period), which frees them from paying excise duty.
Alternatively, a customer may have an authorization number (again for a
specific period) which reduces the excise duty payable to the supplier.
An excise duty license is always dependent on a customer specification
(customer number or customer group), a material specification (material
number or material group) and the handling type. The license applies for a
specific period.
The entry of a company code is optional, but if used, the license is valid only
for that company code. A maximum quantity may be entered.
In the business transactions like order entry, the system attempts to default a
license if there is one applicable for the transaction data (customer, material,
etc.).

North American License Types:

Federal Excise Tax/State Excise Tax / County Excise Tax / City Excise Tax /
Other NA Tax
These taxes are North American duties which are dependent on a customer
specification (customer number or customer group), a material specification
(material number or material group) and the country. The company code,
the mode of transport and the sales document type are optional. The licenses
apply for a particular location, which is:
q For the Federal Excise Tax, the country
q For the State Excise Tax, the state code or an entry in the alternate
location field
q For the County Excise Tax, the state code and the county code or an
entry in the alternate location field
q For the City Excise Tax, the state code and the city code (county code
optional) or an entry in the alternate location field
q For the Other NA Tax, the state code and the city code or the state code
and the county code or the state code, the county code and the city code
or an entry in the alternate location field
The State Excise Tax in most cases applies only for the destination. In
some states the tax applies for the origin as well. These states are
registered in an interstate table.
The condition types, which identify the different “excise” taxes, are linked in
a separate configuration table to the applicable license types. Multiple
condition types can be linked to one license type.
The customer tax group field in the customer master minimizes the number
of license and condition records required for exempt groups, such as
governmental agencies and schools. An “alternate” material group field is
also available for minimizing the number of licenses.
The Interstate table only requires the entry of specific states or jurisdictions
that require licenses at the origin plant. The Interstate table includes the
condition type, the state, county, or city that requires the appropriate license,
and the valid “from” and “to” dates.
Rather than modifying the supplied “user exits,” users can use the standard
pricing condition access sequences to achieve unique requirements, such as
the following:
q A match on customer specific value using core pricing techniques would
stop the access sequence search, if a condition record was found. The
customer- specific conditions are applicable for FOB (customer pick-up
at company “plant”) transactions, with FOB identified in the “Incoterms
1” field.

q A match on plant-specific situations not covered by the standard tax

exemption determination user exits, applicable for FOB transactions,
would allow the search to continue to the next sequence. Included in this
condition would be the new North Carolina tax rules.
q The final FOB access sequence would check for standard condition type
tax records, followed by the tax exemption determination user exit for
license validation.
A “sales order type” field is included in the license data to satisfy a
Canadian legal requirement to enable specific customers to be tax-exempt on
exchange related transactions, while being non-exempt for normal sales
transactions.
Vendor License
For reporting purposes, it is possible to store vendor licenses in the system.
These licenses have no functionality of their own. The vendor number is
mandatory, the company code is optional.
Pre-Paid Permit
This license type deals with those licenses which are issued for a defined
quantity of dutiable material. The company pays a specified amount for the
license and is entitled to sell an agreed quantity of material from an ED-
unpaid area. The cost of the license is in effect prepaying the tax liability.
The license may apply to a group of materials which have a common rate of
tax. Each time there is a delivery of the defined material, the quantity
balance for the license is reduced until it is exhausted. A follow-on license
may be specified for additional delivery quantities.
Mandatory inputs are a customer specification (customer number or
customer group) and a material specification (material number or material
group). A company code and a country are optional. The license applies for
a specific period.
Duty-Free Permit
The duty-free permit is a license which allows transfers of product between
two ED-unpaid areas or allows the customer to buy duty-free (this would
typically apply to an export customer or to a special-use customer such as
the armed forces).
The permit is dependent on a customer specification (customer number or
customer group) and material specification (material number or material
group). A company code and a country are optional. The license applies for
a specific period.
Control of Reduced Excise Duty Rates

A reduction in excise duty is indicated by a specific handling type in the
Excise Duty Rates table. For each material tax group, it is possible to specify
reduced rates of excise duty associated with specific user-defined handling
types. The relationship between a handling type and the requirement for
excise duty license details is specified in a reference table. The predefined
excise price conditions can also be used to handle reduced rates.

Validation of Exemption Licenses and Authorizations

Licenses are validated in the sales order and invoice.
Returns of Material by Customers

5HWXUQVRI0DWHULDOE\ It is possible that dutiable oil products may be returned by customers,
&XVWRPHUV perhaps because an unacceptable degree of contamination has occurred and
the customer wishes to obtain replacement product. In such cases, it is
necessary to make a special “returns“ order in the R/3 System. This order
has no formal link to the original sales order.
It is also possible to create a credit memo for the customer for the value of
the material returned. Prices and excise duty values are calculated using
price condition records. If the value of the credit memo is based on the date
of return of material to stock, it is theoretically possible that the excise duty
value credited to the customer is different from the original excise duty
charged, if the excise duty rate has changed between goods issue and goods
return. However, the excise duty value can be “overwritten“ in the credit
memo with a manual entry.
At the time of material return, care should be taken that the excise duty
parameters (Tax Status “from“ and “to“ and handling type) reflect those
used in the original sales order.
([FLVH'XW\+DQGOLQJIRU7UDQVSRUWDQG'LVWULEXWLRQ
Key areas that are covered by TDP include:
q It is possible to make excise duty postings based on material movements
with respect to product loading or to unloading at the customer site.
q The process that calculates and posts excise duty can handle cases where
modes of transport (truck, ship, etc.) are deemed to be ED-unpaid or ED-
paid locations in their own right, or with cases where the Tax Status
associated with the customer is used for the product in the truck.
q Excise duty gains and losses are calculated and posted for the material.
Duty Liability versus Duty Billed Discrepancies

'XW\/LDELOLW\YHUVXV'XW\ The broad rule is that excise duty liabilities to the customs authorities
%LOOHG'LVFUHSDQFLHV booked for the selling company should match the excise duty billed to the
customer. This can be achieved by ensuring that the excise duty rates to be
used in the R/3 MM Module (defined in the Excise Duty Rates table) match
the excise duty rates to be used in the R/3 SD Module (defined in price
condition records).
However, users are able to configure the system so that differences between
booked liabilities and billed duty may arise.
For example, in some countries, it is allowable to base excise duty liabilities
on quantities of product measured at a standard temperature, while excise
duty billed to the customer may be based on the quantity of oil product
delivered in ambient liters. Differences between excise duty liabilities

booked and excise duty billed will occur in this case. The TDP process which
calculates the duty postings, includes parameters to enable users to specify
whether excise duty should be balanced, that is, whether additional excise
duty liability/claim postings for the difference will be made.
If excise duty is not to be balanced, the process tracks the excise duty
liability booked against the excise duty billed and accounts for any
differences. Differences are treated as a “windfall profit or loss“ with an
appropriate adjustment to revenue.
Excise duty liabilities may be posted for the material movement representing
the loading (scheduled quantity) or the movement representing the delivery
at the customer location (confirmed quantity). Differences between the
posted liability and the excise duty billed to the customer can be tracked in
the delivery note. The system posts differences for the final goods receipt (if
invoicing is completed before the delivery is recorded) or for the invoice
creation (if delivery is completed before invoicing). Any difference is posted
as a “windfall profit/loss“ against a revenue account.
Excise duty postings associated with a difference between posted excise
liabilities and billed excise duty would look as follows. It should be noted
that values only (and not quantities) are balanced in the difference posting.
)LJ([FLVH'XW\3RVWLQJV$VVRFLDWHGZLWKD'LIIHUHQFHEHWZHHQ3RVWHG([FLVH
/LDELOLWLHV %LOOHG([FLVH'XW\
It is possible to specify whether excise duty balancing is required. In
addition, a further indicator must be set to identify whether vehicles used
for transportation are regarded as ED-unpaid or ED-paid locations in their

own right; or whether the Tax Status of loaded product within a vehicle is
taken from the customer’s intended use of the product.
([FLVH'XW\+DQGOLQJIRU([FKDQJH)XQFWLRQV
Requirements for excise duty handling with respect to processing of oil
product exchanges primarily focus on the integration of standard excise
duty techniques with specialized invoice processing functions required for
oil-product exchanges.
Invoices for exchanges may involve the billing of product costs only, fees
only, excise duties only, or any combination of these. A more detailed
description can be found in the chapter on Exchanges.
Excise duty values continue to be calculated for purchase and sales orders
using standard excise duty techniques:
q Excise duty values in “purchase“ agreements can be specified in the
contract using the price condition technique, if the material price
includes excise duty. For goods receipts, excise duty liabilities are
calculated using the rates in the Excise Duty Rates table.
q Excise duty values in “sales“ agreements can be specified using either
the price condition technique or the Excise Duty Rates table. For goods
issues, excise duty liabilities are calculated using the rates in the Excise
Duty rates table.
Excise Duty for Exchange Invoices
([FLVH'XW\IRU([FKDQJH Invoices for exchanges may include any combination of fees, duties and
,QYRLFHV material costs. It is also possible that all invoiced charges may be “netted“
under the agreement with a periodic settling of accounts.
For product received from exchange partners:
q Pure material exchange - no product costs are invoiced. For goods
receipts, excise duty is charged to the goods received/awaiting invoice
accrual account. For invoice receipts, the excise duty portion is matched
to the entry on the goods received/awaiting invoice accrual account.
Fees are matched separately.
q Exchange with material costs billed. In this case, for goods receipts,
excise duty is added to the material cost and a single posting is made to
the goods received/awaiting invoice accrual account at goods receipt. If
an invoice is received, the material and excise duty portion of the cost is
cleared as a single item. Fees are matched separately.
In the case of invoice netting, all charges under the exchange agreement are
cleared and a net payable or receivable is booked against the vendor or
customer account for the exchange partner, as appropriate. For full details of
the netting process, please see the chapter on Exchanges.

5HSRUWLQJ
The TDP application area provides the FI-Special Ledger (FI-SL) structure
for reporting. A line item table and a summary table structure is provided.
The ledger structures enable users to report excise duty postings based on a
variety of key fields, for example:
q Company code
q Plant
q G/L account
q Valuation type
q Tax Status moved from
q Tax Status moved to
q Handling type
The process which calculates and posts the excise duty values also
“populates” the excise duty Special Ledgers. The figure below shows the
relationship of data held in a source document used for excise duty posting
and the data that can be held within the excise duty special ledgers.
The excise duty Special Ledger collects details from all transactions
involving dutiable materials, including those that do not involve an excise
duty posting, such as ED-unpaid to ED-unpaid transactions and transactions
made at an excise duty rate of zero.
With the excise duty Special Ledgers installed, the standard R/3 Report
Writer or Report Painter can be used to build custom reports.
)LJ'DWD5HODWLRQVKLSV

7 TDP Excise Duty

Încărcat de

Informații document

Drepturi de autor

Formate disponibile

Partajați acest document

Partajați sau inserați document

Opțiuni de partajare

Vi se pare util acest document?

Este necorespunzător acest conținut?

Drepturi de autor:

Formate disponibile

7 TDP Excise Duty

Încărcat de

Drepturi de autor:

Formate disponibile

&KDSWHU 

q Tax liability postings for movements of dutiable material from an ED-

handled. Differences can be handled as a windfall gain or loss which is

Excise Duty Postings ([FLVH'XW\3RVWLQJV

Excise Duty Value at Consumption

Excise Duty “Accounting Differences“

q Internal “plant-to-plant“ transfers of material. For example, oil product

Excise Duty Associated with Product Loss or Gain

q With respect to the end use of the product

Posting of Excise Duty

Defaults of Excise Duty Parameters

Purchase Prices Inclusive of Excise Duty

Receipts of Dutiable Material Free of Charge

Subcontracted Purchase Orders

Third Party Orders

TDP provides the following solution for processing excise duties.

Receipts from Purchase Orders

Receipts to inventory: excise duty postings covering a variety of scenarios for

Receipts to consumption: If a non-stock oil material is purchased with the

Materials issued to a production process may be oil materials or non-oil

Issues of material from inventory:

Revaluation of Excise Duty Value of Inventory when

Excise Duty Rate Changes 5HYDOXDWLRQRI([FLVH'XW\

Mechanism for Revaluation

q To maximize the ability to post material movements during

Excise Duty Values for Two-Step Transfers without TD Integration

Posting Rules for Material Quantities

Examples of Excise Duty Postings

Handling of Gains and Losses

Excise Duty Handling in Sales Orders

q Duty rate (per duty quantity)

Excise Duty Handling in Sales Invoices

Licenses: Relief and Exemption Handling

License Master Data

Excise Duty License Types

North American License Types:

q A match on plant-specific situations not covered by the standard tax

Control of Reduced Excise Duty Rates

Validation of Exemption Licenses and Authorizations

Returns of Material by Customers

Duty Liability versus Duty Billed Discrepancies

S-ar putea să vă placă și

&KDSWHU