Introduction To Goods and Services Tax Compliance in Oracle ERP Cloud Case Study Spotlight PDF

Introduction to Goods and Services Tax
ERP CLOUD
Compliance in Oracle ERP Cloud: Case Study
Spotlight
Table of Contents
1. Document Objectives ......................................................................................................................................................2
2. Assumptions and Prerequisites .......................................................................................................................................2
3. GST Structure...................................................................................................................................................................2
4. Enterprise Structure ........................................................................................................................................................2
5. Place of Supply and Tax Applicability ..............................................................................................................................4
6. Manage General GST Compliance in Oracle ERP Cloud ..................................................................................................4
A. Manage GST Registration Numbers ...................................................................................................................................................... 4
Legal Reporting Units ................................................................................................................................................................................ 5
First Party Registration Numbers .............................................................................................................................................................. 6
Third Party Registration Numbers ............................................................................................................................................................. 6
Tax Registration Levels .............................................................................................................................................................................. 7
B. GST processing....................................................................................................................................................................................... 7
C. Implementation of Harmonized System Nomenclature Codes (HSN) ................................................................................................ 10
Product Fiscal Classifications ................................................................................................................................................................... 11
D. Implementation of Service Codes ....................................................................................................................................................... 15
Product Category Fiscal Classifications ................................................................................................................................................... 15
E. Management of Location-Based Transaction Taxes ........................................................................................................................... 18
Geography Tax Determining Factor ........................................................................................................................................................ 20
F. Implementation of Self-Assessed Taxes .............................................................................................................................................. 28
Self-Assessment of Taxes (Reverse Charge) ............................................................................................................................................ 28
G. Implementation of Self-Assessment tax for Advance payments (Prepayments)................................................................................ 30
Configuration: Self-Assessment Taxes on Advance paid (Prepayment).................................................................................................. 31
1 | CASE STUDY SPOTLIGHT: INTRODUCTION TO GOODS AND SERVICES TAX COMPLIANCE IN ORACLE ERP CLOUD
1. Document Objectives
This document describes how to manage fundamental global GST compliance in Oracle ERP Cloud. A goods and services tax (GST) is a
type of general consumption tax that is imposed and collected incrementally on transactions. GST is based on an increase in value of a
product or service at each stage of production or distribution. In multiple countries, GST is usually implemented as a destination-based
tax, where the tax rate is based on the location of an end customer, location to which goods are shipped, or location at which services
are rendered.
2. Assumptions and Prerequisites
In this document, the following entities comprise the prerequisite configuration:
 Data Security
Assign the seeded Tax Manager Job role to the user. For more information, see Cloud Security on Oracle Help Center.
 Enterprise Structures
Oracle ERP Cloud is designed to ensure your enterprise can fulfill legal and management objectives. For more information, see
Enterprise Structures on Oracle Help Center.
 Ledger, Business Unit, Legal Entity, and Legal Reporting Unit

Common setups for Payables, Receivables, Purchasing and Order Management. For more information, see Implementing
Financials Cloud and Implementing Supply Chain Management Cloud on Oracle Help Center.
3. GST Structure
Business organizations must analyze and understand the GST conventions and practices applicable to a specific country to identify the
required tax statutes and the geography level such as country, state, or province at which taxes must be configured. Consequently, you
must evaluate the applicable tax jurisdictions, tax statuses, tax rates, and tax recovery rates in the context of the country’s GST
requirements.
Sample GST regime and tax configuration for selected countries may be referenced in a standard Rapid Implementation (RI) spreadsheet
template (Tax Configuration Workbook). You can use this sample GST configuration to understand the simple and common transaction
tax setup model in Oracle ERP Cloud. The data provided in this document is only for illustration of concepts. Business organizations must
implement specific GST configuration based on the country, operational, and industry requirements.
Each tax in a tax regime has its own tax status and tax rates configuration to accommodate the standard GST calculation and reporting.
Tax configuration may also consist of tax rules to define exceptions to common standard scenarios. For details on Oracle ERP Cloud tax
configuration concepts that aid GST regime-to-rate and tax rules configuration, see the Tax Implementation Guide on Oracle Help
Center.
4. Enterprise Structure
Oracle Fusion Applications allow you to model your enterprise to meet your legal and management objectives. The decisions about your
implementation of Oracle Fusion Applications are affected by your:
 Industry
 Business unit requirements for autonomy
 Business and accounting policies
 Business functions performed by business units and optionally, centralized in shared service centers
 Location of facilities
 Applicable tax laws and tax compliance
Every enterprise has three fundamental structures that describe its operations and provide a basis for reporting:
 Legal
 Managerial
 Functional
In Oracle Fusion, these structures are implemented using the Chart of Accounts and Organization hierarchies. Many alternative
hierarchies can be implemented and used for reporting. You are likely to have one primary structure that organizes your business into:
 Divisions
 Business Units
 Departments
 Inventory Organizations
Business organizations must analyze and understand a country’s GST conventions and applicable practices to identify the required
enterprise structure in order to meet GST requirements. Oracle ERP Cloud is designed to ensure your enterprise can fulfill legal and
management objectives. For more information, see Enterprise Structures on Oracle Help Center.
As per country specific GST laws, taxes are location-based and specific to Tax jurisdiction. Business organizations must register with tax
authorities in each tax jurisdiction where they have business operations and use the assigned Tax Registration Number for their business
transactions.
Oracle ERP Cloud facilitates the Legal Reporting Unit (LRU) functionality where the users can define the Tax Registration Numbers and
these Legal Reporting Units can be assigned to a Management Business Unit, Profit Center Business Unit (PCBU), or Inventory
Organization (INV) as required on the basis of the enterprise structure.
Oracle ERP cloud facilitates the following enterprise structures to meet country specific tax requirements:
Note: These are sample enterprise structures.
Structure 1:
In this structure, you must create a Management Business Unit per tax jurisdiction. Each Management Business Unit can be classified as
Legal Reporting unit where tax registration must be defined.
One or more inventory organizations operating in the respective tax jurisdiction can be assigned to this Management Business Unit.
Internal material movement can happen between these inventory organizations.
The following diagram shows Structure 1:
Legal Entity
Management Management
LRU-BU1 LRU-BU2
BU-1 BU-2
INV1-BU1 INV2-BU1 INV1-BU2 INV2-BU2
This is a restrictive enterprise structure where the mapping of Business Unit is done at Tax Jurisdiction level. This may result into
management overheads when the number of tax jurisdictions is high and business functions may not necessarily be mapped to these
jurisdictions. To provide efficient enterprise structure, the ERP Cloud provides options to decouple Management Business Units with Tax
Jurisdictions.
Structure 2:
In this structure, you can create only one Management Business Unit per region and maintain Inventory Organizations in each tax
jurisdiction they operate in. To meet the GST requirements in this enterprise structure, Oracle Supply Chain Financial Orchestration
allows intercompany trade agreements between Profit Center Business Units (PCBU). A profit center is a cross section of the enterprise
that is tracked as a separate unit of the enterprise for management analysis.
In Oracle ERP Cloud, you can map an Inventory Organization to a Profit Center Business Unit. Multiple inventory organizations can be
mapped to the same Profit Center Business Unit. During an implementation, you must consider your Profit Center Business Units when
deciding entity structures. For example, certain geographies like India mandate that transfer of material between tax registrations of a
legal company be subject to goods and services tax. In this situation, a Profit Center Business Unit designating individual tax registrations
allow you to create intercompany accounting entries including invoices between tax registrations.
Structure:
Legal Entity
Management BU-RE1
PCBU1-RE1 LRU-PCBU1 PCBU2-RE1 LRU-PCBU2
INV1-PCBU1 INV2-PCBU1 INV3-PCBU2 INV4-PCBU2
5. Place of Supply and Tax Applicability
As per country specific GST Rules on Place of Supply and Applicability of Taxes, GSTs are applied on the basis of tax jurisdiction of the
supply. The organization should be registered under GST law in all the tax jurisdictions where they are operating and each location
should be identified by a unique GST registration number per tax jurisdiction.
When there is a supply of goods or services, if the Sold-to organization (supplier facing entity) and supplying organization belongs to one
tax jurisdiction then such supply is called Intra-jurisdiction Supply. If the Sold-to organization (supplier facing entity) and supplying
organization belongs to two different tax jurisdictions such supply is called Inter-jurisdiction Supply.
Oracle ERP cloud uses Ship- From/Bill-From and Ship-To/Bill-To location of First-Party Tax Registration Number as base factors to derive:
 The place of supply per nature of transaction

 The applicable country specific place of supply rules
Each tax jurisdiction can be referred using the Tax Registration Number assigned to Legal Reporting Unit for tax computation and
reporting purpose.
If the place of supply (tax jurisdiction) can’t be identified correctly based on Bill to or ship to locations, you can use the location of First-
Party Tax Registration Number assigned to LRU of the supplier facing entity. Oracle ERP Cloud facilitates the use of First-Party Tax
Registration Number as determining factor for:
 Defaulting the place of supply while defining the taxes

 Determine tax applicability rules.
The following tax applicability rules are defined based on First-Party Tax Registration Number used as a determining factor:
Tax Applicability Rules:
Inbound transactions
Event Class: Purchase Transactions

Tax Determining Tax Class Qualifier Tax Operator Value or Range From Applicability
Factor class Determining
Factor Name
Geography First-Party Tax State Not equal to Determining Ship From Inter state Tax
registration Number factor
Geography First-Party Tax State Equal to Determining Ship From Intra state Tax
Outbound Transactions
Event Class: Sales Transactions

Tax Determining Tax Class Qualifier Tax Operator value or Range from Applicability
Factor class Determining
Factor Name
Geography First-Party Tax State Not equal to Determining Bill To Inter state Tax
Geography First-Party Tax State Equal to Determining Bill To Intra state Tax
You can use different types of tax determining factors such as Bill to, Ship to, First Party Tax Registration Number, and more to define
Place of Supply and Tax Applicability Rules as per their Oracle ERP Cloud enterprise structure and applicable tax rules on place of supply.
6. Manage General GST Compliance in Oracle ERP Cloud

A. Manage GST Registration Numbers
Establishing and applying the GST registration for a business with the relevant tax authorities is a key legal requirement in many
countries. A unique GST registration number is generally assigned to a taxpayer registered with the applicable GST authorities. The
registration number is used as a basis for referencing and tracking the tax obligations of a taxpayer. In some cases, tax determination
and its compliance administration is also dependent on the type of the taxpayer registration.
Case Study
 A GST regime has two taxes that have State level jurisdictions, and require a taxpayer to register. The taxpayer has specific
business operations. For a given state, the GST registration number is the same for both taxes in that GST regime.
 Trader Green Corp. has business operations in two states Telangana (TS) and Tamil Nadu (TN). Therefore, Green Corp. has two
GST registration numbers for the states TS and TN respectively. The customers and suppliers of Green Corp. also have GST
registration numbers for compliance and administration purpose.
Fulfilling GST Registration Requirements
You can fulfill the GST registration requirement in Oracle ERP Cloud using the Manage Tax Registrations feature.
Green Corp
Legal Reporting unit TS
Legal Reporting
Units
Legal Reporting unit TN
(First Party)
Vision corporation tax

profile
Vision Corporation
customer of Green
Corp
Vision corporation site tax
profile
PennyPack system tax

PennyPack profile
Systems supplier
of Green Corp
PennyPack system site tax
profile
For the given case study, the first-party and legal entity is Green Corp. in Oracle ERP Cloud.
Legal Reporting Units
Legal reporting unit (LRU) is the lowest level component of a legal structure that requires tax registrations. For the legal entity
Green Corp., it is necessary to configure two LRUs for the tax registration number pertaining to the two states of TS and TN.
Configure tax registrations for each respective LRU on the Manage Tax Registrations page.
Configure Legal Reporting Unit
1. Sign in as a Tax Manager.

2. In the Setup and Maintenance work area, go to the following:
Offering: Financials
Functional area: Transaction tax
Task: Manage Legal Reporting Unit
Attribute Value Comments

Territory TS The legal reporting unit representing the state of Telangana.
Name Green Corp. TS The name of the legal reporting unit selected by the user.
Main Legal Reporting Yes Not applicable.
Unit
Legal Reporting Unit Addresses
Country India The country of the legal reporting unit address for tax registration
purposes.
Address Line 1 Operation Building The street of the legal reporting unit address for tax registration purposes.
Address Line 2 Not applicable.
City Hyderabad The city of the legal reporting unit address for tax registration purposes.
State TS The state of the legal reporting unit address for tax registration purposes.
Postal Code 500081 The postal code of the legal reporting unit address for tax registration
purposes.

Territory TN The legal reporting unit representing the state of Tamil Nadu.
Name Green Corp. TN The name of the legal reporting unit selected by the user.
Main Legal Reporting No Flag used to designate whether this record represents a main legal
Unit reporting unit.
Legal Reporting Unit Addresses
Country India The country of the legal reporting unit address for tax registration
purposes.
Address Line 1 Services Building The street of the legal reporting unit address for tax registration purposes.
Address Line 2 Not applicable.
City Chennai The city of the legal reporting unit address for tax registration purposes.
State TN The state of the legal reporting unit address for tax registration purposes.
Postal Code 600019 The postal code of the legal reporting unit address for tax registration
purposes.
First Party Registration Numbers
To set up tax registrations for a legal reporting unit:

Functional area: Transaction tax
Task: Manage Tax Registrations
2. On the Manage Tax Registrations page, change the page-level switcher to Legal Reporting Unit Tax Profiles.
3. In the Tax Registrations tab, click Create.
4. Create the legal reporting unit tax registrations using the following values:

Legal Reporting Unit Green Corp. TS Select from a list of values.
Tax Regime Code GST Select from a list of values.
Registration number 36AASPF6826T1ZB Enter the first-party tax registration number.
Legal Reporting Unit Green Corp. TN Select from a list of values.
Registration number 45NYSPF6826T1ZB Enter the first-party tax registration number.
Third Party Registration Numbers
For the given case study, the suppliers and customers of Green Corp. are considered third parties in Oracle ERP Cloud. Third
party registration numbers of suppliers and customers are recorded and reported from the Manage Tax Registrations page. You
can create tax registrations either at The Third Party Tax Profiles level or at the Third Party Site Tax Profiles level. Oracle ERP
Cloud prioritizes the tax registration number at the Third Party Site level, and if there is no existing tax registration record, the
tax registration number at the Third Party level is used.
To create a Third Party Site Tax Profile:

Functional area: Transaction Tax
Task: Manage Party Tax Profiles
2. On the Manage Party Tax Profiles page, change the page-level switcher to Third-Party Site Tax Profiles.
3. Click Create.
4. Select the Party Site Number from the list of values.
5. Click Save and Close.
To set up tax registrations for a third-party site:

2. On the Manage Tax Registrations page, change the page-level switcher to Third-Party Site Tax Profiles.
3. Under the Tax Registrations tab, click Create.
4. Create a Third-Party Site Tax Registration for the registered third-party using the following values:
Party Site XXXX Select from a list of values.
Number
Tax Registration Registered Select from a list of values.
status
Registration 36AASPF6825M1ZB Enter the Goods and Services Tax Identification Number of the
number customer or supplier.
5. Create a Third-Party Site Tax Registration for the registered third-party using the following values:
Party Site Number AAAA Select from a list of values.
Tax Registration Not Registered Select from a list of values.
status
Registration number NULL There will not be any registration number for Not-registered
suppliers.
6. Click Save and Close.
Note: You should maintain tax registration records for both Registered and Not-registered third-parties.
Tax Registration Levels
You can define tax registrations at three different levels of detail:
1. Tax regime level

The tax registration is used for all taxes and tax jurisdictions within the tax regime.
2. Tax level
The tax registration is used for all tax jurisdictions where the tax regime and tax are applicable.
3. Tax jurisdiction level

The tax registration is applicable for the locations covered under the tax jurisdictions defined for the tax regime, tax, and
tax jurisdiction.
A tax regime is mandatory in order to define a tax registration for all three levels. In turn, a tax is mandatory to define a tax
registration for the tax jurisdiction level.
In the given case study, the tax registration number is common for the two taxes under the GST regime. Hence, tax registrations
defined at a tax regime level will be appropriate. In this context, you must leave the tax and tax jurisdiction columns blank. If you
don’t leave them blank, duplicate records will exist for the same tax registration number.
B. GST processing
At transaction time, Oracle ERP Cloud uses tax configuration and determines the tax applicability on each transaction line. Once tax
applicability on a given transaction line is determined, applicable tax lines are created. Each tax line displays tax regime, tax name,
tax jurisdiction, tax status, tax rate, tax amount, and other information where applicable. For each tax line, the required distribution
lines are created.
Case Study
An organization based in Tamil Nadu (TN) sells and dispatches two different products to one of its customers located in Telangana
(TS) for INR 4,460. Assume this transaction is hypothetically subject to a GST at the rate of 18%.
The buyer enters a purchase order in Oracle ERP Cloud Purchasing with following transaction lines:
Purchase Order (PO) Lines (Payables Invoicing Match to PO Option)
Line Item Unit Price Quantity Line Amount Bill to/ship to State Ship from State
1 A (Inventory Item) INR 1.83 1,000 1,830.00 TS TN
2 B (Inventory Item) INR 2.63 1,000 2,630.00 TS TN
Total in INR 4,460.00
Once you enter and save the purchase order, the GST is applied. As a prerequisite, the GST regime and its required taxes, tax
jurisdictions, and tax rates must be previously created either through Rapid Implementation spreadsheet upload or directly in the
Tax application before GST can be applied. The following table outlines the sequence of tax determination processes, which Oracle
ERP Cloud uses to calculate and apply GST on the transaction:
Note: Each process requires completion of certain setup tasks. See The Components Used column for the relevant setup for each
process.
Tax Determination Processes Evaluated
Order Process Name Activities Performed by the Components Used Result

Process
1. Determine Applicable Tax Regimes Identifies the applicable Based on the location Applicable Regime
tax regimes. (Country = India) involved in
the transaction
2. Determine Place of Supply and Tax Identifies the relevant tax Navigation: GST definition > Place of Supply – State
Jurisdiction jurisdiction and place of tax rule defaults > Place of TS
supply. Supply = Bill to/ship to/ First Tax Jurisdiction – State
party tax registration TS
Refer to Note 1. Number
3. Determine Tax Applicability Evaluates taxes based on Tax Applicability Rules GST Applicable
any tax applicability rule
for each tax. Tax conditions:
1. Geography
If the qualifier Ship
From state TS Is not
equal to Bill To/Ship
To/First-Party Tax
Registration Number
state TN, then apply
Interstate tax.
2. Geography
If the qualifier Ship
From state TS is equal
to Bill To/Ship To/First
party tax registration
state TN, then apply
Intrastate tax.
4. Determine Tax Registration Determines the party Navigation: GST definition > Ship from party
type used to derive the tax rule defaults > tax
tax registration for each registration = Ship from-
applicable tax. party
Refer to Note 2.
5. Determine Tax Status Considers tax statuses of Define the tax status for Standard
the applicable taxes. GST as Standard and set it
as default tax status.
Navigation: GST definition >

tax rule defaults > Indirect
defaults > tax status=
Standard
6. Determine Tax Rate Consider the tax rate(s) Tax Rate Rules Applicable GST rate –
of each applicable tax 18%
status associated with Tax conditions –
the applicable tax.
Product Inventory Linked
(Qualifier Level 1 = HSN
Code)
7. Determine Taxable Basis Determines the taxable Standard taxable basis Taxable Basis = Line
basis on which the tax formula = STANDARD_TB Amount, i.e. in this case,
rate for each tax is the two line amounts
applied. are 1,830 and 2,630.
8. Calculate Taxes Identifies the tax Standard tax calculation Taxable Basis * Tax Rate
calculation formula. formula = STANDARD_TC 1,830*18% + 2,630*18%
Calculates taxes using the = 329.40+ 473.40 =
tax calculation formula. 802.80
9. Determine Tax point Basis Identifies the tax point Invoice Recoverable taxes and
basis for taxes to be tax liability accounted
recognized and on Invoice
accounted.
Refer Note 3.
10. Determine Recovery Rate Determines tax recovery For a GST input tax credit, Tax Recoverable
rates, tax recoverable define a 100% tax recovery Amount = Tax Amount *
amounts, and non- rate of GST STANDARD 100%
recoverable tax amount RECOVERY and select a = (329.40*100%) +
amounts. default tax recovery rate. (473.40*100%)
= INR 802.80
Refer to Note 4. Navigation: GST definition >
tax rule defaults > Indirect
defaults > Tax recovery
rates > GST STANDARD
RECOVERY
Note 1: The Determine Place of Supply process identifies the applicable place of supply, which is the location where the supply of
goods or services is deemed to have taken place for a specific tax. Oracle ERP Cloud identifies the tax jurisdiction for the location
that corresponds to the place of supply. You can also use First-Party Tax Registration Number as the determining factor assigned to
legal reporting unit of supplier facing entity to default place of supply.
Note 2: Set up tax registrations for customers and suppliers. Navigate to the Manage Tax Registrations page to configure any
required tax registrations for Third-Parties. A tax registration contains information related to a party's transaction tax obligation with
the tax authority where it conducts business. The supplier located in TN has a tax registration record against the GST regime with a
current tax registration status as Registered. The supplier must maintain tax registration records for all its Third-Parties. Regular
transaction taxes are applied if Third-Party is registered under GST. If not registered, transaction taxes can be computed as self-
assessed (Reverse charge). See Management of GST Registration Numbers and Implementation of Self-Assessed Taxes sections for
more details.
Note 3: Tax Point Basis (TPB) is the point where recoverable taxes can be accounted and reported. Oracle ERP Cloud facilities
Delivery, Invoice, Accounting, and Payment as Tax Point Basis. You can use any one of these TPB as per their GST Transaction process
requirements on recognition and reporting of recoverable taxes. Using the Manage Configuration Owner Tax Options task you can
enable Allow Delivery Based Tax Calculation on Invoice for Oracle Payables application with TPB as Invoice and Tax Point Date (TPD)
as receipt. This ensures that taxes are calculated as per tax rates prevailing on Goods receipt date and Recoverable taxes can be
recognized and accounted on Invoice for Inbound transactions. See the Tax Implementation Guide for more details on Tax Point
Basis and Configuration Owner Tax Options (COTO).
The following table lists sample setups for Allow Delivery Based Tax Calculation on Standard Invoice for Payables application through
COTO:
Configuration Owner tax Options (COTO)

Configuration owner Business Unit
Application name Payables
Event Class Standard Invoice
Allow Delivery Based Tax Calculation YES
Report Delivery based taxes on INVOICE
Tax Point date Receipt
Tax point basis INVOICE
Note 4: Tax recovery is the full or partial recovery of the tax paid on purchases by a registered LRU to offset the taxes collected from
any sales transactions. GST is recoverable by the way of an input tax credit after complying with applicable regulations. In Oracle ERP
Cloud, tax recovery functionality is available. The GST recovery rate on a tax may vary based on one or more transaction factors. You
must set up the required tax recovery rate rules to determine the appropriate recovery rate applicable on the transaction.
For more details, see the Tax Recovery topic in Oracle Help Center.
PO Tax Determination Applied
Transaction Serial Tax Regime Tax Tax Status Tax Tax Tax Recoverable Non
Line No Name Jurisdiction Rate Amount Tax Amount Recoverable
No Tax Amount
1 1 GST GST Standard TS 18% 329.40 329.40 -
Total GST on Payables Invoice 802.80 802.80 -
After the Tax Determination process is complete, Oracle ERP Cloud inserts tax lines at a summary level. It inserts one line for each
applicable tax. In this illustration, there is one tax line for the GST.
PO Tax Line
Tax Line Rate Name Rate Tax Amount Tax Regime Tax Name Tax Status Tax Jurisdiction
1 GST_18 18 802.80 GST GST Standard TS
Once the PO is approved, buyer sends it to seller with following details:
Seller: Green Corp.

Bill to/ship to Location: TS
Line Item Unit Price Quantity Line Amount

1 A (Inventory Item) INR 1.83 1,000 1,830.00
2 B (Inventory Item) INR 2.63 1,000 2,630.00
18% GST 802.80
Total PO Value in INR 5262.80
The seller located in TN sends an invoice for the total amount of INR 5,262.80 (4,460 item amount plus 802.80 tax).
Buyer configures TPB as Invoice so recoverable taxes are accounted on the Payables invoice. Buyer enters the Payables invoice in
ERP Cloud by matching it to PO, selects the First-Party Tax Registration Number and validates the invoice. The Tax determination
process is initiated and following taxes are computed:
AP Tax Determination Applied
Transaction Serial Tax Regime Tax Tax Status Tax Tax Tax Recoverable Non
Line No Name Jurisdiction Rate Amount Tax Amount Recoverable
No Tax Amount
Total GST on Payables Invoice 802.80 802.80 -
After the Tax Determination process is complete, Oracle ERP Cloud inserts tax lines at the summary level. It inserts one line for each
applicable tax. In this example, there is one tax line for the GST.
AP Tax Line
Tax Line Rate Name Rate Tax Amount Tax Regime Tax Name Tax Status Tax Jurisdiction
1 GST_18 18 802.80 GST GST Standard TS
After tax lines are generated, the respective distribution lines are generated for both transaction and tax lines.
Line Distribution Type Amount

1 Accrual 1,830.00
2 Accrual 2,630.00
3 Recoverable Tax 329.40
3 Non Recoverable Tax 0.00
3 Recoverable Tax 473.40
3 Non Recoverable Tax 0.00
Total Balance 5,262.80
After Accounting, the following accounting entries are created:
Account Class Account Type Debit Credit

Accrual Accrual 4,460.00
Tax Recoverable Asset 802.80
Tax Non Recoverable Expense 0.00
Liability Liability 4,460.00
Liability Liability 802.80
Total Balance 5,262.80 5,262.80
C. Implementation of Harmonized System Nomenclature Codes (HSN)
The Harmonized Commodity Description and Coding System, also known as the Harmonized System Nomenclature (HSN) is an
internationally standardized system of names and numbers used to classify trade products. In some countries, the tax legislation
follows the HSN coding system to drive the GST and reporting.
Case Study
Vision Corporation wholesaler sells confectionery products. The GST compliance mandate is to adopt four digit HSN codes for their
commodities. The tax rate applicability is based on the HSN code.
Sample HSN and Applicable Tax Rates
Commodity HSN Applicable

Code GST Rate
Rusk and Toast 1905 5%
Pasta 1902 18%
Wafers 1905 18%
Baking Powder 2102 12%
Snacks 2106 12%
Product Fiscal Classifications
For this case study, there are four HSN codes and two tax rates. We will evaluate two different GST rates of 18% and 12%.
 A GST rate of 12% is applicable for the HSN codes of 2102 (Baking Powder) and 2106 (Snacks).
 A GST rate of 18% is applicable for the HSN codes of 1902 (Pasta) and 1905 (Wafers).
Prerequisite Inventory Setup Steps
1. Create a Catalog
A catalog is a collection of categories used for classifying items. Create one catalog specifically for the HSN coding system with
the name of HSN.
i. Sign in as a Product Manager.
ii. From the Navigator, select Product Management > Product Information Management > Item Management > Manage
Catalogs.
iii. Click Create to create a new catalog.
2. Create Categories in a Catalog
Every four-digit HSN code is defined as a category in the catalog. The category code is a six-digit code comprising of the four-digit
HSN code prefixed by a two-digit code that represents the tax slab and category name (commodity name). In this example, you
must define the following four categories:
Category Code Category Name

AA1902 Pasta
AA1905 Wafers
BB2102 Baking Powder
BB2106 Snacks
The prefix of two digits AA or BB is added to the category code. This approach is an easy way to maintain the category if the tax
rate on any specific commodity changes. For example, if the GST rate on wafers changes from 18% to 12%, then you can simply
end date the category code AA1905 that represents 18% GST rate. You can create a new category code BB1905 that represents a
12% GST rate.
To create categories:
1. Sign in as a Product Manager.
2. From the Navigator, select Product Management > Product Information Management > Item Management > Manage
Catalogs.
3. Search for the catalog and select the catalog.
4. On Edit Catalog page, click Create to create a new category.
3. Assign Categories to an Item
After you identify items that can be classified under a particular HSN code, assign them to their respective categories. For
example, for baking powder, you have two associated items of Spruce Street Foods and Small, Inc. Both of these items are
taxable at a GST rate of 12%. Therefore, these two items from the Item Master are assigned to a category of BB2102 (baking
powder).
To assign Items to a Category:
1. Sign in as a Product Manager.

2. From the Navigator, select Product Management > Product Information Management > Item Management > Manage Items.
3. Search for the required item and select the item.
4. On the Edit Item page, go to the Categories section.
5. Click Create to assign an item to a category.
For more information about defining catalogs, categories, and items as well as assigning categories to items, see Assigning Items
to Categories.
Tax Setup Steps
4. Create Product Fiscal Classification Types

2. In the Setup and Maintenance, go to the following:
Task: Manage Product-Based Fiscal Classifications
3. On the Manage Product-Based Fiscal Classifications page, click Create to create a new product fiscal classification type with
the following attributes:

Inventory HSN Assign the catalog that you created. This is the point where you link
Category Set inventory categories and the corresponding tax product fiscal
classification.
Number of 2 The item category code you created has six digits. The first two
Levels digits are tracked as level 1 and represent the tax rate. The
remaining four digits represent the HSN code and are tracked as
level 2.
Level 1 Details
Type Code GST_RATE The value entered is based on user discretion. The first two digits of
the category code represent the GST rate.
Type Name GST_RATE The value entered is based on user discretion.
Start position 1 This value ensures the tax engine processes the category code from
the first digit as a level 1 value.
Number of 2 This value ensures the tax engine identifies that the level 1 value
characters ends with the second digit.
Level 2 Details
Type Code HSN_CODE The value entered is based on user discretion.
Type Name HSN_CODE The value entered is based on user discretion.
Start position 3 This value ensures the tax engine processes the category code from
the third digit as a level 2 value.
Number of 4 This value ensures the tax engine identifies that the level 2 value
characters ends with the fourth digit.
Tax Regime GST The entry of the tax regime is required in order to use the product
Code fiscal classification in tax rules.
4. Create Tax Rates
You must create a unique GST rate. The federal and state levels simultaneously levy GSTs called GST1 and GST2 respectively on
applicable transactions. In the given case study, you must create four GST rates.
GST Rate GST1 GST2

12% GST1 6% GST2 6%
18% GST1 9% GST2 9%
5. Create Tax Rate Rules
A tax determining factor (TDF) can be a geographical location, tax registration status, product fiscal classification, or any other
criteria that drives the Tax Determination process. TDFs are categorized into logical groupings called Tax Determining Factor
Classes. Each Tax Determining Factor Class contains determining factor names that constitute the contents of the class. For the
given scenario, inventory categories are used as product fiscal classifications.
The following table outlines TDF details required to fulfill the given scenario.

Tax Determining Product inventory linked The Tax Determining Factor Class allows the use of a Product
Factor Class Fiscal Classification as a Tax Determining Factor to create tax
rules.
Tax Determining Product Fiscal The Tax Determining Factor Name uses Oracle ERP Cloud
Factor Name Classification Type Inventory Catalog, Category, and Item functionality to derive an
Inventory Category from an item populated in a transaction
line.
Create Tax Determining Factor Sets

Task: Manage Tax Determining Factor Sets
3. On the Manage Tax Determining Factor Sets page, click Create to create a tax determining factor set with the following
attributes:
Tax Determining Factor set

Attributes Values Comments
Tax Determining Factor Set Code GST_RATE User Discretion
Tax regime Code GST Select the GST Regime.
Tax Determining Factor Class Product inventory This factor class allows you to use product
linked fiscal classification as a tax determining factor
to create tax rules.
Tax Class Qualifier Level 1 Tax rate rules will be configured at level 1.
Tax Determining factor Name GST_RATE Product Fiscal Classification Type defined
above.
Create Tax Condition Sets

Task: Manage Tax Condition Sets
3. On the Manage Tax Condition Sets page, click to create a tax condition set with the following attributes.
Tax Condition Set I

Tax Condition Set Code GST_HSN_18 User Discretion
Tax Determining Factor Set GST_RATE Tax determining factor set created above
Code
Operator Equal to Inventory Category value matched with
Value AA Tax Condition set will apply if the level 1 PC
is AA
Tax Condition Set II

Tax Determining Factor Set GST_RATE Tax determining factor set created above
Code
Operator Equal To Inventory category value matched with
Value BB Tax Condition set apply if the level 1 PC is

BB
Create Tax Rules

Task: Manage Tax Rules
3. On the Manage Tax Rules page, click Create to create a tax rules with the following attributes:
Tax Rate Rule

Rule code GST1_RATES User Discretion
Code GST_RATE Tax Determining Factor set Created above
Tax Regime Code GST
Tax GST1
Tax Condition
Tax Condition set Code Result Comments
If category code first two digits are AA then tax engine defaults
GST_HSN_18 Tax Rate GST1 9% tax rate as GST1 9%
If category code first two digits are BB then tax engine defaults
Tax Rate Rule

Code GST_RATE Tax Determining Factor set Created above
Tax Regime Code GST
Tax GST2
Tax Condition
Tax Condition set Code Result Comments
If category code first two digits are AA then tax engine defaults
If category code first two digits are BB then tax engine defaults
Transaction Simulation in the Procure-to-Pay Cycle
Enter invoice pertaining to the purchase of pasta, select First-Party Tax Registration Number and validate the invoice in Payables.
Payables Transaction Line

1 Pasta 250 g 1,000 1 1,000
Total in INR INR 1,000
Tax Determination Process
GST is levied at 18% on the transaction line amount (1000*18% = INR 180). The tax engine examines the item populated on the
transaction line and derives the corresponding item category using the first two digits of the item category. In turn, the tax rate
rule defaults the 18% GST rate. GST lines are created upon the completion of the Tax Determination process.
Tax Lines
Tax Line Rate Name Rate Tax Amount Tax Regime Tax Name Tax Status
1 GST1_9 9 90.00 GST GST1 Standard
2 GST2_9 9 90.00 GST GST2 Standard
D. Implementation of Service Codes
In some countries, GST legislation may adopt a coding system for levying taxes on services and reporting. These service codes
determine the applicable GST rates. A taxpayer rendering services must use proper service codes to fulfill the GST compliance
requirements.
Case Study Illustration of Service Codes
Vision Corporation renders the services listed in the following table. Each service has a five-digit service code. The GST rate
applicability is based on the service code applied.
Service Code Taxable Services Applicable GST Rate

996511 Road transport services of Goods 5%
996601 Rental services of road vehicles 5%
997133 Accident and health insurance services 18%
998321 Architectural advisory services 18%
You can use Product Fiscal Classifications to classify items for tax determination and reporting purposes. You can also use Product
Category Fiscal Classifications when the Inventory is not available.
Product Category Fiscal Classifications
In this scenario, there are two GST rates of 5% and 18%. Create two Product Category Fiscal Classifications for each tax rate.
Implement a two-level classification (level 1 and 2 nodes) for each Product Category Fiscal Classification. All of the service codes on
which GST is levied at 5% are grouped as child nodes under the 5% level 1 node. In addition, all of the service codes on which GST is
levied at 18% are grouped as child nodes under the 18% level 1 node.
For an organization that renders or receives taxable services that fall under different GST rates, it is necessary to create a level 1
node for each GST rate. Under each level 1 node, group service codes that are chargeable at same GST rate. These serve as child
nodes.
The prefix of the two digits AA and CC are added to the child nodes. This makes it easy to maintain the nodes if GST rate on any
service code changes in future. For example, if the GST rate on the service code of 998321 for architectural advisory services changes
from 18% to 28%, then you can simply end date the existing child node CC998321 that represents the 18% GST rate. At the same
time, you can create a new child node under the level 1 node as DD_IN_GST_SAC to represent the 28% GST rate.
To configure product category fiscal classifications:

Task: Manage Product- Based Fiscal Classification
3. On the Manage Product- Based Fiscal Classification, click Create to create Product- Based Fiscal Classifications.
4. Create a Level 1 Node with the following attributes:

Code AA_IN_GST_SAC The value entered is based on user discretion. AA represents the 5% GST rate.
Name AA_IN_GST_SAC The value entered is based on user discretion.
Country India This value allows the fiscal classification to be restricted to India.
Start Date 01/01/2017 The date from which the GST is applicable.
Create child nodes under level 1 node AA_IN_GST_SAC
5. Create child nodes under level 1 node AA_IN_GST_SAC.

Code AA996511 The specific service code associated with the service rendered.
Name Road transport services The detailed description of the service rendered.
of Goods
6. Create another child node under level 1 node AA_IN_GST_SAC.

Code AA996601 The specific service code associated with the service rendered.
Name Rental services of road The detailed description of the service rendered.
vehicles
In this manner, all services that are taxable at the 5% GST rate are created as child nodes under the level 1 node of AA_IN_GST_SAC.
AA represents the 5% GST rate. Since AA represents the 5% tax rate, you don’t need to mention the percentage in the Product
Category Fiscal Classification because if the tax rate changes you don’t need to change the classification name or code.
In the current scenario, you must create another level 1 node for the 18% taxable services:

Code CC_IN_GST_SAC
The value entered is based on user discretion. CC represents the 18% GST
rate.
Name CC_IN_GST_SAC The value entered is based on user discretion.
Create child nodes under level 1 node CC_IN_GST_SAC.
Code CC997133 The specific service code associated with the service rendered.
Name Accident and health The detailed description of the service rendered.
insurance services
Create child nodes under level 1 node CC_IN_GST_SAC.
Code CC998321 The specific service code associated with the service rendered.
Name Architectural advisory The detailed description of the service rendered.
services
Create Tax Rates
You must create a unique GST rate. The federal and states levels levy GSTs GST1 and GST2 respectively. In the given example, you
must create four GST rates.
GST Rate GST1 GST2

5% GST1 2.5% GST2 2.5%
18% GST1 9% GST2 9%
Configure Tax Rate Rules using Product Category Fiscal Classifications
A Tax Determining Factor (TDF) can be a geographical location, Tax Registration Status, Product Fiscal Classification, or any other
criteria that drives the Tax Determination process. TDFs are categorized into logical groupings called Tax Determining Factor Classes.
Each Tax Determining Factor Class contains Tax Determining Factor Names. The following table outlines TDF details required to fulfill
the given scenario:
Tax Determining Product Non This factor class uses product category fiscal
Factor Class inventory linked classification as a TDF.
Tax Determining Product Category This value recognizes the product category
Factor Name fiscal classification selected by the user on
the transaction page.

3. On the Manage Tax Determining Factor Sets page, click Create to create a tax determining factor set with the following attributes:

Tax Determining Factor Set Code GST_PCFC User Discretion
Tax Determining Factor Class Product non inventory This factor class uses product category fiscal
linked classification as a tax determining factor to
create tax rules
Tax Class Qualifier Level 1 Level 1 node is used for tax rules definition.
Tax Determining factor Name Product Category This factor recognizes level 1 node based on
level 2 node value chosen by the user in the
transaction UI.

3. On the Manage Tax Condition Sets page, click to create a tax condition set with the following attributes:
Tax Condition Set I

Tax Condition Set Code GST_PCFC_AA User Discretion
Tax Determining Factor Set Code GST_PCFC Tax determining factor set created above
Operator Equal to
Value AA_IN_GST_SAC This condition will meet if the product category level 1
node is AA_IN_GST_SAC
Tax Condition Set Code GST_PCFC_CC User Discretion
Tax Determining Factor Set Code GST_PCFC Tax determining factor set created above
Operator Equal To
Value CC_IN_GST_SAC This condition will meet if the product category level 1
node is CC_IN_GST_SAC
Create Tax Rate Rules

Tax Rate Rule

Tax Determining Factor set Code GST_PCFC Tax Determining Factor set Created above
Tax Regime Code GST
Tax GST1
Tax Condition
Tax Condition set Code GST_PCFC_AA Tax condition set I created above
It will default GST1 2.5% rate if the level 1 node is
Result Tax Rate GST1 2.5% AA_IN_GST_SAC
Tax Condition set Code GST_PCFC_CC Tax condition set II created above
Result Tax Rate GST1 9% It will default GST1 9% rate if the level 1 node is CC_IN_GST_SAC
Tax Rate Rule

Tax Determining Factor set Code GST_PCFC Tax Determining Factor set Created above
Tax Regime Code GST
Tax GST2
Tax Conditions
Tax Condition set Code GST_PCFC_AA Tax condition set I created above
It will default GST2 2.5% rate if the level 1 node is
Result Tax Rate GST2 2.5% AA_IN_GST_SAC
Tax Condition set Code GST_PCFC_CC Tax condition set II created above
Result Tax Rate GST2 9% It will default GST2 9% rate if the level 1 node is CC_IN_GST_SAC
Enter payables invoice pertaining to a cab rental service and select the First-Party Tax Registration Number. Validate payables
invoice.
Payables Transaction Line
Line Type Unit Price Quantity Product Category

1 Item 1,000 1 AA996601
Tax Determination Process
GST is levied at 5% on the transaction line amount (1000*5% = INR 50). The tax engine examines the product category given in the
transaction line and derives the level 1 node value. Based on the level 1 node value, the related tax rate rule defaults the GST rate as
5%. Tax lines are created upon successful completion of the Tax Determination process.
Tax Lines
Tax Line Rate Name Rate Tax Amount Tax Regime Tax Name Tax Status
1 GST1_2.5 2.5 25.00 GST GST1 Standard
2 GST2_2.5 2.5 25.00 GST GST2 Standard
E. Management of Location-Based Transaction Taxes
In some countries, the applicability of GSTs may be based on intrastate and interstate supplies. The intrastate supply of goods or
services is when the location of the supplier and the place of supply are in the same state. The interstate supply of goods or services
is when the location of the supplier and the place of supply are in different states.
Interstate and Intrastate Trade Case Study
GST1 is levied on the supply of any goods and services in the interstate trade. GST2 and GST3 are levied on the supply of any goods
and services in the intrastate trade. If the supplier and the customer are located in different states, it is considered as interstate
trade, and GST1 is applicable on the transaction.
If the supplier and the customer are located in same state, it is considered as intrastate trade, and GST2 and GST3 are applicable on
the transaction.
Enterprise structure
Legal Management BU Inventory Legal Tax Registration Comments

Entity Organizations and reporting Number
Location Unit
Vision Vision IND- Telanagana_INV TS_LRU 36AA543786IZ
India SOUTH For global procurement and
internal material transfers
between these Inventory
Organizations, you must:
Tamil Nadu_INV TN_LRU 35AA985796AZ  Define PCBUs and
assign them to
respective Inventory
Organizations.
 Associate LRUs to
PCBUs.
Note: If you maintain your Enterprise Structure as Management BU per Tax Jurisdiction (State), then you can assign LRUs to the
Management BU.
Associate Legal reporting Units to Inventory Organizations
Task Manage Associated Business Entities

Legal Entity Vision India
Legal Reporting Unit TS_LRU
Type Inventory Organization
Name Telangana_INV
Country INDIA
Address Hyderabad
Start date XXX
End date XXX
Task Manage Associated Business Entities

Legal Entity Vision India
Legal Reporting Unit TN_LRU
Type Inventory Organization
Name Tamil Nadu_INV
Country INDIA
Address Chennai
Start date XXX
End date XXX
Regime to Rate Structure
Tax Tax Jurisdiction Tax Tax Tax rules defaults Tax rate Tax Account Assignment
regime Status
GST Telangana Standard GST1 Place Of supply: First TS_GST1_RATE18% Rate Level:
(Geography Type: State Party Tax (Assign Tax 1. Tax Liability:
Registration Jurisdiction as 01.555.00.000
Parent Geography Type: Number. Telangana while 2. Tax recoverable
Country) defining tax rate ) Account: 01.556.00.000
Tax Applicability:
NOT Applicable
Tax registration: Ship

GST2 TS_GST2_RATE9% Rate Level:
from Party
1. Tax Liability:
01.666.000
Tax Point Basis:
2. Tax recoverable
Delivery
Account: 01.667.00.000
GST3 Refer Note 1 TS_GST3-RATE9% Rate Level:
1. Tax Liability:
01.676.00.000
2. Tax recoverable
Account: 01.668.00.000
Tamil Nadu Standard GST1 TN_GST1_RATE18% Rate Level:
(Geography Type: State 1. Tax Liability:
(You must assign 01.444.00.000
Parent Geography Type: Tax Jurisdiction as 2. Tax recoverable
Country) Tamil Nadu while Account: 01.445.00.000
defining tax rate.)
GST2 TN_GST2_RATE9% Rate Level:
1. Tax Liability:
01.446.000
2. Tax recoverable
Account: 01.447.00.000
GST3 TN_GST3-RATE9% Rate Level:
1. Tax Liability:
01.448.00.000
2. Tax recoverable
Account: 01.449.00.000
You can define default tax rules to be considered at each tax level when no specific tax rules are defined. Set up the Tax Point Basis
as Delivery at Tax or Tax Rate Level. You must enable Allow Delivery Based Tax Calculation on Invoice with TPB as Invoice and Tax
Point Date (TPD) as Receipt Date for Payables using the Configuration Owner tax Options (See Note 3). This allows you to calculate
Inbound Transactions Taxes as per the prevalent tax rates on Goods Receipt Date and account the Recoverable Taxes on the
Payables invoice. You can calculate Outbound Transactions Taxes as per the prevalent tax rates on Shipping Date and account the
Tax Liability on Receivables invoice.
You can set up the default place of supply as First-Party Tax Registration Number so that respective Tax jurisdiction, Tax rates, and
Tax Accounts can be derived as per the location of Legal reporting unit assigned to the Inventory Organization/management BU
during transaction processing, which will be the place of supply.
Set up the default tax registration as Ship from Party. The Third-Party Tax Registration Status can be verified to compute the regular
taxes and self-assessed taxes. Refer to the Implementation of self-assessed Taxes section for more details on how to configure self-
assessed taxes.
Tax Rules Configuration
For GST1, the tax definition has a tax rule default setting which designates the place of supply as the First-Party Tax Registration
Number location. The GST1 tax applicability is based on whether or not the Ship-From location state does not equal First-Party
Registration Number location state. In this case, you can define a tax applicability rule that validates the transaction line and
determines the GST1 applicability.
For the GST2 and GST3 tax, the tax definitions have tax rule default settings that designate the place of supply as the First-Party Tax
Registration Number location. The GST2 and GST3 tax applicability is based on an evaluation of whether or not the Ship-From
location state equals the First-Party Tax Registration Number location state. In this case, you can define a tax applicability rule that
validates the transaction line and determines the intrastate taxes applicability.
The tax applicability rule may be vary for inbound transactions and outbound transactions in this case users must define tax
applicability rule based on evet class attribute for purchase transaction and sales Transaction.
Tax rate rules must be defined based on Product Fiscal Classification to apply the tax rate as per HSN codes. These tax rate rules
should define the geography specific rule as per given regime to rate structure. For more details on HSN codes, refer to the
Implementation of Harmonized System Nomenclature Codes (HSN) section.
Geography Tax Determining Factor
A tax determining factor (TDF) can be a geographical location, Tax Registration Status, Product Fiscal Classification, or any other
criteria which helps drive tax determination. TDFs are categorized into logical groupings called tax determining factor classes. Each
tax determining factor class contains determining factor names that constitute the contents of the class.
The following table outlines TDF details required to fulfill the given scenario:

Tax Determining Geography This determining factor allows the use of First-Party Tax Registration Number and
Factor Class Ship from and Bill to locations as criteria in the tax determination process for
Inbound and Outbound transactions as per event class given in the tax applicability
rule.
Tax Determining State This determining factor name checks for the state involved in a location.
Factor Name
Tax Applicability Rule Creation for Inbound Transactions (Purchase Transaction)

attributes:
Tax Determining Factor Set GST_TDF User Discretion
Code
Tax regime Code GST Select the GST Regime
Tax Determining Factor Geography This factor uses the location where the transaction occurred.
Class
Tax Class Qualifier First Party Tax Registration Compares the First-Party Tax Registration location with Ship
Number from location
Tax Determining factor State Geography type as State
Name
Create Tax Condition Sets:

Tax Condition Set I (GST1 Applicable)

Tax Condition Set Code GST1_TCS_PUR User Discretion
Tax Determining Factor Set Code GST_TDF Tax determining factor set that you created
Operator Not equal to Determining Factor
determining
factor
Value Ship from Consider Ship from state
Tax Condition Set II (GST2/GST3 Applicable)
Tax Condition Set Code GST2 User Discretion
&3_TCS_PUR
Tax Determining Factor Set Code GST_TDF Tax determining factor set that you created
Operator Equal to Determining Factor
determining
factor
Value Ship from Consider Ship from state
Create Tax Rules

Tax Applicability Rule (GST1)

Rule Code GST1_Purchase User Discretion
Tax Regime GST Select the regime from the LOV.
Tax GST1 Select from the LOV.
Event Class Purchase Select from the LOV. This rule applies to all
transaction purchase transactions.
Tax Determining GST_TDF Tax determining factor set that you created.
Factor Set Code
Tax Conditions
Tax Condition Set Result Comments
Code
GST1_TCS_PUR Applicable GST1 applies if the First-Party Registration
Number state <> Ship from location.

Factor Set Code
Tax Conditions
Tax Condition Set Code Result Comments
GST2&3_TCS_PUR Applicable GST2 applies if the First-Party Registration
Number state = Ship from location.

Factor Set Code
Tax Conditions
GST2&3_TCS_PUR Applicable GST3 applies if the First-Party Registration
Number state = Ship from location
Tax Applicability Rule Creation for Outbound Transactions (Sales Transaction)

attributes:

Tax Determining Factor GST_TDF2 User Discretion
Set Code
Tax Determining Factor Geography This factor uses the location where the transaction occurred.
Class
Tax Class Qualifier First Party Tax Registration Compares the First-Party Tax Registration location with Ship
Number from location.
Tax Determining factor State Geography type as State
Name

Tax Condition Set (GST1 Applicable)

Tax Condition Set Code GST1_TCS_SAL User Discretion
Tax Determining Factor Set Code GST_TDF2 Tax determining factor set that you
created.
Operator Not equal to Determining Factor
determining
factor
Value Bill to Consider Bill to State
Tax Condition Set II (GST2/GST3 Applicable)
Tax Condition Set Code GST2 User Discretion
&3_TCS_SAL
Tax Determining Factor Set Code GST_TDF2 Tax determining factor set that you
created.
Operator Equal to Determining Factor
determining
factor
Value Bill to Consider Bill to State
Create Tax Rules


Rule Code GST1_sales User Discretion
Event Class Sales transaction Select from the LOV. This rule applies to all sales transactions.
Tax Determining Factor Set GST_TDF2 Tax determining factor set that you created.
Code
Tax Conditions
GST1_TCS_SAL Applicable GST1 applies if the First-Party Registration Number state<> Bill to
location.

Code
Tax Conditions
GST2&3_TCS_SAL Applicable GST2 applies if the First-Party Registration Number state=Bill to
location.

Code
Tax Conditions
GST2&3_TCS_SAL Applicable GST3 applies if the First-Party Registration Number state=Bill to
location.
Create Tax Rate Rules using Product Category Fiscal Classifications
For the given scenario, inventory categories are used as product fiscal classifications. The following table outlines TDF details
required to fulfill the given scenario:

Tax Determining Factor Class Product inventory This determining factor class allows the use of a product fiscal
linked classification as a tax determining factor to create tax rules.
Tax Determining Factor Name Product Fiscal This determining factor name uses the Oracle ERP Cloud inventory
Classification Type catalog, category, and item functionality to derive an inventory
category from an item populated in a transaction line.

attributes:

Tax Determining Factor Set Code GST_PCFC User Discretion
Tax Determining Factor Class Product inventory This factor class allows you to use product
linked fiscal classification as a tax determining factor
to create tax rules.
Tax Class Qualifier Level 1 Tax rate rules will be configured at level 1.
Tax Determining factor Name GST_RATE Define product fiscal classification.
Create Tax Condition Sets:

Tax Condition Set I

Tax Determining Factor Set Code GST_RATE Tax Determining factor set created above
Operator Equal To Inventory Category values matches with
Value AA Tax Condition Set will apply if the Level 1 PC is AA
Tax Determining Factor Set Code GST_RATE Tax Determining factor set created above
Operator Equal To Inventory Category values matches with
Value BB Tax Condition Set will apply if the Level 1 PC is BB
Create Tax rate Rules

Tax Rate Rule I

Rule Code GST1_RATES_TS User Discretion
Tax Determining factor GST_RATE The tax determining factor set code you created
Set Code earlier.
Tax Regime Code GST Select from the LOV.
Set as Geography Enable
specific rule
Location Type First-Party Tax Geography from the First-Party Registration Number
Registration location.
Number
Parent Geography Type Country
Parent Geography India
name
Geography Type State
Geography Name Telangana The rule is applied when the tax jurisdiction on
transaction is Telangana.
Tax Conditions
GST_HSN_18 TS_GST1_RATE18% If the first two digits of the category code are AA, then
tax engine defaults tax rate as TS_GST1_RATE18%.
Tax Rate Rule II

Tax Determining factor Set GST_RATE The tax determining factor set code you
Code created earlier.
Set as Geography specific Enable
rule
Location Type First-Party Tax Geography from the First-Party Registration
Registration Number Number location.
Parent Geography name India
Geography Name Telangana The rule is applied when the tax jurisdiction
on transaction is Telangana.
Tax Conditions
GST_HSN_9 TS_GST2_RATE9% If the first two digits of the category code are
AA, then tax engine defaults tax rate as
TS_GST2_RATE9%
Tax Rate Rule III
Tax Determining GST_RATE The tax determining factor set code you created earlier.
factor Set Code
specific rule
Location Type First-Party Tax Geography from the First-Party Registration Number
Registration location.
Number
Parent Geography Country
Type
name
Geography Name Telangana The rule is applied when the tax jurisdiction on transaction is
Telangana.
Tax Conditions
Tax Condition Set Result Comments
Code
GST_HSN_9 TS_GST3_RATE9% If the first two digits of the category code are AA, then tax
engine defaults tax rate as TS_GST3_RATE9%
Tax Rate Rule IV

Rule Code GST1_RATES_TN User Discretion
Tax Determining factor Set GST_RATE The tax determining factor set code you
Code created earlier.
Set as Geography specific Enable
rule
Location Type First-Party Tax Geography from the First-Party Registration
Registration Number Number location.
Parent Geography name India
Geography Name Tamil Nadu The rule is applied when Tax jurisdiction on
transaction is Tamil Nadu.
Tax Conditions
GST_HSN_18 TN_GST1_RATE18% If category code first two digits are AA then
tax engine defaults tax rate as
TN_GST1_RATE18%
Tax Rate Rule V

Tax Determining GST_RATE The tax determining factor set code you created
factor Set Code earlier.
specific rule
Location Type First party tax Geography from the First-Party Registration Number
registration Number location.
Type
name
Tax Conditions
GST_HSN_9 TN_GST2_RATE9% If the first two digits of the category code are AA,
then tax engine defaults tax rate as
TN_GST2_RATE9%
Tax Rate Rule VI

Tax Determining GST_RATE The tax determining factor set code you created
factor Set Code earlier.
specific rule
Location Type First party tax Geography from the First-Party Registration Number
registration Number location.
Type
name
Tax Conditions
GST_HSN_9 TN_GST3_RATE9% If the first two digits of the category code are BB,
then tax engine defaults tax rate as
TN_GST3_RATE9%
Transaction Simulation in the Procure-to-Pay Cycle (Inbound Transactions)
Vision India-south BU procured materials for it’s Telangana INV from Vision Corporation Ltd located in Mumbai, and this transaction
is subject to the GST1 based on applicable tax rules.
Line Item HSN ( Unit Quantity Line Bill To Ship To First-Party Tax Supplier Ship
Product Price Amount Registration Site From
Fiscal Number Location
Classificati
on)
1 A AA1234 INR 1000 INR Vision Telangana 36AA543786IZ Mumbai Mumbai

(Inventory 1.83 1,830.0 India- _INV
Item) 0 South
2 B AA3456 INR 1000 INR Vision Telangana 36AA543786IZ Mumbai Mumbai

(Inventory 2.63 2,630.0 India - _INV
Item) 0 South

0
The following table outlines the Tax calculation in Oracle ERP Cloud procure-to-pay flow from the perspective of the buyer Green
Corp.:
Activity Tax Determination Accounting

Create a Purchase  Ship from location (Mumbai) and First party Tax Registration No Accounting Impact
Order (PO) number (location of LRU- Telangana) is different therefore GST1
tax will be applied as per the above define applicability rules.
 Tax rate will be applied as 18% since the selected product fiscal
classification level 1 is equal to AA.
 You can see the detail tax lines calculated on purchase order as per
the defined Tax rules and default tax rules on applicable tax.
 You can define Tax Recovery rate rules also with “Intended use”
determining factor and recovery rate applied on calculated tax
accordingly.
 Here we are assuming 60% is recoverable and 40% is Non-
recoverable for the case study.
Create receipt for  All tax determinants flows from purchase order to receipt upon Receiving inspection DR- 4460
above Purchase receipt creation. Non recoverable tax DR-
Order and run  As Allow Delivery Based Taxes on Invoice is enabled with TPB as 321.12
Receipt Invoice and TPD as the receipt date at COTO for Payables, tax
Accounting distributions for Non-recoverable tax (802.8*40%=321.12) are Accrual CR- 4781.12
Distributions created and added to the item cost.
Create Payables  AP invoice is created with reference to PO which are receipt Payables Accrual DR- 4781.12
Invoice Matched matched. Taxes are recalculated as TPB is Invoice with TPD as the GST1 Recovery DR- 481.68
to a above PO receipt date and account recoverable taxes (802.8*60%=481.68) Supplier Liability CR- 5262.80
Receipt  For users who are allowed to change the invoice price, the
application considers Invoice Price Variance (IPV) and Tax Rate
Variance (TRV) and account the variance to cost of the item.
 The application derives the tax accounts from tax rate level as we
configured the Tax Account Assignment at Tax Rate level. In this
approach, you can maintain the tax account per jurisdiction as tax
rates and their applicability is based on tax jurisdiction. This
enables you to fulfill the GST reporting requirements and track the
tax account balance as per jurisdiction
Tax Line
Tax Rate Rate Tax Recoverabl Non- Tax Tax Tax Tax Place TPB &TPD
Line Name Amoun e tax recoverabl Regim Nam Status Jurisdictio of
t e tax e e n supply
1 TS_GST1 18 802.80 481.68 321.12 GST GST1 Standard Telangana FP Invoice&
_18% TRN- Receipt date
locati
on
(TS)
F. Implementation of Self-Assessed Taxes
GST self-assessment is required in several countries for certain business situations, and in these cases, the purchasing organization is
responsible for remitting the self-assessed GSTs directly to the local tax authority. Since these taxes calculated on the invoice are not
included in the amount payable to the supplier, they are accounted as a self-assessed tax liability of the purchasing organization.
Case Study for Self-Assessment
For example, the supply from an unregistered dealer to a registered dealer results in the obligation of the registered dealer as the
receiver of goods to self-assess GST and assume the liability to pay the tax directly to the local government.
Self-Assessment of Taxes (Reverse Charge)
In order to initiate the automatic self-assessment of taxes, perform the following setup:
1. Enable Self-Assessment for First Party Registration

I. Sign in as a Tax Manager.
II. In the Setup and Maintenance, go to the following:
III. On Manage Tax Registration UI Search for the legal reporting unit tax profile.
IV. Under the Tax Registrations tab, click Create to create the tax registration for the selected legal reporting unit.
V. In the General tab, enable the check box Set as self-assessment. This initiates self-assessed taxes on Oracle ERP Cloud
Payables transactions. This self-assessment applies to all the taxes of the tax regime selected at the header level of the legal
reporting unit tax registration.
2. Update the Third Party or Third Party Site Tax Profile
To define a tax registration for the supplier or the supplier site for the GST regime:
I. Sign in as a Tax Manager.

II. In the Setup and Maintenance, go to the following:
III. On Manage Tax Registration UI Search for the third party or third party tax profile.
IV. Under the Tax Registrations tab, click on Create to create a tax registration.
V. In the Registration Details section, select the tax registration status as Not Registered for the unregistered supplier.
Create Tax Determining Factor Set
A Tax Determining Factor (TDF) can be a geographical location, Tax Registration Status, Product Fiscal Classification, or any other
criteria which helps drive tax determination. TDFs are categorized into logical groupings called tax determining factor classes.
Each tax determining factor class contains determining factor names that constitute the contents of the class.
The following table outlines TDF details required to fulfill the given scenario:

Tax Determining Factor Registration This value allows you to drive tax rules by registration information.
Class
Tax Determining Factor Registration This value allows the verification of the registration status of parties
Name Status involved in a transaction.
Create Tax Determining Factor Set:

attributes:
Tax Determining Factor Set

Tax Determining Factor Set Code GST_RC Based on User Discretion
Tax Determining Factor Class Registration
Tax Class Qualifier Ship From Party

Tax Determining factor Name Registration status Verifies Tax Registration status of the Ship
from party –Supplier site.
Create Tax Condition Set
Create one tax condition set with the following values to verify a supplier’s tax registration status:
Tax Condition Set I

Tax Condition Set Code GST_RC Based on user discretion
Tax Determining Factor Set GST_RC Tax Determining factor set created above
Code
Operator Equal To Party fiscal classification value equal to
Value Not
Registered
Create Tax Registration Rule
Create a tax registration rule with the following values to designate taxes as self-assessed in the situation of an unregistered
supplier:
Tax Registration Rule
Rule Code GST_RC It is based on user discretion
Tax Determining factor Set GST_RC Tax Determining Factor set code created
code above
Tax conditions
GST_RC First Party Tax Registration If supplier is not registered, the rule will get
Number satisfied and the registration status of the
First-Party Tax Registration Number would be
used where the first party LRU is enabled for
self-assessment.
After completing the required configuration, when you enter an invoice in Payables and validate it, the Tax Determination
process calculates the applicable taxes. In this scenario, third-party tax profile of respective supplier or supplier site is evaluated
to see if they are registered or unregistered.
If the supplier or supplier site is registered under the respective GST authority then the mentioned tax rule criteria is not satisfied.
The default tax registration based on the supplier ship-from source is used here, even if the first party legal reporting unit is set
up with self-assessment box checked, the rule for tax registration does not evaluate to true because the supplier or supplier site
is registered.
If the supplier or supplier site is not registered under the respective GST authority, then the mentioned tax rule criteria is satisfied
and taxes are computed as self-assessed. At the time of invoice validation, Oracle ERP Cloud Payables generates both self-
assessed tax lines and self-assessed tax distribution lines. Upon executing Create Accounting, accounting entries are created for
the respective self-assessed tax lines.
Refer to the Implementation of Self-Assessment Tax for Advance Payments (Prepayments) section for more details on self-
assessed taxes and how to create tax rules to compute tax as self-assessed on the basis of specified goods/services.
Green Corp. located in TS procured materials from Vision Corporation, an unregistered supplier located in TN. The GST1 tax
applies to this purchase transaction.

1 A (Inventory Item) INR 1.83 1,000 1,830.00
2 B (Inventory Item) INR 2.63 1,000 2,630.00
The following table explains the Oracle ERP Cloud Procure-to-Pay flow from the perspective of the buyer Green Corp.:
Activity Explanation Accounting

Create a Purchase The supplier Vision Corporation is defined with a tax No Accounting Impact
Order (PO) registration record created having a registration status of
Not Registered Using the Manage Tax Registrations page.
Save the PO, which initiates the tax determination process

and displays tax lines with the GST1 tax applied to the PO.
Assume that the GST1 18% tax rate is applicable. The GST1
tax is $802.80 (4,460*18%)
Create a Payables Enter payables invoice matching to the PO receipt and select Dr. Payables Accrual 4,460.00
Invoice Matched to first-party tax registration number. Tax determination Dr. GST1 self-Assessed Recoverable
PO Receipt process is initiated with tax point basis as invoice and tax 802.80
creates a tax line. Cr. Supplier Liability 4,460.00
Cr. GST1 Self assessed Tax Liability
802.80
Tax Line
Tax Line Rate Name Rate Tax Amount Tax Regime Tax Name Tax Status Tax Jurisdiction Self-Assessment
1 GST_18 18 802.80 GST GST1 Standard TN ✔
G. Implementation of Self-Assessment tax for Advance payments (Prepayments)
In some countries, taxes must be self-assessed when there is advance payment (prepayment) for supply of goods/services. Under
this self-assessment tax mechanism, the receiver of the goods/services is required self-assess the applicable taxes on advance paid
for supplies.
There may be different rules, based on which taxes must be self-assessed on payment of advances. For example,
 Case 1: Taxes must be self-assessed on payment of advances for supply of goods/services from non-registered suppliers.
 Case 2: Taxes must be self-assessed on payment of advances for supply of specified goods/services.
Map Requirements
You can use the Self-Assessed Tax feature to manage the self-assessment of taxes on advance payments for the supply of
goods/services.
Prerequisite steps:
1. Enable Tax Calculation on Prepayments in the Configuration Owner Tax Options task for applicable Business Unit or Legal
Entity.
2. Define tax registration rules for computation of taxes as self-assessed.
3. Enable the Self-Assessed Tax feature at the Legal Reporting Unit of Receiver organization.
4. Define the tax registration status of suppliers at Third-Party Tax Profile/Third-Party Site Tax Profile.
5. Define Product-Fiscal classification rules for Inventory Linked items (goods) and Product category rules for Non-inventory
Linked items (services) for the computation of taxes as self-assessed for specified goods/services.
Configure Self-Assessment Taxes on Advance Paid (Prepayment)
Required setup to trigger self-assessment taxes on Advance payment (Prepayment) as follows –
Enable Allow Tax Applicability for Prepayment Invoices at Configuration Owner Tax Options (COTO).

Task: Manage Configuration Owner Tax Options
2. Click Create. Select the respective Business Unit to enable for Business Unit owning Tax content or select the Legal Entity to
enable for First-Party Legal Entity level (party type)
3. Select the event class as Prepayment Invoices, Payables.
4. Enable Allow Tax Applicability check box.
Enable Self-Assessment for First Party Registration
To enable Self-Assessment:

2. On the Manage Tax Registrations page, search for the respective legal reporting unit (LRU).
3. In the Tax Registrations section, click Create to create tax registration for LRU.
4. On the General Tab, enable the Set as Self-Assessment (Reverse Charge) check box. This initiates self-assessment of taxes
on procure-to-pay transactions. This self-assessment applies to all the taxes of the tax regime selected at header level.
Update Third Party/Third-Party Site Tax Profile
To define tax registration for the supplier or supplier site for the applicable tax regime:

2. On the Manage Tax Registrations page, search for the respective third party/third-party site.
3. Click Create.
4. Select the registration status as Not Registered for unregistered suppliers and Registered for registered suppliers
5. Enter the registration number.
Create Tax Applicability Rule
In the given case 1, taxes must be self-assessed on Advance payment on the basis of the registration status of the Supplier of the
goods/services. This means that self-assessed taxes are not calculated on the payment of advances to the registered supplier for the
supply of regular goods/services. Self-assessed taxes apply only on prepayments to unregistered suppliers for supply of
goods/services.
Perform the following steps to define the tax applicability rule:
1. Create Determining Factor Set
A tax-determining factor (TDF) can be a geographical location, Tax Registration Status, Product Fiscal Classification and so on.
TDF is an attribute that contributes to the outcome of a tax determination process. TDFs categorized into logical groupings
called tax determining factor class. Each tax determining factor class contains determining factor names that constitute the
contents of the class. The following table explains the TDF details required to map the given scenario.
Attribute Value
Tax Determining Factor Class Registration
Tax Determining Factor Name Registration Status
Create Tax Determining Factor Set:

3. On the Manage Tax Determining Factor Sets page, click Create to create a tax determining factor set with the
following attributes:
Tax Determining Factor GST_RC It is based on user discretion.
Set Code
Tax Regime Code GST Select GST Regime.
Tax Determining Factor Registration
Class
Tax Class Qualifier Ship From party Verifies ship from Supplier for registration details
Tax Determining Factor Registration Status Verifies registration status of the parties involved in the
Name transaction.
2. Create Tax Condition Set
Create one tax condition set to verify supplier registration status with the following attributes:
Tax Condition Set I

Tax Condition Set Code GST_RC It is based on user discretion.
Tax Determining Factor Set GST_RC Tax determining factor set created above.
Code
Operator Equal To
Value Not Registered
3. Create Applicability Rule
For the supply of regular goods/services, create a tax applicability rule with the following attributes:
Tax Applicability Rule

Rule Code GST_RC It is based on user discretion.
Event Class Prepayment Select event class from list of values.
Invoices
Tax Determining Factor Set GST_RC Tax Determining Factor Set created above.
Code
Tax Condition
GST_RC Applicable If supplier site is Not registered, the rule will get satisfied
and taxes will apply on prepayments to Unregistered
suppliers.
This rule ensures that that self-assessed taxes are applied only to unregistered suppliers on prepayment.
4. Create Tax Registration Rule:
You must define Tax registration rule to self-assess the taxes applicable on prepayments.
Perform the following steps to define a registration rule to self-assess taxes on prepayment to unregistered suppliers:
Note: If you created a Tax Registration Rule to apply self-assessed taxes on the basis of registration status of the Third Party
(Ship from location), then you can apply same rule to calculate self-assessed taxes on prepayments to unregistered
suppliers.
1. Create Determining Factor Set:

Class
Tax Determining Factor Registration Status Verifies registration status of parties involved in a transaction.
Name
Create Tax Determinant Factor Set:

3. On the Manage Tax Determining Factor Sets page, click Create to create a tax determining factor set.

Tax Determining Factor GST_PRERC_RG It is based on user discretion.
Set Code
Class
Tax Class Qualifier Ship From Party Ship From location of the supplier for Registration details
Tax Determining Factor Registration Verifies registration status of the parties involved in the
Name Status transaction.
2. Create a Tax Condition Set:
Create a tax condition set to verify supplier registration status with the following attributes:
Tax Condition set I

Tax Condition Set Code GST_PRERC_RG It is based on user discretion
Tax Determining Factor Set GST_PRERC_RG Tax determining factor set created above.
Code
Operator Equal To
Value Not Registered
3. Create Tax Registration Rule:
In case of prepayments to unregistered supplier, create tax registration rule with the following attributes to mark
taxes as self-assessed:

Tax Determining Factor Set GST_RC Tax Determining Factor Set created above.
Code
Tax Conditions
GST_RC Bill To Party If supplier site is not registered, the rule is satisfied and
the registration status of the Bill To (First Party) is used.
5. Setup Self-Assessed Taxes on the Basis of Specified Goods/Services
As mentioned in the given case 2, sometimes taxes must be self-assessed on prepayments for supply of specified
goods/services. Here the self-assessed tax applicability is based on the product and not on the Registration status of the
supplier.
You can use the following tax rule setups self-assess taxes on prepayments for specified goods/services to both Registered
and Unregistered suppliers. These Tax rules are based on Product Fiscal Classification for Inventory linked/goods and
Product Category Fiscal Classification for Non-inventory linked/services items.
Case Study for Illustrative purpose
Vision Corporation Ltd pays advance to Green Corp. Ltd for Supply of Agriculture Product (HSN: 998876) and for
Transportation services (HSN: 556678). Green Corp. Ltd is a registered supplier under GST. As per the GST rules on Self
assessed taxes, any advance paid to the supplier for the supply of agriculture product (HSN: 998876) and for transportation
services (HSN: 556678) is taxable and the receiver of these goods/services must self-assesses the taxes.
To map this requirement, you must define a tax registration rule to compute the taxes as self-assessed when there is a
Prepayment for supply of agriculture product (HSN: 998876) and transportation services (HSN: 556678) from a supplier.
Note: Refer to the Implementation of Harmonized System Nomenclature Codes (HSN) section for information on how to
setup Product Fiscal Classification. Refer to the Implementation of Service Codes section for information on how to setup
Product Category Fiscal Classifications.
A tax-determining factor (TDF) can be a geographical location, Tax Registration Status, Product Fiscal Classification and so
on. TDF is an attribute that contributes to the outcome of a tax determination process. TDFs categorized into logical
groupings called tax determining factor class. Each tax determining factor class contains determining factor names that
constitute the contents of the class. For the given scenario, following table explains about TDF details required to map the
given scenario

Tax Determining Factor Product Inventory Linked
Class
Tax Determining Factor Product fiscal Product fiscal classification defined under manage product based fiscal
Name classification classification.
Create tax determining factor set:

attributes:

Tax Determining GST_PRERC_PFC_TD It is based on user discretion.
Factor Set Code
Tax Determining Product Inventory
Factor Class Linked
Tax Class Qualifier Level 3 Select the level at which the HSN indicates the product as
Self Assessed.
Tax Determining GST_HSN_PFC Select the user-defined Product Fiscal Classification
Factor Name under which the product is categorized as Self-assessed
with suffix RC.
Create a tax condition set to verify the Level 3 of Product fiscal classification defined by user.
Tax Condition Set I

Tax Condition Set Code GST_PRERC_PFC_TC It is based on user discretion.
Tax Determining Factor Set GST_PRERC_PFC_TD Tax determining factor set created above.
Code
Operator Equal To Party fiscal classification value equal to.
Value or Range From RC It selects the RC value defined in product Fiscal
Classification code to identify the product as self-
assessed product.
3. Create Tax Registration Rule
For Product Fiscal Classification, create tax registration rule with the following attributes to mark taxes as self-assessed:

Tax Determining Factor Set GST_PRERC_PFC_TD Tax Determining Factor Set created above.
Code
Tax Conditions
GST_PRERC_PFC_TC Bill To Party If the user selects the mentioned Product Fiscal
Classification, the rule refers to level 3 for RC code and
results Bill To Party for computation of taxes as self-
assessed where Bill To Party LRU is enabled for self-
assessment.
6. Create tax registration rule for product non-inventory linked items (services)
Product category fiscal classification (product Category) can be used to define Tax registration rule for computation of self-
assessed taxes on prepayment to specified services (Non inventory linked).
Tax Determining Product Non
Factor Class Inventory Linked
Tax Determining Product category Product category fiscal classification defined under
Factor Name manage product based fiscal classification.
1. Create tax determining factor set:

3. On the Manage Tax Determining Factor Sets page, click Create to create a tax determining factor set.
Tax determining factor Set

Tax GST_PRERC_PCFC_TD It is based on user discretion
Determining
Factor Set
Code
Tax Regime GST Select GST Regime
Code
Tax Product Inventory
Determining Linked
Factor Class
Tax Class Level 3 Select the level 3(child node) at which the HSN indicates the product
Qualifier as Self Assessed e.g. AA (level 1 Node), 556678 (Level 2 child node)
RC (Level 3 Child node) to identify for self-assessed taxes
Tax Product category
Determining
Factor
Name
Create one tax condition set to verify the Level 3 of Product fiscal classification defined by user.
Tax Conditions Set I

Tax Condition Set Code GST_PRERC_PCFC_TC It is based on user discretion
Tax Determining Factor Set GST_PRERC_PCFC_TD Tax determining factor set created above.
Code
Operator Equal To Party fiscal classification value equal to
Value or Range From RC It select the RC value defined in child node of
Product category fiscal classification code to
identify the product as self-assessed product.
3. Create Tax Registration Rule
Create tax registration rule with following values to mark taxes as self-assessed:
Tax Determining Factor Set GST_PRERC_PCFC_TD Tax Determining Factor Set created earlier.
Code
Tax Condition
GST_PRERC_PFC_TC Bill To Party If the user selects the mentioned Product Fiscal
Classification, the rule refers the level 3 child node
for RC code. The taxes on the Bill-To party are
calculated as self-assessed wherein the Bill-To party
LRU is enabled for self-assessment.
Transaction Simulation in P2P
Green Corp. Ltd located in TS, pays advance (prepayment) to PennyPack Systems Ltd located in TN for the supply of Goods (HSN:
5488864). PennyPack Systems Ltd is an unregistered supplier and therefore, the applicable tax rate is 9% for the goods.
As per the applicable tax rules, taxes must be self-assessed on payment of advance to unregistered suppliers for the supply of goods.
Such business cases can be simulated as per the tax rules configuration as follows:
Create the Prepayment Invoice with the following determinants to compute the self-assessed taxes on such prepayment:
Header Information
Field Input Comments

Business Unit Green Corp. Ltd BU
Legal Entity Green Corp. Ltd This Legal Reporting Unit is enabled for computation of self-
assessed taxes.
Supplier PennyPack Systems Ltd The tax registration status of PennyPack Systems Ltd is not
registered and the supplier tax registration filed is blank.
Supplier Site PennyPack Systems TN
Invoice Type Prepayment Computation of taxes enabled for prepayments.
Line Level information
Line Item Unit Price Quantity Line Amount Product Fiscal classification
1 A (Inventory Item) INR 15 100 1500.00 HSN:AA5488864
Total in INR 1500.00
Tax Rules Simulation
Rule Explanation
Tax Applicability rule The Tax Applicability rule can be defaulted from the tax applicability option at the Mange
Tax Level. You can also define the Tax Applicability rule based on the Geography
Determining Factor or Tax Classification Input Factor.
Tax Rate rule The tax rate depends on the Tax Rate rule defined on the basis of Product Fiscal
Classification (HSN: AA5488864) or any other rules based on your requirement.
Tax Registration rule Taxes computed as self-assessed per the Tax Registration rule. In the given business case,
PennyPack Systems LTD is an unregistered supplier so this rule refers to the Bill to LRU
setup to compute tax as self-assessed.
Tax Point Basis (TPB) The TPB is Invoice and TPD is the date when the invoice was created.
Tax Line
Tax Rate Rate Tax Recoverable Non- Tax Tax Tax Status Tax Self-
Line Name Amount Tax Recoverable Regime Name Jurisdiction Assessment
Tax
1 GST_9 9 135.00 81.00 51.00 GST GST9 Standard TS ✔
Accounting on prepayment
For example, tax recovery rate is 60% of INR 135.00, INR 81.00 is the Recoverable tax, and INR 54.00 is the Non-recoverable tax. You
configured Tax recovery rate and rules accordingly in the application.
Note: The following Account CCID is an example. You must define tax accounts and sub ledger accounting rules as per your business
requirements to account the prepayments. In some countries, as per applicable tax rules on prepayments, input tax credit can’t be
allowed on advance payments. In such cases, you must define tax recovery rules so that Input tax credit can’t be recorded on
advance payments.
Line Account CCID Class Debit credit Comments

1 01.00.1340.000.00 Prepaid expenses 1500.00
2 01.00.2340.000.00 Self-Assessed Recoverable Tax 81.00 Recoverable taxes are accounted in
this Accounting class in a separate
Account Code Combination
Identification number (CCID) as per
your tax account configuration.
This is a part of the Input Tax
Credit.
3 01.00.1340.000.00 Self-Assessed Non-recoverable 54.00 Non recoverable taxes are
Tax accounted in this Accounting class.
These taxes are a part of the item
cost and use the same CCID as the
prepaid expenses.
4 01.00.2210.000.00 Liability 1500.00 Supplier liability
5 01.00.2599.000.00 Self-Assessed Tax Liability 135.00 Self-Assessed tax liability
Accounting on standard AP Invoice
For example, Vision Corporation Ltd created a standard AP invoice for supply of goods worth INR 4000 (HSN: 5488864) to PennyPack
Systems Ltd and applied the earlier prepayment for this invoice. The accounting entries for standard AP invoice creation and
application of prepayment on this invoice are listed in the following table:
1 01.00.7810.000.00 Item expenses 4000.00 Value of the supplied goods.
2 01.00.2340.000.00 Self-Assessed recoverable Tax 216.00 Recoverable taxes are accounted in
this Accounting class in a separate
CCID (as per your tax account
configuration). This is a part of the
Input Tax Credit.
3 01.00.7810.000.00 Self-Assessed Non recoverable 144.00 Non recoverable taxes are
Tax accounted in this Accounting class.
These taxes are a part of the item
cost and use the same CCID as the
prepaid expenses.
5 01.00.2599.000.00 Self-Assessed Tax Liability 360.00 Self-Assessed tax liability
Accounting on after Applying prepayment to standard Invoice

1 01.00.7810.000.00 Item expenses 4000.00
2 01.00.2340.000.00 Self-Assessed recoverable Tax 216.00
3 01.00.7810.000.00 Self-Assessed Non recoverable 144.00

Tax
4 01.00.2210.000.00 Liability 1500.00 Supplier liability is reversed.
5 01.00.2599.000.00 Self-Assessed Tax Liability 135.00 Self-Assessed tax liability is

reversed.

7 01.00.1340.000.00 Prepaid expenses 1500.00
8 01.00.2340.000.00 Self-Assessed recoverable Tax 81.00 Self-Assessed recoverable tax
reversed.
9 01.00.1340.000.00 Self-Assessed Non recoverable 54.00 Self-Assessed Non-recoverable tax

Tax reversed.
10 01.00.2599.000.00 Self-Assessed Tax Liability 360.00
Mange input tax credit under self-assessed tax Mechanism
Self-assessed taxes are accounted through separate accounting classes. These accounting classes differentiate the self-assessed tax
liability and the self-assessed input tax credit from the regular taxes.

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Introduction to Goods and Services Tax

2. Assumptions and Prerequisites

In this document, the following entities comprise the prerequisite configuration:

 Ledger, Business Unit, Legal Entity, and Legal Reporting Unit

 Business unit requirements for autonomy

 Business and accounting policies

 Applicable tax laws and tax compliance

Note: These are sample enterprise structures.

The following diagram shows Structure 1:

INV1-BU1 INV2-BU1 INV1-BU2 INV2-BU2

PCBU1-RE1 LRU-PCBU1 PCBU2-RE1 LRU-PCBU2

INV1-PCBU1 INV2-PCBU1 INV3-PCBU2 INV4-PCBU2

 The place of supply per nature of transaction

 Defaulting the place of supply while defining the taxes

Tax Applicability Rules:

Event Class: Purchase Transactions

Event Class: Sales Transactions

6. Manage General GST Compliance in Oracle ERP Cloud

Vision corporation tax

PennyPack system tax

Legal Reporting Units

Configure Legal Reporting Unit

1. Sign in as a Tax Manager.

Attribute Value Comments

Attribute Value Comments

First Party Registration Numbers

To set up tax registrations for a legal reporting unit:

1. In the Setup and Maintenance work area, go to the following:

Attribute Value Comments

Third Party Registration Numbers

To create a Third Party Site Tax Profile:

1. In the Setup and Maintenance work area, go to the following:

To set up tax registrations for a third-party site:

1. In the Setup and Maintenance work area, go to the following:

6. Click Save and Close.

Tax Registration Levels

You can define tax registrations at three different levels of detail:

1. Tax regime level

3. Tax jurisdiction level

Purchase Order (PO) Lines (Payables Invoicing Match to PO Option)

Tax Determination Processes Evaluated

Order Process Name Activities Performed by the Components Used Result

Navigation: GST definition >

Configuration Owner tax Options (COTO)

PO Tax Determination Applied

Once the PO is approved, buyer sends it to seller with following details:

Seller: Green Corp.

Line Item Unit Price Quantity Line Amount

AP Tax Determination Applied

Line Distribution Type Amount

After Accounting, the following accounting entries are created:

Account Class Account Type Debit Credit

C. Implementation of Harmonized System Nomenclature Codes (HSN)

Sample HSN and Applicable Tax Rates

Commodity HSN Applicable

Prerequisite Inventory Setup Steps

2. Create Categories in a Catalog

Category Code Category Name