SAP Implementation FAQ

The FAQs include the most frequent questions and answers about SAP Implementation in India. They have been compiled to cater to both the local as well as the global reporting frameworks and try to bridge the gap between the two, make the reporting requirement facile and ensure consistency of the presented data.

How to address the differences in financial year / reporting period and reporting framework for consolidation and India?

Companies in European and US sub-continent have their financial / fiscal year as a calendar year beginning January 1, XXXX and ending December 31, XXXX for consolidation, however in India the financial / fiscal year is from April 1, XXXX to March 31, XXXX.

In addition to the same the group may follow IFRS, US GAAP or German GAAP whereas Indian entity is required to follow IGAAP [Indian Generally Accepted Accounting Principals] or IFRS converged standards [Indian Accounting Standards IND AS].

Hence for consolidation purpose the Indian entity will be required to operate with 2 set of accounts / post additional entries for group reporting purposes. Maintenance of accounting records with 2 separate reporting frameworks is simplified in SAP.

• Set up parallel ledgers using leading ledger 0L for recording the transactions as per group Holding Company reporting requirements
• Different Fiscal year and different Group accounting policy related accounting can be posted in different LEDGER ACCOUNT which is the Non-Leading ledger with automated adjustments for standards like IFRS 15 (revenue) or 16 (leases).
• Example : ZI / IN / 4L are Local GAAP ledgers maintained for India

What customization are required for recording import of goods into India and what are the key drivers?

Globally customs duty is levied on imports all these items are being categorized by the customs authorities based on the tariff code [Harmonized System of Nomenclature (HSN code)].

To ensure the costs of the customs and related clearance charges are added to the cost of the material pricing / import conditions are required to be created for purchase orders issued by Indian entity

• Customs duty is to be recorded as cost of purchase of the article hence material / asset mapping required as purchase order level
• JCDB, JSWS & JCV1 condition records are to be maintained in the system
• Disclosure is required to be made in the local Indian financial statements for the aggregate purchases made during the year

What are the local India tax setups to be configured?

a. GST [Goods and Services tax] – Similar reference concept of global term VAT [Value Added Tax]G

GST on sales and purchases : Monthly Reporting is to be made to government authorities reflecting invoice level details of the goods and services sold / received.

• GST setup can be condition based taxation hence, eliminating the need to maintain the tax rate in FTXP transaction code.
• In condition-based taxation, tax rates can be defined based on condition record. FV11 and VK11 transaction codes can be used for FI and SD condition records, respectively.
• Access sequence JGSO can be setup for procurement
• Access sequence JGSI can be setup for procurement
• Alternatively, multiple Individual Tax codes can be setup for each condition of tax covering % charged, basic value, HSN of the goods / SAC of the dealt in along with the tax registration category of the customer and vendor

b. TDS [Tax deducted at Source] – Similar reference concept of global term Withholding taxes

Reporting to government authorities – entity and invoice level automation for government to identify tax deducted and paid by 1 entity reflects in the income tax account of another.

Setting up tax codes and maintaining the fields for the reporting in the vendor master data is required to be setup for each condition of tax covering % to be deducted.

Does India also have e-invoicing mandatory and are there which API / custom integrations would be required during the ERP setup?

Companies having turnover exceeding INR 50 million must generate e-invoicing with Invoice Reference Number [IRN] mentioned on the invoice.The same can be done via integrating the SAP with the Government portal with the help of a GST Suvidha Provider [GSP].

SAP S/4HANA’s Digital Compliance Service [DCS] uses embedded APIs to integrate directly with the GST Network (GSTN) and Invoice Registration Portal (IRP), enabling automated calculations for GST, and real-time e-invoice validation with HSN/SAC code mapping. This reduces errors in high-volume transactions via in-memory computing.

What are specific fixed assets capitalization and depreciation requirements in India?

It has been commonly noted the life of the asset as per the Companies Act, 2013 [applicable Indian law] differs from the European countries as the same are pre-defined depending on the class of the asset and the end usage. The SAP Hana separate ledger and depreciation codes amongst other parameters for tax depreciation and book depreciation separately to be maintained.

Note: In India the depreciation is to be calculated on number of days basis, as against SAP standard function of depreciation charged for the entire month

What are the document numbering requirements in India?

As per the local regulations applicable in India a separate document sequence is required to be maintained for the sales invoices, credit notes and debit notes. There are 2 options for the setup:

• Custom development
• ODN [Official document numbering] – The ODN sequence must be separate from the group numbering system and auto-reset of new series must be from Indian Fiscal Year i.e. April 1, 20XX marks the beginning of the new series

Is there a specific type of local license to be procured mandatory?

SAP offers localization package for standard withholding tax / VAT / GST setup in India

What is the compliance to be ensured for the purpose of auditing and government mandates on backup policies?

Based on the amendments under Requirement as per the Companies (Accounts) Rules, 2014 Companies are required to ensure compliance which requires the following:

• Electronic Records to always remain accessible in India to be usable for subsequent reference;
• Back-up of the Electronic Records (whether within or outside India) are now required to be kept in servers physically located in India on a daily basis, instead of periodic basis;
• In case the service provider is located outside India, the name and address of the person in control of the Electronic Records in India is also required to be provided, along with details of the service provider along with the name and address of the person in control of the books of account and other books and papers in India.
• Applicability: The requirement applies to all companies registered in India, regardless of where their primary servers are located.
• Scope: Covers books of accounts, financial records, and other relevant documents related to Indian operations.
• Frequency: Daily backups are mandatory.
• Storage Location: Backups must be stored on a server physically located within India.

Dynamically growing organization and every changing markets also require their ERP to be ready for the future. If you want to discuss or need support for SAP Implementation – contact our experts.