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January 21, 2020

Stock Transport Order (STO) in India with application of GST and SAP solution

Inter branch/unit transfer of goods is common and indispensable for large manufacturing units spread across multiple geographical locations. This will help them to get closer to the customers and bridge the time gap between demand and supply. In SAP, transfer of goods between 2 branches or units is termed as STO (Stock transfer order).  The same can be interstate (outside state) and Intra state (within state). The former is taxable under GST Act, 2017 and treated in the same way as normal sale to customer. The tax credit benefit to sending and receiving branch is same as a normal sale to customer and One branch will pay GST and other branch will take Input Tax Credit (ITC). This blog gives a high-level solution on STO given by SAP and how we can implement the same for our clients.

STO process is always between 2 plants mapped to the same company code. Hence, billing/invoicing is not applicable in this process. However, in India, as per GST law, billing document is to be generated and a subsequent outbound (at issuing plant) and inbound (at receiving plant) invoice documents must be generated. In India, there are 2 types of GST namely Inter-State GST and Intra-State GST and the relevant taxes differ for transport of goods between plants within the same state and within plants in different states.

Simple-STO-Process-Flow.jpg

Standard STO setup in SAP and challenges with India STO process

Generally, STO process does not differ from country to country. The standard STO process does not involve any taxation and billing but for India, invoice document is to be generated as per India tax laws. Hence there is a requirement to distinguish the STO process for India from other countries.

Tax is not calculated in intra-state STO since plants in same state share the same GSTIN. IGST is computed in inter-state STO process.

India Intra-state STO

India Inter-state STO

In other countries

No GST

GST should be computed

No taxation

Billing document to be created

Billing document to be created

No billing document

No ODN reference in accounting document since   plants have same GSTIN

ODN to be generated in accounting document

Not applicable

Info Record (maintain tax code) mandatory reference in PO

Info Record (maintain tax code) mandatory reference in PO

Not applicable

 

How does SAP standard solution for STO process with GST integration work?

SAP has given complete solution with a set of notes to be implemented in SAP GST India: STO Solution notes.

STO-process-with-GST.jpg

How Infosys approached and addressed these challenges

The basic process flow mostly remains unchanged as can be deduced from figure 2. We must make creation of billing document (and subsequent accounting document) possible for STO process in India to compute GST. This can be achieved by assigning a delivery type and item category relevant for billing to the India plants in STO configuration.

As for ODN, separate billing document types for Intra-state and inter-state STO is maintained because ODN generation is made mandatory for Inter-state process only.

These changes help business comply with GST law, 2017 in India.

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