Wednesday 26 April 2017

Trading Process Setup in NAV 2016

Trading is a process where business buy a specialized range of products, maintain a stock and deliver products to customer. Importers or wholesalers maintain a stock and deliver products to shops or large end customers. They work in a large geographical area, while their customers, the shops, work in smaller areas and often in just a small neighbourhood.

First Stage Dealer (FSD) means “a dealer who purchases the goods directly from manufacturer or importer under the cover of an invoice”.

Second Stage Dealer (SSD) means “a dealer who purchases the goods from a First Stage Dealer”.


Steps to follow for updation of entries in "RG 23 D" register (Trading Process):


"Trading Co." field in Company Information window should be checked or it should be updated on the "Trading" field on location card. The option is available on the "Tax Information" tab of both tables. If only one location is engaged in trading activities, then it is suggested to check mark on "Trading" field in location card. "E.C.C. No." of the location should also be updated on the location card or Company information card. 

When user enters the "Purchase" transaction, he should check the followings :
a) Structure should contain "Excise"
b) Trading location should be selected in "Purchase Order" 
c) When user select the correct location code which is marked as "Trading", the system automatically update the field "Trading" available at the "Tax Information" tab of purchase Order.
d) User should check the statistic before posting the Purchase Invoice. He should check whether "Excise amount" is properly reflecting on the statistic.

After checking above options, he should post the purchase Invoice. When user post the Trading Purchase Invoice, he should navigate the "Posted Purchase Invoice" and would find that entry is updated in "RG 23 D" table.


The table "RG 23 D" contains the following information related to Purchase transactions:

1. Posting Date : The field shows the information when transaction was posted

2.  Document No. : Posted document no. of Purchase Invoice.


The document no. setup for trading location is updated in "Purchase & Payable Setup". The fields available related to trading location in "Purchase & Payable Setup" are as follows :
         a) Posted Invoice No. (Trading)
         b) Posted Ret Shpt Nos. (Trading)
         c) Posted Purch. Rcpt. (Trading)
         d) Posted Purch. Cr. Memo (Trading)


3. Item No. : Item code of the transaction 

4. Transaction  Type: Whether transaction is Purchase or Sale

5. Location Code : Trading Location code

6. Source Type : Vendor or Customer

7. Quantity : Total Quantity in the Trading Purchase Invoice for that item

8. Amount : Total Excise amount

9.  Source Code : Vendor or Customer code

10. Excise Amount per Unit : It is the Excise amount per unit (Amount/Quantity)

11. Bed Amount Per Unit : It is the Bed amount per unit (BEd Amount/Quantity) 

12. Ecess Amount Per Unit : It is the Ecess Amount per unit(Ecess Amount/Quantity)

13. She Cess Amount Per Unit : It is the She Cess Amount Per Unit (She Cess Amount/Quantity)

14. Excise Base Amount Per unit : It is the total Excise base amount per unit on which excise amount is calculated (Excise Base Amount/Quantity)

15. Remaining Quantity : It shows the information about the quantity available on which user can take credit.

16. Order No. : Purchase Order number.

17. Vendor Invoice No : It shows the information regarding Vendor Invoice number.

18. Line Amount Per Unit : It shows the per unit cost of the line (Line Amount / Quantity)


When user enters the "Sales" transaction, he should check the followings :

a) Structure should contain "Excise"
b) Trading location should be selected in "Sales Order" 
c) When user select the correct location code which is marked as "Trading" , the system automatically update the field "Trading" available at the "Tax Information" tab of sales Order.
d) User should check the statistic before posting the Sales Invoice. He should check whether "Excise amount" is properly reflecting on the statistic.
e) User should remember that the excise amount would be copied from the purchase transaction. Also remember that the Excise Amount per unit cost of Purchase transaction would be multiply with quantity of sales order. 

After checking above options, he should post the Sales Invoice. When user post the Trading Sales Invoice, he should navigate the "Posted Sales Invoice" and would find that entry is updated in "RG 23 D" table.


Excise Duty pass on flow for trading business :

As for the trading business, the distributor have to pass the excise duty amount to the customer , if the same material we are purchasing from the manufacturer at different cost and every time we are paying different excise duty amount for the same material then how to map this amount material relationship when we are selling the material, please check the below example

Purchase Material "A": Basic amount 100, Excise Amount: 8

Sale Material  "A": Basic amount 1200, Excise Amount Pass : 8


Second Scenario:

Purchase Material "B': Basic amount 150, Excise Amount : 12

Sale Material "B" : Basic amount 18000, Excise Amount Pass : 12

(We need to remember that we cannot pass more excise in Sale even if sale amount is on the higher side. We can pass only that amount which we have received in Purchase. Excise per unit cost plays a important role as it calculates the excise amount during sales transaction) 


Third Scenario :

"B" is a dealer and purchase materials from its principal A by paying Base amount (say Rs 100 ) & Excise duty (say BED 12%, Ecess 2% & SEcess 1%), comes to Rs 115 and applicable VAT (say 5% ) on it . Thus landed value comes to Rs 120.75. Again "B" sells this material to a manufacturer C for a base amount (say Rs 125) and pass on the excise value he paid to A (Rs 15,ie Rs 125 + 15 =140) and applicable VAT (say 5%) on it. Thus landed value comes to (Rs 140 + Rs 7 =147).

"B" can pass on the credit provided B is registered as First Stage Dealer with Central Excise Department. "B" can sell the good at ₹ 110/- but he can pass on as credit only ₹ 2, being the duty paid by the manufacturer. B cannot pass of duty @2% of 110 as received the excise amount of Rs. 2 during purchase transaction.



The table "RG 23 D" contains the following information related to Sales transactions:

1. Posting Date : The field shows the information when the Sales transaction was posted

2. Document No. : Posted document no. of Sales Invoice.


The document no. setup for trading location is updated in "Sales & Receivable Setup". The fields available related to trading location in "Sales & Receivable Setup" are as follows :
a) Posted Invoice No. (Trading)
b) Posted Ret Rcpt Nos. (Trading)
c) Posted Sales Shpt. (Trading)
d) Posted Sales Cr. Memo (Trading)


3. Item No. : Item code of the transaction

4. Transaction Type: Sale

5. Location Code : Trading Location code

6. Source Type : Customer

7. Quantity : Total Quantity in the Trading Sales Invoice for that item

8. Amount : Total Excise amount

9. Source Code : Customer code

10. Excise Amount per Unit : It is the Excise amount per unit (Amount/Quantity)

11. Bed Amount Per Unit : It is the Bed amount per unit (BEd Amount/Quantity)

12. Ecess Amount Per Unit : It is the Ecess Amount per unit(Ecess Amount/Quantity)

13. She Cess Amount Per Unit : It is the She Cess Amount Per Unit (She Cess Amount/Quantity)

14. Excise Base Amount Per unit : It is the total Excise base amount per unit on which excise amount is calculated (Excise Base Amount/Quantity) during purchase transaction

15. Remaining Quantity : It shows the information about the quantity available on which user can take credit. User need to check the related Purchase Line.

16. Order No. : Sales Order number.

17. Vendor Invoice No : It shows the information regarding Vendor Invoice number through which sales transaction is linked.

18. Line Amount Per Unit : It shows the per unit cost of the line (Line Amount / Quantity). User need to check the related Purchase Linked through which Sales transaction is linked


Note: User need to understand that during posting of Sales Invoice, it checks the remaining quantity in "RG 23 D", if quantity is not available, it will show the error "Item X is short by "Y" quantity in RG 23 D. Please adjust the quantity to proceed.". As mentioned that trading invoice can be made for those quantity quantity which user has purchased for trading and updated in "RG 23 D" table.



Steps Related to Transfer process for Trading 


In order to receive material from other location to Trading location or send material from Trading location, user has to do the process in the same manner as he receives material for other normal transfer order. 

In order to send the material at Trading location, following steps need to follow (as mentioned above that it is default transfer process ):

1) Open the Transfer Order (Department --Purchase--Plannings --Transfer Order) and update the following information :
 a) Transfer-from Code :  Enter the Location code from where the material is being transferred
 b) Transfer-to Code : Enter the Trading Location code where the material is to be received
 c) In-Transit Code: Enter "In-Transit Code"
 d) Structure : User must select the correct "Excise" structure so that Excise be updated in the table "RG 23 D" table
 e) User should check whether "Excise Amount" is updated on the line section
 f) Enter the "Vendor Invoice No." 
 g) Item Code: Update Item Code
 h) Quantity : Update quantity
 i) Transfer Price: Update the price.

After updating above information, click on "Post--Ship" option and post the transaction. The entry will update in "In Transit Location". Users has to  click on "Post--Receive" option to receive the material in "Trading" location. 

When user RECEIVE the item related to Trading through "Transfer Order", the followings information updated in the "RG 23 D" table :

1. Posting Date : The field shows the information when the "Transfer Order"  was posted

2. Document No. : Posted document no. of Transfer Order.

3. Item No. : Item code of the transaction

4. Transaction Type: The system will update the "Purchase" for transfer related entries.

5. Location Code : Trading Location code

6. Source Type : It would be blank for transfer related entries.

7. Quantity : Total Quantity in the Transfer Order received for that item

8. Amount : Total Excise amount

9. Source Code : It would be blank for transfer related entries.

10. Excise Amount per Unit : It is the Excise amount per unit (Amount/Quantity)

11. Bed Amount Per Unit : It is the Bed amount per unit (BEd Amount/Quantity)

12. Ecess Amount Per Unit : It is the Ecess Amount per unit(Ecess Amount/Quantity)

13. She Cess Amount Per Unit : It is the She Cess Amount Per Unit (She Cess Amount/Quantity)

14. Excise Base Amount Per unit : It is the total Excise base amount per unit on which excise amount is calculated (Excise Base Amount/Quantity) 

15. Remaining Quantity : It shows the information about the quantity available on which user can take credit.

16. Order No. : Transfer Order number.

17. Vendor Invoice No : It shows the information regarding  Invoice number

18. Line Amount Per Unit : It shows the per unit cost of the line (Line Amount / Quantity). 




In order to send the material from Trading location, following steps need to follow :

1) Open the Transfer Order (Department --Purchase--Plannings --Transfer Order) and update the following information :
 a) Transfer-from Code :  Enter the Trading Location code from where the material is being transferred
 b) Transfer-to Code : Enter the Location code where the material is to be transferred
 c) In-Transit Code: Enter "In-Transit Code"
 d) Structure : User must select the correct "Excise" structure so that Excise be updated in the table "RG 23 D" table
 e) Applies to Entry (Ship) : It needs to be selected to transfer the material from the Transfer Location.
f) Applies to Entry (RG 23 D): After updating the information "Applies to Entry(Ship)", user should update this field.
 e) User should check whether "Excise Amount" is updated on the line section by clicking on the "Calculate Structure Value" available at the top of the screen.
 f) Enter the "Vendor Invoice No." 
 g) Item Code: Update Item Code
 h) Quantity : Update quantity
 i) Transfer Price: Update the price.

After updating above information, click on "Post--Ship" option and post the transaction. The entry will update in "In Transit Location". Users has to  click on "Post--Receive" option to receive the material.

When user RECEIVE the item related to Trading through "Transfer Order", the followings information updated in the "RG 23 D" table :

1. Posting Date : The field shows the information when the "Transfer Order"  was posted

2. Document No. : Posted document no. of Transfer Order.

3. Item No. : Item code of the transaction

4. Transaction Type: The system will update the "Sale" for transfer related entries.

5. Location Code : Trading Location code

6. Source Type : It would be "Item" for transfer related entries.

7. Quantity : Total Quantity in the Transfer Order received for that item

8. Amount : Total Excise amount

9. Source Code : It would be "Item No." for transfer related entries when we transfer the items from trading locatiom.

10. Excise Amount per Unit : It is the Excise amount per unit (Amount/Quantity)

11. Bed Amount Per Unit : It is the Bed amount per unit (BEd Amount/Quantity)

12. Ecess Amount Per Unit : It is the Ecess Amount per unit(Ecess Amount/Quantity)

13. She Cess Amount Per Unit : It is the She Cess Amount Per Unit (She Cess Amount/Quantity)

14. Excise Base Amount Per unit : It is the total Excise base amount per unit on which excise amount is calculated (Excise Base Amount/Quantity) 

15. Remaining Quantity : It shows the information about the quantity available on which user can take credit.

16. Order No. : Transfer Order number.

17. Vendor Invoice No : It shows the information regarding  Invoice number

18. Line Amount Per Unit : It shows the per unit cost of the line (Line Amount / Quantity).


Setup related to Trading Process :
User needs to update the "General Posting Setup". The following fields need to be updated for Trading process :
a) Sales Account (Trading)
b) Sales Cr. Memo Acc (Trading)
c) Purchase Account (Trading)
d) Purchase Cr. Memo Acc (Trading)

For opening of "RG 23 D", we need to post the purchase transaction on dates before go live. Nullify the impact of the G/L but don't do anything with the ILE and RG23 D.  


Other information related to Trading Process :
  • Central Excise Dealers, who purchases excisable goods from manufacturers or first stage dealers and further transfers CENVAT Credit (earlier known as MODVAT), are required to maintain RG23D register as per Central Excise rules.
  • Dealers are required to disclose all the purchases and sales transactions in the register even though no CENVAT Credit is passed on to end buyers.
Circular No. 96/7/1995-CX of Central Excise dated 13/2/1995 has clarified this problem long ago:

There are 3 situations as per this Circular:

When whole credit is to be passed on to buyer:

(a) Whenever a registered person receives a consignment under Rule 52A invoice or 57G invoice and in respect of the same he propose to issue either one or more modvatable invoices, he shall keep complete account of each such consignment and all transactions relating there to in RG 23 D register.

For example, if dealer X buys excisable goods from Y with CENVAT of Rs. 100/- and the whole lot of goods is further sold to Z then X shall include these both transactions (i.e. purchase from Y on receipt side, sale to Z on issue side) in the RG23D register.


When partly credit is to be passed on to buyer:


(b) In respect of any consignment part of which is sold under a modvatable invoice and the other part under the cover of non-modvatable invoice, then the details of sales under non- Modvatable invoices have also to be entered in the prescribed register RG 23D. The non- modvatable invoices are not required to be issued in the prescribed proforma.

For example, if dealer X buys excisable goods from Y with CENVAT of Rs. 100/- but only 40% of such goods is further sold to Z with 40% (i.e. 40/-) of excise credit transfer and rest 60% is sold to A through commercial invoice without transfer of balance 60% (i.e. 60/-) credit even though X shall include these all 3 transactions (i.e. purchase from Y on receipt side, sale to Z & A on issue side) in the RG23D register.


When no credit is to be passed on to buyer:

(c) A registered person need not enter into RG 23D register details of those consignment received under Rule 52A invoice or 57G invoice for which he does not propose to issue modvatable invoices.


For example, if dealer X buys excisable goods from Y with CENVAT of Rs. 100/- and sales all goods to A through commercial invoice without transfer of any credit then X shall not include any of these transactions (i.e. purchase from Y and sale to A) in the RG23D register.


Simply speaking, if the credit is not required to be passed on to the buyer then first/second stage dealer is not required to enter details of such excisable invoices in RG23. However, if even some part of credit needs to be issued to buyer then whole excisable invoice details shall be entered and on the issue side both first stage dealer invoice (issued for transfer of partly credit) and commercial invoice (for sale of goods without transfer of excise credit) needs to be entered.


If user does not want to take trade excise credit, he can de-select the option "Trading" from the "Tax Information" from header.


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