CENVAT UTILIZATION ON RAW MATERIALS.

Question

HI ,
      AM INTO SALES & DISTRIBUTION.
CAN U PL EXPLAIN  WTS CENVAT CREDIT & HOW ITS  UTILIZED , ON RAW MATERIALS & FINAL PRODUCTS.

Answer 1

Hi Jerry,
Background
When we Purchase goods we pay duty (Excise) this we can take credit if we are making some Finished goods out of the raw material by doing some value addition. When we do Sales of the Finished goods which was made by converting our raw material we have to Pay Excise (because goods are Physically moved outside our Plant).
According the Concept of CENVAT since we have already paid Excise for the raw materials which we have used for making our Finished goods we can claim the excise we have paid & only the difference amount we will pay to the government.
So normally when we do Procurement we will capture the Excise duties in Seperate GL's & when we do Sales we will capture the Excise payable on sales in Seperate GL's & at the end of every month or before 7th of the next month we will do utilization ( i.e we will utilize the excise payed on inputs(purchase) against the excise to be payed on Sales).
In SAP
Procurement Side
Capture & Post Excise - T.code - J1IEX or MIGO
The duties (BED,Ecess & SHEcess) will post in different A/C's say X,Y & Z
The sum of X,Y & Z will be posted in a clearing A/C & we will pay the same to Vendor when we do Bill Passing.
Sales Side
When we Sell goods we will create an Excise Invoice as goods are movin out of our Premises.
T.Code - J1IIN
We will post the Excise Payable on Sales to different GL's
CENVAT Utilization
T.Code - J2IUN
If our input GL balance (Purchase Excise Credit) is less than our Sale side Excise Payable - We will pay the balance amount from PLA
We Will Configure the GL A/C's in SPRO/Logistics General/Tax on Goods Movements/India/Account Determination
Go through the CIN threads in the Forum for more clarifications.
Award points if you find this as useful.
Thanks,