Subcontracting Process in GST: India
As a SAP Procurement Consultant, Subcontracting is one of the most sought after and important procurement process.
Subcontracting is a process of providing components/goods to vendors and receiving finished products.
With an aim to bring in uniformity in the tax structure, the GOI rolled out GST.
As we are aware of the changes proposed by SAP after the introduction of GST in India, new Transactions came into the the picture and the process of reconciliation of Challans.
I recently worked on an activity(Subcontracting with automatic reconciliation) which involved simplification of the procurement process of Subcontracting and wanted to provide an overview of the the standard process.
The process is as follows:
- Create a Subcontracting PO(Item Category L), also maintain the component for the same.
- Issue goods to the Vendor using MIGO.(541 Mvt Type)
- Now create a Challan for the 541 material document using T-code J1IGSUBCON.
- Now post a Goods Receipt for the goods
- Now reconcile the challan for the consumed material using J1IGRECON Tcode..
Let me explain you with an example below:
Step 1: Create a Purchase Order(L Item Category)
- Enter the Vendor Code
- Enter the Item Category as L, Material, Qty, Del Date, Plant and Storage
- Click on the components button to maintain the Components for each line item.
Here enter the Material and Requirement qty/unit.(To make the final product we need to provide these to vendor)
Click on Back Button and come out of the screen.
Save the PO
Step 2:Goods Issue to Subcontracting Vendor via MIGO.
Save the Document
Note: Enter the component quantity equal to the component Qty maintained in PO.
Step 3:Challan Creation J1IGSUBCON
- Now enter the Company Code, Plant and 541 Mat Doc
- Select the Create Challan Radio button
- Select the line items and click on Create Challan button.
- Challan Numbers are generated.
Step 4: Goods Receipt
I have posted GRN for 1 Qty and the document is shown above.
Here note that 543 movement type is triggered for the components(Consumption of components is defined with the help of 543 movement type).
Step 5: Reconciliation of Challans(J1IGRECON)
Here we have 2 options to post: FIFO and Manual processing
a) When a user selects FIFO, system proposes a Challan of that component automatically by selecting the oldest.
b) With the use of manual, we can enter Challan associated with our delivery manually.
Now click on execute.
I hope this blog is of good importance for all MM consultants and gives an overview of the process.
Thank You !