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Subcontracting With GST

Subcontracting involves outsourcing production to a vendor. In SAP MM, subcontracting can be done with or without a challan under GST. The key steps are: 1) Create a subcontracting purchase order and issue components to the vendor; 2) The vendor processes the components and issues the finished goods upon receipt; 3) A challan or invoice is created depending on the process; 4) Accounting entries update relevant stock and clearing accounts.

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394 views3 pages

Subcontracting With GST

Subcontracting involves outsourcing production to a vendor. In SAP MM, subcontracting can be done with or without a challan under GST. The key steps are: 1) Create a subcontracting purchase order and issue components to the vendor; 2) The vendor processes the components and issues the finished goods upon receipt; 3) A challan or invoice is created depending on the process; 4) Accounting entries update relevant stock and clearing accounts.

Uploaded by

ABHISHEK SRIVASTAVA
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Subcontracting Process in SAP MM after GST

Subcontracting is one of the manufacturing strategy by which a company decides to outsource


some or all of its production operations to a vendor. In SAP, Subcontracting is one of the special
procurement type in the SAP MM.
Subcontracting can be defined as the processing of the material by the external supplier to get
the final products.
In this process, a manufacturing company provides raw materials/ components to a
subcontracting vendor. The vendor in turn process these components to turn them into end
products. This final product is then used by the manufacturing company to carry out the rest of
the operations.
After GST Implementation, there is a change in the Subcontracting Configuration and Process.
As per GST law, we can run Subcontracting process in one of the following ways:

 With Challan

 Without Challan (with Invoice)

Subcontracting Configuration for GST

 Define Shipping Data for Plants: Assign Sales Organization, Distribution Challan and
Division should be maintained for Supplying Plant from which the components are to be
delivered. Table view – V_001W_IV, T. Code – SM30 Or SPRP -> SAP Ref. IMG -> Materials
Managment -> Purchasing -> Purchase Order -> Set up Stock Transport Order -> Define
Shipping Data for Plants

 New Billing Type define – ZSN SC Challan (No Taxes), ZSP – SC Invoice (with Taxes)

 Classify Subcontracting Billing Types: Maintain View J_1IG_V_SUBINV through Code –


SM30 – Company Code, Sales Type, Billing Type, Billing Class – ZSN for Create Challan and
ZSP for Create Invoice

 Use the existing SD Pricing Procedure or define a new Pricing Procedure for
Subcontracting process

 Set up “Delivery to Billing Type” Copy Control. Copied with Billing Type “FX” and Sales
Order “OR

Steps for Subcontracting Process:

 Material Master - Material Master should be available in system for both Finished and
Raw Materials (T. Code – MM01). Components must have stock in the system. Extend the Sales
View for the Raw Materials or Components

 Customer - Create Customer (T. Code – XD01) with necessary details as per
Subcontractor Vendor

 Vendor - Maintain Subcontractor Vendor (T. Code – XK01) and assign Customer in the
Vendor Master data.
 Sales Condition Record - Maintain Sales Condition Record for Material Pricing (T. Code
– VK11)

 Subcontracting Info Record - Create Subcontracting Info Record (T. Code –


ME11) (Optional)

 Subcontracting Purchase Order - Create Subcontracting Purchase Order (T. Code –


ME21N) against Subcontracting Vendor with Item Category L. This will activate the “components”
button in the Material data tab in the Item of the Purchase Order. Explode BOM or maintain the
components manually and with zero tax

 Goods Issue to Subcontractor - Enter Transfer Posting with reference to


Subcontracting Purchase Order through (T. Code MIGO/ MB1B)using 541 Movement type. This
will issue the material to the Subcontractor. No Accounting Document generate at the time of
Transfer Posting. This will update the stock of the material in the Stock Provided to Vendor in
Stock Overview.

 If we are using T. Code – ME2O for issuing components to vendor, then system will
create Outbound Delivery. And then Go To Change Delivery (T. Code – VL02N) to do PGI, which
will generate Goods Issue document using Movement Type – 541.

 Subcontracting Challan - Create Subcontracting Challan with reference of Material


Issue Document through T. Code -J1IGSUBCON. Then create Challan using “With Challan”, this
will generate the Billing Document (ZSN – SC Challan Document in SD). No taxes have been
maintained in the Challan Document. Any changes can be done in the Billing Document by
using T. Code – VF02.

 Post Goods Receipt - When Vendor sends the materials, we post the Goods Receipt in
the system using T. Code – MIGO with reference to Subcontracting PO having Movement Type
101 for final or end products and Mov. Type 543 for Components. Consumption of Components
material from the Vendor Stock and Stock update for the Final Products.

 Reconcile Challan - Reconcile Challan with reference to goods receipt material


document through T. Code – J1IGRECON. Select Manual and enter the Challan No. and Save
the Data.

 Invoice Receipt - Post Invoice Receipt for Subcontracting Vendor for the service
charges paid to the Subcontractor through T. Code – MIRO with reference to Subcontracting PO

Accounting Entries at the time of Goods Receipt:


BSX – Stock A/C for Assembly/ Semi-Finished – Dr. 11000
BSV – Change in Subcontracting Stock Cr. 11000-
FRL – Subcontracting Charges Dr. 10000
WRX – GR/IR Clearing (Semi-Finished) A/C Cr. 10000-
BSX- Stock A/C for Components Cr. 1000
GBB-VBO Consumption A/C for Components Dr. 1000
Accounting Entries at the time of Invoice Receipt:
GR/IR Semi Finished Clearing A/C Dr. 10000
IGST or SGST/CGST Taxes A/C Dr. 900, 900 (CGST/SGST) or 1800 (IGST)
Vendor A/C Cr. 11800
T. Code - MBLB To display Stock to Subcontractor

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