This video gives you an overview of the tax engine functionality in Finance and Operations
which is available starting in platform update 12.
This functionality is for legal entities with a primary address in India.
We'll provide an overview of the new functionality including the tax areas that the functionality applies to.
We'll dive into the process workflow, data flow, and at the end will get a brief demo
of the functionality each tax type and tax rate can require unique and complex configuration and setup
When local tax regulations change, you'll need to reconfigure taxes or modify your tax setup.
In past releases of Finance and Operations, tax changes required a regulatory update for your system that we delivered via a
hot fix. With the new tax engine and Electronic workspace, you have the power to update and customize your tax logic without needing to
install a hot fix. The tax engine covers four areas of tax. Tax applicability, tax calculation, tax accounting, and tax settlement.
Tax applicability is how you determine which tax type, tax component or tax rate applies in a transactional scenario.
Tax calculation is used to determine the tax amount and the distribution of the tax amount. Tax accounting is when the calculated tax is
posted and distributed to accounts. Tax settlement includes assessing output and input taxes, making tax adjustments, and paying or
refunding taxes. Now, let's take a look at the typical process for using the tax engine.
First you need to download tax configurations from the Lifecycle services shared asset library and then, if needed, you can customize tax
configurations in the Electronic reporting workspace in Finance and operations. After you complete these configurations you can
download them locally or deploy the configurations by synchronizing them with your environment.
On the Tax setup page in Finance and Operations, you can set up conditions of tax applicability using your runtime data when you
create taxable documents such as sales orders, purchase orders, or other source documents.
The tax engine uses your tax configuration, tax setup, and source document information to calculate and
post the taxes incurred from the source document transactions.
After you've posted transactions with tax, you can settle taxes and generate tax returns.
Tax configurations include tax data models. One of the elements in the data model is a taxable document which is an abstract of the
source document like a sales order or a purchase order. For each taxable document you specify the tax logic or formulas for tax
calculation when a transaction occurs, the tax engine uses a taxable document as input and then returns a tax document. The tax document will be
converted into the tax_trans table which will be be consumed by tax inquiries and reports
This is the Electronic reporting workspace where you can find tax configurations
you can see the tax configurations are organized into a tree structure in this tax configuration
there are two taxable documents. One contains global taxable documents and the other
contains India specific taxable documents. The last node is a tax document
The tax document is where you maintain all of the tax logic.
you can use the designer to modify the tax logic for each tax type. In the tax document for India you can see there are two tax types.
Custom duty and GST. Under each tax type, there are several tax components.
for each component you can use the properties tab and the look up tab to maintain the tax applicability. You'll use the formulas tab
to change the tax calculation formulas and the tax distribution formulas
The postings tab is where you control how taxes are posted
After you load the configurations you need to do your tax setup. For example, you can set up CESS so that it is only applicable for goods
with a specific HSN number. Finally we'll show how to verify the tax information on a purchase order
We've already created a purchase order with a taxable item. For each purchase order line, you can view the tax information
to verify that it is entered correctly before you post the purchase order
On the tax information page for this purchase order line, you'll notice that the Ship from address is Bangalore and the Ship to address
is Delhi. The Ship from and Ship to addresses are used to determine that only IGST is applicable as this is an interstate transaction.
When we view the tax document, it reflects the applicable IGST tax and shows that the tax rate is 28%.
Next, we'll change the ship to address to Bangalore
and HSN code to be the number that we set up so that CESS would be applicable for the transaction. When we open the tax documents
you can see that there are three tax components that are applicable. Central GST also known as CGST and State GST also
known as SGST are now applicable because the transaction is an intrastate transaction and CESS is applicable because the transaction
uses the HSN code that we set up earlier for CESS. Thanks for watching. For more information about India GST and the Microsoft
Dynamics 365 for Finance and Operations tax engine, visit Docs.microsoft.com.
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