SAP Financials

Tax Collected at Source - TCS

Prepared By:
Ms. Pramila Nagaraj First Class MBA Finance Graduate (2010) - FRESHER Global Academy of Technology, Bangalore (VTU- Belgaum) SAP Financials Associate Certified Consultant Trainee/Fresher Certified Candidate @ Source One Management Services Pvt. Ltd Bangalore

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Tax Collected at Source

This is a form of tax in India, which is collected at source from the buyer by the seller of prescribed items. It is commonly referred to as TCS. The system automatically calculates the tax collected at source and makes the relevant postings in Financial Accounting (FI) and Sales and Distribution (SD).

Prerequisites
You have: Made settings as described in Customizing for Tax Collected at Source Entered the TCS withholding tax type and withholding tax code and selected the W/tax checkbox in the customer master. For more information, see Customer Master (Withholding Tax Data).

Features
Tax Collected at Source has the following features: The rate of tax collected at source differs based on the type of commodity. The Education Cess and the Secondary and Higher Education Cess are applicable at a certain percentage on the tax collected at source. The seller of the items should furnish a tax certificate specifying whether tax has been collected, the amount that has been collected, rate of tax applied, and such other particulars as may be prescribed.

Activities
You post the tax collected at source by creating: 1. A sales order using the Create Sales Order (VA01) transaction. 2. An outbound delivery using the Create Inbound Delivery (VL01) or the Create Inbound Delivery with Order Reference (VL01N) transactions. 3. A billing document using the Create Billing Document (VF01) transaction.

Example
Consider an invoice for goods of INR 1000 and TCS of 10%. The goods buyer pays the tax collected at source. During the creation of billing document, the system makes the following postings: Account Customer A/c Dr Sales A/c Cr TCS payable Cr Debit (Dr) 1100 1000 100 Credit (Cr)

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Customizing for Tax Collected at Source

To calculate and report tax collected at source, make the following settings (all under country key IN) : Customizing 1. Financial Accounting (New) Financial Settings Create official withholding tax key 206C

Accounting Global Settings (New) Withholding Tax Extended Withholding Tax Keys 2. Financial Accounting (New) Financial Create withholding tax type S1 with the name Tax Collected at Source-Base and make the following settings: - Base amount = Modif. net amount - Rounding rule = Round w/tax amnt up - Select Post w/tax amount checkbox - Accumulation type = No accumulation - Control data = select checkboxes W/tax base manual, Manual w/tax amnt, and No cert. numbering Similarly create withholding tax types S2, S3, and S4 with the names Tax Collected at Source-Surcharge, Tax Collected at SourceEducation Cess, and Tax Collected at Source-SECESS respectively and make settings as stated above. 3. Sales and Distribution Basic Copy the existing access sequence J1AW and create a new access sequence J1IW with the name Withholding tax code country-specific and make the following settings: - Access sequence-Access number = 10 - Condition table = 399 4. Sales and Distribution Basic Create condition type JTCS with the name TCS-Base and make the following settings: - Access sequence = J1IW - Cond. class = W - Calculat. type = A - Cond. category = D - Select Item Condition checkbox Similarly create condition types JTEC and JTSE with the namesECS on TCS and SECess on TCS respectively and make settings as stated above. 5. Financial Accounting (New) Financial Assign condition types JTCS, JTEC, and JTSE to withholding tax types S1, S3, and S4 respectively. Basic Settings Define Withholding Tax

Accounting Global Settings (New) Withholding Tax Tax Extended Withholding Calculation Withholding Tax Type

Define Withholding Tax Type for Invoice Posting

Functions Pricing Access Sequences)

Pricing Control

Define Access Sequences (chooseMaintain

Functions Pricing Condition Types)

Pricing Control (choose Maintain

Define Condition Types

Accounting Global Settings (New) Withholding Tax Extended Withholding Tax Calculation Withholding Tax Type

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Assign Condition Type to Withholding Tax Type 6. Financial Accounting (New) Financial Create withholding tax code S1 with name TCS-Base and make the following settings: - Off. W/Tax Key = 206C - Post.indic. = 3 Similarly create withholding tax codes S3 and S4 with the names Education cess on TCS and SE Cess on TCS and make settings as stated above. 7. Financial Accounting (New) Financial Enter the chart of accounts CAIN. You need to maintain the same G/L account for the transaction key WIT-based tax line items and SD-FI condition based tax line items. Maintain a separate G/L account for the transaction key OFFbased line items. Since posting of TCS happens on both SD and FI documents, ensure that you assign the same G/L account for each combination of withholding tax type and withholding tax code.

Accounting Global Settings (New) Withholding Tax Extended Withholding Tax Calculation Withholding Tax Code Define Withholding Tax Codes

Accounting Global Settings (New) Withholding Tax Extended Withholding Tax Tax Posting Accounts for Withholding Define Accounts for Withholding Tax to

be Paid Over

Note
To post tax collected at source for Sales and Distribution documents, maintain the same G/L account in Customizing for Sales and Distribution, by choosing Basic Functions Account Assignment/Costing Accounts . 8. Sales and Distribution Basic Select the pricing procedure JINFAC and double-click Control data. The system displays the Control data screen. Define the condition types JTCS, JTEC, and JTSE and add them to the pricing procedure JINFAC. The system calculates the values of the goods but does not post them directly to the Sales and Distribution document (SD). Instead, posting takes place based on the assignment of condition types to the withholding tax types (refer step 5). 9. Sales and Distribution Basic Create a new condition type JWTS to post TCS to Financial Accounting (FI) documents. Add this condition type to the pricing procedure JINFAC. Similarly create condition types JETS for ECS on TCS and JSTS for SECess on TCS and add them to the pricing procedure JINFAC. Revenue Account Determination Assign G/L

Functions Free Goods Pricing Pricing

Control Free goods

Maintain Pricing Procedure For

Functions Pricing Condition Types)

Pricing Control

Define Condition Types (choose Maintain

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TCS Configuration under Sec. 206C

Tax Collected at Source (Under Sec. 206C) Configuration This is a legal requirement and it is required for companies dealing with scrap sales, Alcohol sales and timber sales. TCS is applicable to the buyer, deducted by seller, during sale of the following items: o Alcoholic liquor for human consumption(other than Indian made foreign liquor) o Tendu leaves o Timber o Any other forest produce not being Timber/Tendu leaves o Scrap This is a tax which is to be deducted for prescribed items, by the Seller at the time of debiting the amount payable by the buyer. This tax deduction is to be done at transaction item level based on the Prescribed rates defined by the Income tax office. In addition, the seller is to submit a certificate to the buyer regarding the tax deducted and paid on their behalf, pay the prescribed amount to the government and file half yearly returns on the same. Required Configuration: 1. Define Withholding Tax key (206C) 2. Define Withholding Tax type 3. Create the access sequence for withholding for TCS in SD 4. 5. 6. 7. 8. (Copy the existing access sequence J1AW and create the new access sequence) Create condition types corresponding to Tax collected at Source in SD Assign withholding tax types to SD condition types Define withholding tax codes Assign GL accounts for withholding tax types Add TCS conditions in pricing procedure (assign TCS conditions in pricing procedure as a statistical conditions) 9. We will need to define a new condition type and add this to the pricing procedure to post to the FI. This condition type will be manual and can be manually filled at the time of creation of sales order. This can also be copied from the statistical TCS condition types in the pricing procedure

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