Withholding tax for sales

[Former Member]

Withholding tax or Tax collected at source:

In India tax has to be collected at source (by the seller) from buyer on specific items like alcoholic liquor, tendu leaves, timber, other forest produce, on mining/quarrying & scrap. Withholding tax rate or TCS rate is generally 1% - 5% varying from product to product. We will see below process configuration for TCS on sale of affected products by creating a provision for the same in sales pricing procedure.

1. First we will create two condition types say JTCS for charging TCS in sales order & JWTS for posting TCS amount in FI with an offsetting entry. Here, JWTS will be 100% value of JTCS and will be posted from sales order with accrual key say JTS.

2. Include JTCS & JWTS in pricing procedure after regular taxes:

3. Assign withholding tax type in customer master as under:

NOTE: Create condition records for JTCS – 1%  with withholding tax code T1 & JWTS – 100%  with tax code T1 for your key combination in VK11.

Tax collected at source entries in accounting document from sale of scrap will be as under:

Please note Extended withholding tax has to be activated for the company code and relevant FI configuration is required before use of withholding tax in Sales.

FI Configuration is as under:

1. Define Withholding Tax Keys

After including country code (IN) in basic settings  - check withholding tax countries, a key for withholding tax has to be created. Enter official key 206C for withholding tax – Tax collected at source

2. Now, define withholding tax type for invoice posting

Double-click and choose configuration for T1. Your choice of base amount & rounding rule here have to be backed up with subsequent configuration for the same.

3. Assign condition type JTCS to withholding tax type T1.

4. Define withholding tax code in FI

Assign Withholding tax code for withholding tax type T1.

5. Further, assign withholding tax type to company code and define accounts for the same.

6.Define accounts for withholding tax to be paid over and accounts for withholding tax offsetting entry

7. Define processing key for modified net amount

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