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Withholding tax for sales

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.


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

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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      35 Comments
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      Author's profile photo Former Member
      Former Member

      Its seems useful stuff to configure TCS for business specific requirement.

      Author's profile photo Former Member
      Former Member

      good one

      Author's profile photo Former Member
      Former Member
      Blog Post Author

      Thank You 🙂

      Author's profile photo Muthukumareshan vijayan
      Muthukumareshan vijayan

      Hi

      Helpful information Thanks u

      Thanks

      Muthu

      Author's profile photo Former Member
      Former Member
      Blog Post Author

      thank you Muthu... 🙂

      Author's profile photo Former Member
      Former Member

      Hi

      Helpful Information Thanks 🙂

      Author's profile photo Former Member
      Former Member
      Blog Post Author

      Thank you Pramod..

      Author's profile photo Jyoti Prakash
      Jyoti Prakash

      As scenario is related to Country India document moved to Internationalization and Unicode

      Author's profile photo Former Member
      Former Member
      Blog Post Author

      Noted & Thank you

      Author's profile photo Srinu S
      Srinu S

      Good document.

      Author's profile photo Former Member
      Former Member
      Blog Post Author

      Thank you Srinivas!

      Author's profile photo Former Member
      Former Member

      Nice one Karuna!!.. Thanks for sharing.

      Author's profile photo Former Member
      Former Member
      Blog Post Author

      You are welcome 🙂

      Author's profile photo Rakesh S
      Rakesh S

      Very useful document Karuna. thanks for sharing helpful document. Keep sharing.

      Rakesh 🙂

      Author's profile photo Former Member
      Former Member
      Blog Post Author

      Thank you Rakesh 🙂

      Author's profile photo manu m
      manu m

      good one

      Author's profile photo Former Member
      Former Member
      Blog Post Author

      Thank you 🙂

      Author's profile photo G Lakshmipathi
      G Lakshmipathi

      Karuna Ravuri

      Only after Abhishek Laghate referring your blog, I have gone through and you have nicely presented.  Keep it up and by the way, I have one query.  You should be aware, for implementing TCS, couple of OSS notes are there and you have not mentioned about those notes in your blog.  So do you mean to say, without implementing those notes also, this can be achieved ?  It is more than 5 years since I touched this area and not able to recollect how I achieved in one of my earlier projects.

      G. Lakshmipathi

      Author's profile photo Former Member
      Former Member
      Blog Post Author

      Hi Lakshmipathi, Thank you for your appreciation!

      Regarding OSS notes, I really need to go through them before commenting. I noted you mentioned two notes in Abhishek's discussion which I will check and revert back.

      When I along with my FI counterpart did the TCS configuration for one of our clients, we did not refer to any SAP notes, but did google on the subject 🙂

      Author's profile photo G Lakshmipathi
      G Lakshmipathi

      Apart from the notes I referred, there are also other couple of notes like 1168591, 1394827, 1873488 etc., which I feel, definitely in your system.

      G. Lakshmipathi

      Author's profile photo Former Member
      Former Member
      Blog Post Author

      No, I checked all notes you mentioned and we did not follow any notes other than 168591 as it has reference config guide.

      Author's profile photo Former Member
      Former Member

      Thanks a lot Karuna,

      I resolved my issue through this document. Thanks once again.

      Author's profile photo Former Member
      Former Member
      Blog Post Author

      Glad to know it helped resolve your issue Abhishek. 🙂 Thank you.

      Author's profile photo Pradeep Mani
      Pradeep Mani

      Informative

      Author's profile photo Former Member
      Former Member
      Blog Post Author

      Thank you 🙂

      Author's profile photo CH Raman
      CH Raman

      Good presentation and useful doc.

      Thanks for your efforts and sharing.

      Author's profile photo Former Member
      Former Member
      Blog Post Author

      Glad you found it useful Raman 🙂 Thank you.

      Author's profile photo Former Member
      Former Member

      Very good piece of information. Thanks for sharing.

      Author's profile photo Former Member
      Former Member
      Blog Post Author

      You're welcome Arshiyan 🙂

      Author's profile photo Former Member
      Former Member

      Hi Karuna Ravuri,

      Really useful share.

      Great

      Thanks a lot

      Regards

      ACR.Ruben

      Author's profile photo Former Member
      Former Member
      Blog Post Author

      Glad you find it useful Ruben 🙂

      Author's profile photo Former Member
      Former Member

      Hi Karuna,

       

      I did all the above configuration. My sale orders have more than one item. In accounting document, withholding tax lines(OFF, WIT) appeared only for first item. why offsetting entry is not done for remaining items ?

      Below is my accounting document of invoice having two scrap items. Please help.

      Regards

      Kks

      Author's profile photo Former Member
      Former Member

      Hi Karuna,

      Thanks for this step by step TCS configuration.

      We have done all configuration as per your suggestion but FI document result is not correct.

      Withholding tax percentage is 1 %.  While posting document, WHT calculated on Base amt + Vat +SD tax ZTC*1% (100000 + 12500 + 1125*1% = 1136.25) however it should be Base amount + Vat *1%  (100000 + 12500*1% = 1125)

      Can you please urgently advise why we are not getting correct result ?

      Capture.PNG

      Author's profile photo Rajesh Kumar Sinha
      Rajesh Kumar Sinha

      Hi Karuna,

       

      Appreciate for the effort you took for presenting the topic TCS.

      I have doubt on TCS, my client needs TCS should be a mandatory field in F-29 and I made all the configuration as per the oss note (same as your document) but the accounting entry is coming as for example:

      Currently the system is showing the entry as

      40 Bank a/c Dr 4000

      40 TCS a/c Dr 500

      19A To Customer a/c Cr 4500

      But it should come as :

      40 Bank a/c Dr 4500

      19A To customer a/c Cr 4000

      50 To TCS a/c   Cr             500

       

      When I referred another OSS note and found out (1394827) that TCS reporting is supported only for documents posted via SD route ; Direct FI postings are not supported.

      My question is there any way to make the TCS as mandatory field during billing?

      It would be great if you suggest some opinion on this issue.

      Author's profile photo Sunil K Roge
      Sunil K Roge

      Hi Karuna,

      I find your document very helpful now that 206C(1H) is effective 1st Oct 2020.

      I am not getting line item for TCS Clearing against accnt key JTS in the document posted to FI.

      I have maintained necessary account determination in VKOA and account key JTS is maintained for condition type JWTS in pricing procedure.

      Condition records maintained as suggested by you.

      Can you help fix this issue?