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:
- 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
Its seems useful stuff to configure TCS for business specific requirement.
Thank You 🙂
Helpful information Thanks u
thank you Muthu... 🙂
Helpful Information Thanks 🙂
Thank you Pramod..
As scenario is related to Country India document moved to Internationalization and Unicode
Noted & Thank you
Thank you Srinivas!
Nice one Karuna!!.. Thanks for sharing.
You are welcome 🙂
Very useful document Karuna. thanks for sharing helpful document. Keep sharing.
Thank you Rakesh 🙂
Thank you 🙂
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.
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 🙂
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.
No, I checked all notes you mentioned and we did not follow any notes other than 168591 as it has reference config guide.
Thanks a lot Karuna,
I resolved my issue through this document. Thanks once again.
Glad to know it helped resolve your issue Abhishek. 🙂 Thank you.
Thank you 🙂
Good presentation and useful doc.
Thanks for your efforts and sharing.
Glad you found it useful Raman 🙂 Thank you.
Very good piece of information. Thanks for sharing.
You're welcome Arshiyan 🙂
Hi Karuna Ravuri,
Really useful share.
Thanks a lot
Glad you find it useful Ruben 🙂
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.
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 ?
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.
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?