GST India : TCS Solution
As per the Finance Act 2020, a new amendment was introduced with respect to TCS (Tax Collected at Source) for section 206C with effect from 1st of October, 2020. Tax collected at source (TCS) is the tax payable by a seller which he collects from the buyer at the time of sale. Section 206C of the Income-tax act governs the goods on which the seller must collect tax from the purchasers.
Table of contents:
- Section 206C of the Income Tax Act requires the sellers to collect tax in relation to sale of certain goods like scrap, tendu leaves, and so on.
- Tax collected by the sellers is allowed as tax credit to the buyer of goods.
- Provision now extended to all goods with effect from April 1, 2020 under Section 206C(1H).
- Sellers to collect tax from each buyer at the rate of 0.1% on sale consideration exceeding 50 lac Rupees in a year.
- Sellers of Overseas tour packages are required to collect 5% TCS on the package amount if buyer provides PAN/Aadhar else TCS to be collected at 10% rate
The above stated provisions are not applicable in the following scenarios:
- If the buyer is liable to deduct TDS or collect TCS under any other provision of the Act and has deducted/collected such amount.
- If the buyer is a Central Government, State Government, an Embassy, High Commission, Legation, Consulate, Trade representation of foreign state, or Local authority.
- Any class of person notified by the Central Government in the official gazette for the purpose subject to such condition as specified in that notification.
SAP proposes to introduce an TCS solution to enable customers to comply with the new legal requirement. SAP has provided solution to capture TCS both on sales and FI side.
- SD solution:
This solution covers posting Outgoing Invoices with TCS via transaction codes VF01, VF02, VF11 and VF04. SAP delivered notes can be referred to in the KBA 2898812 under “TCS on SD solution” section.
Implement all the latest notes as mentioned in the KBA as this will keep the system consistent and avoid errors or issues.
- FI solution:
This solution covers posting Customer Invoices with TCS via transaction codes FB70, FB75 and cancellation via transaction code FB08. SAP delivered notes can be referred to in the KBA 2898812 under “TCS on FI solution” section.
- Prerequisite notes for both ECC and S4 systems are mentioned in the note 2948240.
- GST solution pre-requisites has to be met and minimum support package of the SAP system should be as per note 1175384.
For queries on TCS, refer the below FAQ note.
2963124 – FAQ on Tax Collected at Source (TCS)
Some of the frequently encountered issues and its resolution is provided in the below Guided answer.
Configurations and Process overview
To configure the TCS solution on SD side, refer note 2948539 and its attachments.
To configure the TCS solution on FI side, refer note 2960994 and its attachments.
- Fiscal Year 2020-21
Posting billing document considering previous sale value (from 1 st April 2020 to 30th September 2020 – Total sale value for 206C(1H) goods)
In this case, the BAdI BADI_1IG_TCS must be implemented with methods GET_SALE_AMOUNT The sale value should be a fixed value for a combination of buyer-seller and it should not be changed after 1st October 2020 till March 31st 2021. This BADI implementation will not be in use after 1st April 2021 and can be deactivated.
- Fiscal year 2021-22
Once the fiscal year changes notes are implemented below methods from the BADI BADI_J1IG_TCS will not be called anymore,
- GET_SALE_AMOUNT: Which is used to fetch accumulation amount from April 1st to Sept 30th, 2020 for customers.
- SET_ACCUMULATION_FLAG: Which is used to identify if we have to reduce the accumulation amount based on STEUC if the customer is reversing the document that was posted from April 1st to Sept 30th, 2020.
The above BADI is only used in FY 20-21 as the TCS solution introduced in the middle of the fiscal year(Oct-20) which was used to calculate accumulation amount from April 1st – Sep 30th and to reduce the accumulation amount if any document is reversed which is posted during April 1st to Sept 30th, 2020. This is not required in FY 21-22.
- Master data setup:
Customer Master Configuration
1. Maintain PAN
Execute BP transaction code and open Business Partner for the Buyer, Go to Customer: Country Specific Ext tab and maintain the PAN if applicable
Execute Transaction code XD01/XD02 and enter the customer number, Go to Withholding Tax tab under CIN details section and maintain the PAN if applicable
2. Maintain Aadhaar
Execute transaction SM30 and enter View: V_TB039A
- Create Aadhaar ID Type with value ‘AADHAR’ and Description: India: Aadhaar Number
- To maintain Aadhaar, go to BP transaction code and open Business Partner for the Buyer and maintain the Aadhar in Identification tab if available.
Execute Transaction Code XD01/XD02 and enter the customer number, Go to GST Details tab under CIN details section and maintain the Aadhaar Number if applicable.
3. Maintain Customer Tax Classification
Execute transaction code OVK1 and make an entry for JTC1 with the available tax sequence number. Note: The sequence number should be ascending order and should not have any gaps for a specific company code.
Execute transaction code OVK3 to maintain the tax classifications details and make 2 entries as shown below.
To maintain the tax classification in S4
Execute BP transaction code and open Business Partner for the Buyer
- Under Sales Area details, go to Billing tab and maintain the classification for JTC1 Tax Category in Output Tax section
JTC1 – 0 if TCS is applicable for the customer
JTC1 – 1 if TCS is not applicable for the customer
To maintain the tax classification in ECC
Execute transaction code XD01/XD02 and enter the customer number
- Click on Sales Area data option and go to Billing document tab.
- Maintain the Tax classification as shown below under Taxes section
JTC1 – 0 if TCS is applicable for the customer
JTC1 – 1 if TCS is not applicable for the customer
Maintain Material Tax classification
Execute transaction code OVK4 and maintain the tax classification as shown below.
Execute transaction code MM02 and enter the material master, Go to Sales: Sales org 1 tab and maintain the value for JTC1 tax classification
Company Code Configuration
- Maintain PAN
Execute Transaction Code OBY6 and open the Company code Addition Data settings, maintain the Company Code PAN number in J_1I02
Create access sequence:
Create condition types:
Create account key:
Execute transaction code V/08 and open the pricing procedure you are using for your sales
- Enter JTCB with step number that includes all material price and taxes with discounts or surcharges. Make JTCB as statistical as this will be used only for calculation purpose.
- Enter JTC1 and JTC2 as the tax condition and maintain the steps to derive base amount
- Assign 364 Routine in Alternative Condition Base Value against JTC1 condition
Classify Condition Type
- Execute transaction SM30 and enter the view J_1IEXCDEFN
- Click on Edit and classify the 3 condition types with your pricing procedure as shown below.
Create tax codes
Create TCS interim(for ex: A0) and final tax(for ex. T0) codes in FTXP. Assign target tax code to the interim tax code as below.
Maintain Condition record
- Go to Transaction Code VK11 and maintain condition records for JTC1.
- Maintain only those company codes whose previous year turnover is above 10 Crores (If Company turnover is less than 10 Crores, then TCS is not applicable).
- Maintain the tax rates when tax classification is 0 in customer master.
- If the PAN or Aadhaar is present for a customer, then maintain 01 in Maintained ID field with corresponding tax percentage.
- If the PAN or Aadhaar is not present for a customer, then maintain 02 in Maintained ID field with corresponding tax percentage.
- Maintain the same for all HSN code that belongs to section 206C(1H).
- The 50 Lac sale consideration check will be done in the routine 364.
- Maintain customer master and company code configurations same as SD side.
- Create interim and final tax codes same as SD side.
Create condition type:
Create JTC1 condition in OBQ1 as per below.
Maintain tax rate:
Maintain TCS tax rate in FTXP as per below.
- Refer the note 2960994’s attachment and create condition types (JTC1, JTC2) and Transaction key (JTC).
- Enter JTC1 and JTC2 as the tax condition and maintain the steps to derive base amount inclusive of GST.
- Assign 361 routine against JTC1 condition type.
Classify Condition Type
Classify the Tax procedure and JTC1 condition as per below.
Threshold amount for the fiscal year 2021-22 can be maintained with 5.000.000,00 in the maintenance view J_1IG_THLDV.
TCS in sales order:
The solution is provided only for invoicing transactions so, TCS amount will be calculated in the sales order without considering threshold limit.
TCS in invoice:
- FY 20-21
For first invoice, TCS is calculated in the invoice considering the sale amount of the period from 01.04.2020 or 01.10.2020 passed through Badi BADI_1IG_TCS, If the total amount(previous sale amount + invoice value) crosses the threshold amount maintained in the view J_1IG_THLDV, TCS amount will be calculated on the excess amount for which threshold has been crossed.
Once the invoice is saved and the accounting document has been posted, the accumulation data will be updated in the J_1IG_ACCUMHDR and J_1IG_ACCUMDTL tables.
From the second invoice onwards, the sale amount from the badi BADI_1IG_TCS will not be considered as the accumulation amount for this customer has been updated in the J_1IG_ACCUMHDR and the same will be considered.
- FY 21-22
For the invoices posted in FY 21-22, TCS will be calculated once the threshold amount is crossed for the particular customer.
Cancellations and credit memos:
In Fiscal year 20-21, TCS solution was supporting only the billing document to be posted as first document for every buyer-seller combination (in each financial year) in order to create an entry in the accumulation tables – J_1IG_ACCUMHDR and J_1IG_ACCUMDTL.
In Fiscal year 21-22, you can create credit memo or debit memo or cancellation of billing or cancellation of credit memo or cancellation of debit memo as the first document and accumulation tables – J_1IG_ACCUMHDR and J_1IG_ACCUMDTL will be updated correctly.
TCS on Procurement
It is Legally not required to capture TCS in the incoming side as the seller will be depositing the collected tax against PAN/Aadhar of the buyer and the same can be adjusted by the buyer against his/her income tax liability. Here there is no Tax credit adjustment against payable and receivables unlike GST.
TCS in direct FI postings:
FB70 and FB75 are the transactions that are supported in TCS on FI solution. Make sure you select “Calculate taxes on net amount” in FB00 transaction for correct calculation of TCS amount.
Journal Vouchers (TCS JV):
When you cancel a billing or credit/debit memo total sale accumulation amount for the customer can fall below the threshold amount, in these cases filed ADJ_AMT in table J_1IG_ACCUMDTL will be updated with the adjusted TCS amount.
You need to post a Journal Voucher in t-code J1IGTCSJV against the adjusted amount in which is updated in J_1IG_ACCUMDTL table.
Refer note 2958296 for process and configuration details on TCS JV solution.
Refer the KBA 2898812 under “Notes for TCS JV” for notes related to TCS JV solution.
Refer the KBA 3013277 to understand how the “Adjustment amount” field and “JV status field” will be updated in J_1IG_ACCUMDTL table.
TCS in next FY / subsequent fiscal years:
You have to maintain the below configurations for the next FY and for following subsequent fiscal years.
- TCS Threshold amount must be maintained for every fiscal year in the view J_1IG_THLDV.
- Maintain condition records with required TCS rate and change the tax rates for interim and target tax codes in FTXP.
Intermediate G/L and Final G/L
As per the TCS rule, any seller who receives any amount as consideration for sale of goods of value or aggregate of such value exceeding 50 lacs at the time of receipt of such amount should collect TCS at the rate of 0.1%(0.075% till 31.03.2021). So when the bills/invoices are raised TCS amount is posted to intermediate G/L and on receipt of such amount from the buyer, the TCS amount will be transferred from intermediate G/L to actual/final G/L.
You can use report RFUMSV50 to transfer the tax amount from intermediate G/L to Final G/L upon Payment receipt.
Refer below notes to understand and how to use report RFUMSV50.
1800344 – How to start using deferred tax report RFUMSV50
2971824 – Execution steps- Deferred tax transfer program (RFUMSV50) for TCS
TCS Challan Remittance:
As per the legal requirement, it is required to collect the TCS from the customer and pay to the government by remitting the challan before 7th of subsequent Month.
To create Remittance challan you can use the transaction FIWTIN_TCS_CHALLAN or report RPFIWTIN_CHALLAN_UPDATE_TCS.
Refer note 2962153 for process ad configuration details on TCS Challan Remittance solution.
Refer KBA 2898812 under “Notes for TCS Challan Remittance” for notes.
Refer KBA 2977827 for frequently asked queries related to challan remittance.
TCS Quarterly Returns:
TCS quarterly returns can be filed with Form 27EQ in the transaction FIWTIN_QRETURNS.
Refer KBA 2898812 under “Notes for TCS Quarterly Returns” for notes.
Any new TCS updates and TCS correction notes which are released which are released will be updated in the master KBA 2898812. It is always suggested to implement all the correction notes to avoid any inconsistencies in the TCS solution.
Further, raise an incident in the component XX-CSC-IN-SD, for queries/issues related to the TCS SD/FI process and in the component XX-CSC-IN-FI, for queries/issues related to the TCS reporting process.