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GST India : TDS Solution

As per the budget 2021, government has inserted new sections:

  • TDS u/s 194Q on purchase of goods of the value or aggregate of such value exceeding 50 Lakh INR in any FY shall at the time of credit of such sum to the account of the seller or at the time of payment thereof by any mode, whichever is earlier, deduct an amount equal to 0.1 per cent. of such sum exceeding fifty Lakh rupees as income-tax.
  • 206CCA as per which higher rates of TCS to be applied for non-Filers of IT returns in the last 2 years and if total tax deducted/collected is equal to 50000 INR or more.

Table of contents:

  1. Business background/Impact
  2. Overview
  3. Solution Approach
  4. Prerequisites
  5. Configurations and process overview
  6. Common queries
  7. Conclusion

 

Business Impact:

TDS on purchase of goods: It is proposed to provide for TDS on purchase of goods from a resident at the rate of 0.1%, where,

  • Buyer’s total sales, gross receipts, or turnover from the business carried on by him/her exceeds INR 10 crores during the financial year immediately preceding the financial year in which the purchase of goods is carried out.
  • Tax is required to be deducted by the buyer if the purchase of goods by him/her from the seller is of the value or aggregate of such value exceeding INR 50 lakh in the previous year.

TDS to be deducted by the buyer on the purchase of goods:

1. Buyer deducts TDS if total sales, gross receipts, or turnover from the business carried on by him exceed INR 10 crore during the financial year immediately preceding the financial year in which the purchase of goods is carried out.

2. TDS to be deducted by the buyer on paying sum exceeding 50 lakhs on purchase of any goods.

3. Amount will be deducted on earlier of following: –

  • Payment date
  • The credit of such sum to the account of the seller

4. Buyer to collect TDS at the rate of 0.1% if the seller has provided the Permanent account number (PAN) else, TDS needs to be deducted at the rate of 5% as per Section 206CAA.

5. TDS under Section 194Q is not applicable if,

  • Tax is deducted under any other provision of this Act
  • Tax is collectible under the provision of Section 206c other than Section 206c(1H)
  • Import of goods

Overview:

SAP proposes to introduce an TDS solution to enable customers to comply with the new legal requirement.

Solution Approach:

With the solution from note 3044961 you will be able to,

  • Stop TCS u/s 206c(1H) applicability in invoices if buyer is liable to deduct TDS u/s 194Q
  • TCS collection at higher rates for buyer who have not furnished IT returns for last 2 years and the total TDS/TCS is equal to or more than 50000 INR

Prerequisites:

There are no prerequisites required if you are already using the TCS u/s 206c(1H) solution which is provided through KBA 2898812.

Configurations:

SD side

Solution approach 1:

Maintain customer tax classification:

Execute transaction code OVK3 and add tax classification 2 – TDS applicable for JTC1 as 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 as 2 if the buyer’s turnover is more than 10 Crores buyer is liable to deduct TDS u/s 194Q. If not only then TCS is applicable, so retain the tax classification as 0 or 1.

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 as 2 if the buyer’s turnover is more than 10 Crores and buyer is liable to deduct TDS u/s 194Q. If not only then TCS is applicable, so retain the tax classification as 0 or 1.

Create condition table:

Execute V/05 transaction and create the condition tables as below.

9SV

9SR

Access sequence:

Update the existing access sequences with the created condition tables as below.

ZGD1

Maintain the created 9SV condition table above the existing 9SS table.

ZGD2

Maintain the created 9SR condition table above the existing 9SU table.

Maintain condition record:

  • As per section 194Q, If buyer is deducting TDS u/s 194Q, then seller should not collect TCS u/s 206C(1H). If you have already maintained the tax classification as 2 for customer in customer master, while creating the invoice existing TCS condition records will not be triggered and TCS will not get calculated. Here you don’t need to maintain any condition records with tax classification 2.
  • As per section 206CCA, if buyer has not filed ITR for last 2 years and the total TDS or TCS is = or > 50000 INR then TCS is to be collected at higher rates. So maintain condition record against the table that has customer number for JTC1 or JTC2. i.e 9SV or 9SR from the above example.

Note:

  • This activity of changing the tax classification at customer master(if applicable) must be performed during every financial year change. You will have to foreclose all the open documents as the master data changes will impact the back-dated postings.
  • You may also reduce the number of condition record maintained at the control code level. To achieve this, you can add material tax classification instead of control code in the condition table.

Solution approach 2:

If you do not want to make changes in customer master for tax classification, then you can opt for the below approach

Create Condition table

Create a new condition tables 9SV and 9SR as suggested in the Solution Approach 1.

Access sequence:

Add condition tables 9SV and 9SR to the access sequence ZGD1 and ZGD2 respectively as suggested in the Solution Approach 1.

Maintain Condition record

  • As per section 194Q, If buyer is deducting TDS u/s 194Q, then seller should not collect TCS u/s 206C(1H). Here you need to limit the validity of existing JTC1 condition record.
  • As per section 206CCA, if buyer has not filed ITR for last 2 years and the total TDS or TCS is = or > 50000 INR then TCS is to be collected at higher rates. So maintain condition record for JTC1 or JTC2 with relevant tax rate

Note:

  • There will be high number of condition record maintenance in this approach. But there will be flexibility to limit or de-limit the validity of the condition record
  • You may also reduce the number of condition record maintained at the control code level. To achieve this, you can add material tax classification instead of control code in the condition table.

FI Side:

For FI transactions, the TCS rates are picked based on the tax code entered. Enter the relevant tax code in the customer invoice or customer credit memo documents.

Calculation of TDS 194Q at the buyer side:

Any person, being a buyer who is responsible for paying any sum to any resident (hereafter in this section referred to as the seller) for purchase of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any Financial Year, shall, at the time of credit of such sum to the account of the seller or at the time of payment thereof by any mode, whichever is earlier, deduct an amount equal to 0.1 per cent. of such sum exceeding fifty lakh rupees as income-tax. This will be effective from 01-July-2021.

Go through the note 3035980 for configurations and process related documents.

Go through the KBA 3032781 for the notes and updates regarding the section 194Q.

Calculation of TDS at the buyer side according to section 206AB and 206CCA:

If Tax deducted/collected is of 50000 or more in the last 2 years of any individual, then tax deductor is required to collect the ITRs for the previous 2 years.

Business needs to check if the individual has filed returns and provided the proof for the same in the form of ITRs for the last 2 years before July 1st. If yes then no change in the vendor master, same tax type and tax code can be used.

If the individual fails to submit the same before July 1st, then TDS to be deducted/applied at higher of the below rates –

  • At twice the rates specified in the relevant provision of the act
  • At twice the rates in force
  • At the rate of 5%

Go through the KBA 3031916 for configuration and process documentation.

Common Queries:

  1. Solution from the note 3044961 is to restrict the TCS calculation if the buyer is applicable for TDS 194Q.
  2. Solution from the notes 3035980 and 3031916 are to capture TDS at the buyer side.
  3. TDS is not required to capture in outgoing invoice as the buyer will be depositing the deducted tax against PAN/Aadhar of the seller and the same can be adjusted by the seller against his/her income tax liability.
  4. In a single transaction either TDS or TCS one of it would apply. TDS will take precedence and if buyer is not liable to deduct TDS then seller should collect TCS.
  5. TDS will be applied at header level and not line item level so goods from u/s 206c and 194Q cannot be clubbed in the same invoice

Conclusion:

Go through the FAQ Note 3033325 for any process related queries.

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 TDS 194Q and 206CCA process.

 

14 Comments
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  • Hello sir,

    How to calculate or accumulate threshold value for vendors having without PAN no cases.

    I am using FIWTIN_ACC_EXEM table to accumulate value. I have implemented note 2484946.

     

    Awaiting your reply.

    • Hi Falguni,

      For both with and without PAN the same table FIWTIN_ACC_EXEM  will be updated with the accumulation amount. You can use "Customer/Vendor account number" field in this table to check the cumulative amount with vendor number.

      Regards, Punith

       

    • Hi Falguni,

      Kindly raise an OSS incident under XX-CSC-IN-FI component. An expert will check the issue and suggest solution.

      Regards, Punith

  • Good Afternoon Sir,

    I have one more query If I want to maintain 0.1% and 5% both tax code in single vendor how to achieve that?

    Based on requirement user will select relevant tax code.

    EG: from July to September vendor was not having PAN available  so 5% was applicable.

    in October PAN number was submitted by vendor then 0.1% tax code is selected.

    Problem is coming in threshold value calculation.

    Please suggest. Thanks in advance.

     

     

     

    • Hi Falguni,

      Kindly raise an OSS incident under XX-CSC-IN-FI component. An expert will check the issue and suggest solution for same.

      Regards, Punith

  • Hi Punith,

     

    Do you have any idea on how to capture TDS receivable value at AR accounting document level. As buyer is deducting the TDS from invoice value how can we capture the deducted receivable value in seller accounting document. Do we need to maintain any condition records?

     

    Regards

    Siva

    • Hi Sivaiah,

      Please go through the FAQ note 3033325 for more information:

      Q5. TDS solution on Sales/Seller/Accounts receivable side?
      A5. It is Legally not required by the seller to capture TDS in the outgoing side as the buyer will be depositing the deducted tax against PAN/Aadhar of the seller and the same can be adjusted by the    seller against his/her income tax liability.
      In order to be able to close the open invoices on payment receipt users can post the balance amount which buyer has deducted to a separate TDS account and clear it manually after receipt of      TDS certificate from buyers by end of every quarter.

      Regards, Punith

  • Hi Falguni,

     

    We have started the implementation of TDS, the system is not updating the PAN level accumulation in the table FIWTIN_ACC_EXEM. Could you please let us know which SAP note needs to Implement in the system.

    Thank you so much for help.

     

    • Hi Himanshu,

      Kindly raise an OSS incident under XX-CSC-IN-FI component. An expert will analyse the issue and suggest solution.

      Regards, Punith

  • Hello All,

    Has anybody faced issues in TDS adjustment on advances? like F-54 (accumulation table FIWTIN_ACC_EXEM in getting reduced incorrectly).

    And Amount split in vendor invoice is also not working if threshold is available, only one line item of the vendor is considered for exemption.

    Please help. we have raised an issue, but its taking long somehow.

    Best Regards

    Ankita