2022-05-17 2963124

2963124 - FAQ on Tax Collected at Source (TCS)

Version 15 Type SAP Note
Language English Master Language English
Priority Recommendations / Additional Info Category FAQ
Release Status Released for Customer Released On 26.07.2021
Component XX-CSC-IN-SD ( use FI-LOC-SD-IN )

Please find the original document at https://launchpad.support.sap.com/#/notes/ 2963124

Symptom

Important Note:

Please ensure that below note is implemented for section code to be updated against customer line for TCS
documents.
If the section code is not updated then those TCS documents will not be fetched for reporting.
2949714 - Section code needs to be updated for TCS billing document

For direct FI postings FB70/75 section code should be filled in the header of the screen.

Section code inturn is associated with the TAN no, so ensure that items belonging to different Plant
(associated to different section code/TAN) must not be billed in the same invoice as this will lead to
issue in quarterly returns filing.

Example:

Company code Section code TAN No

IN01 SE01 TAN123455
IN01 SE02 TAN567890

Company code Plant Section code

IN01 IN01 SE01
IN01 IN02 SE02

Single invoice with Plant IN01 and IN02 is not recommended as they belong to different section code.
Two separate invoices should be created in this case.

Q1. What are the modules supported for TCS solution?

Q2. TCS for advance payments

Q3. TCS solution for Procurement/Buyer/Accounts payable side

Q4. Are credit notes and Sales returns processes supported?

Q5. Is excise scenario supported?

Q6. Will the existing TCS solution via WHT route become obsolete?

Q7. What is the condition type JTC2 for?

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Q8. Can we post TCS from sale of 206C other goods like scrap, timber, tendu etc to actual TCS G/L directly
instead of intermediate G/L?

Q9. Why is Material tax classification required?

Q10. Why is Billing document with 2 step process(release to accounting via VF02 or VFX3) not supported?

Q11. FB70/75 only supports TCS calculation on net amount and not gross amount.

Q12. What are transaction codes supported for TCS?

Q13. If Billing document is posted in current month and credit note is posted in the subsequent month after
remittance, how will it be processed?

Q14. For direct FI postings FB70/75 how to handle TCS along with GST?

Q15. Creating Cancelation/Credit memo/Debit memo on 1st of october for documents posted prior to 1st Oct,
2020?

Q16. Why do we need two tax codes and two G/L accounts for TCS?

Q17. How will the tax amount be transferred from intermediate G/L to Final G/L?

Q18. Is TCS applicable on Intercompany/Inter Unit Sales?

Q19. Is TCS applicable on export sale?

Q20. TCS applicability on Buyer who is Central govt, State govt, embassy, High commission, legation etc.?

Q21. For 50 Lacs threshold check the sale consideration should be from 01.04.2020 or 01.10.2020? How to
handle it?

Q22. Can we change/update PAN no or Aadhar no in between once the transactions have happened?

Q23. What about TCS applicability on composite supply?

Q24. What about TCS applicability on job work?

Q25. Accounting document is getting generated but billing doc is not created. Why?

Q26. Why is two step process in direct FI posting like parking and posting(FV70 and FBV0) not supported?

Q27. Will Bapis, IDOCS, Function modules, Reports and Programs be extended as a part of localization for
TCS?

Q28. TCS Calculation in Proforma invoice.

Solution

Q1. What are the modules supported for TCS solution?

A1. 1. SD (Sales and Distribution)

2. FI (Financials)

Q2. TCS for advance payments

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2022-05-17 2963124

A2. TCS on advance payments is not supported as of now.

There is ambiguity on calculation of TCS at the time of advance payment receipt. TCS on advance is
applicable on 206c(1H) goods but for goods under 206C others the rule says TCS is applicable at the time of
advance payment/invoice whichever is earlier. Also Advance payment received can be adjusted against
206c(1H) goods, Services etc.
Now if TCS is to be charged at the time of advance payment then what is the guarantee that the advance
received will be adjusted against 206C(1H) goods only?
So if the advance is cleared against any TCS invoice the liability will be picked up for payment due 7th of
subsequent month.

Q3. TCS solution for Procurement/Buyer/Accounts payable side

A3. 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.

As a business requirement solution from below note can be followed for capturing TCS charged by the seller
on the buyer side-
2977148 - GST India: Tax Collected at Source in Procurement

Q4. Are credit notes and Sales returns processes supported?

A4. Yes credit notes and Sales return processes are supported

Q5. Is excise scenario supported?

A5. Yes the current solution supports TCS postings for excisable goods as well

Q6. Will the existing TCS solution via WHT route become obsolete?

A6. No we continue to support existing TCS solution via WHT route till end of the financial year(2020-2021).
And customers who are currently using WHT route for TCS on scrap, motor vehicles, timber etc can continue
using the same.
From FY 2021- 22 onwards TCS solution via WHT will no longer be supported.

Q7. What is the condition type JTC2 for?

A7. JTC2 condition type is for TCS others like Sale of Alcoholic liquor, timber, tendu leaves etc.
JTC2 if for goods other than 206c(1H) where threshold check of 50 Lacs is not required

Q8. Can we post TCS from sale of 206C other goods like scrap, timber, tendu etc to actual TCS G/L
directly instead of intermediate G/L?

A8. Yes TCS from JTC2 can be posted to actual TCS G/L.

Q9. Why is Material tax classification required?

A9. As per the standard behavior if tax category is introduced in OVK1 then the same will by default appear in
customer tax classification and material tax classification.

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Customers tax classification option is used to identify whether TCS is applicable for the customer or not.
TCS is not applicable for central government, state government, high commission, embassy, foreign
customer so with this identifier TCS applicability will be considered.

Material classification here has no significance but by default it will appear if the user creates a new material
or changes existing material. In that case please maintain
any of the given classification. This is not used in the TCS solution.

Q10. Why is Billing document with 2 step process(release to accounting via VF02 or VFX3) not
supported?

A10. Accumulation table will get updated with the total accumulation/sales amount and TCS amount only
once the posting hits accounting.
If the billing document is posted and not released to accounting then tables J_1I_ACCUMHDR and
J_1IG_ACCUMDTL will not be updated; meanwhile if subsequent documents are posted the accumulation
would have been increased/decreased and if you now try to release the billing document to accounting at this
point TCS will not be correct. So in order to have the right accumulation value and calculation of correct TCS
amount, document should be posted to accounting.

For any reason if the document could not be released to accounting because of some error then you will have
to retrigger pricing before "Release to Accounting".
This will ensure that correct TCS calculation will happen and accumulation tables will be updated correctly.

Q11. FB70/75 only supports TCS calculation on net amount and not gross amount.

A11. As per the rule for TCS, tax is to be collected only when the sale consideration has exceeded 50 Lacs.
In order to achieve this, we accumulate the total sale value with the documents that are posted. If the gross
amount is checked for tax calculation, then arriving at the correct taxbase amount on which TCS has to be
computed is not possible due to technical limitations. So currently FB70/75 only supports TCS calculation on
net amount

Q12. What are transaction codes supported for TCS?

A12. VF01
VF11
VF04
FB70
FB75
FB08

Q13. If Billing document is posted in current month and credit note is posted in the subsequent
month after remittance, how will it be processed?

A13. The Credit Memo will be posted with reference to the invoice and even if remittance of tax liability to tax
authority is done while doing reporting the tax liability will be adjusted against subsequent invoice accordingly
and reported.

Q14. For direct FI postings FB70/75 how to handle TCS along with GST?

A14. Direct FI postings are tax code based and MWST access sequence should be used.

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For TCS calculation along with GST new tax codes with tax rates against TCS and GST conditions should be
created for FB70/75 postings

Q15. Creating Cancelation/Credit memo/Debit memo on 1st of october for documents posted prior to
1st Oct, 2020?

A15. Ensure that all the likely cancelations/credit /debit notes for documents prior to 1st oct, 2020 are
completed before go live of new solution. And you are passing the correct sale consideration value taking into
account all your invoices, cancelations, credit notes, debit notes as on 1st oct, 2020. This is to ensure that
there is no inconsistency in accumulation and TCS calculation.

Q16. Why do we need two tax codes and two G/L accounts for TCS?

A16. 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.
Two tax codes are associated with two different G/L accounts

Q17. How will the tax amount be transferred from intermediate G/L to Final G/L?

A17. Use RFUMSV50 report to transfer the tax amount from intermediate G/L to Final G/L upon Payment
receipt.
Refer to Below Note to understand how to run RFUMSV50
2971824 - Execution steps- Deferred tax transfer program (RFUMSV50) for TCS
1800344 - How to start using deferred tax report RFUMSV50

Q18. Is TCS applicable on Intercompany/Inter Unit Sales?

A18. In an intercompany Sale/InterUnit sale if the PAN of the selling unit and buying unit are the same then
TCS is not applicable

Q19. Is TCS applicable on export sale?

A19. No TCS is not applicable on export sale.

Q20. TCS applicability on Buyer who is Central govt, State govt, embassy, High commission, legation
etc.?

A20. TCS is not applicable for buyers like central govt, state govt, embassy, local authority etc.
We have provided an option in customer tax classification to classify such buyers as "TCS not Applicable".

For quarterly returns filing via Form 27EQ it is required to report transactions which are not subject to TCS
from above classified buyers.
So it is mandatory that condition record is maintained with 0% TCS for such customers/buyers and the Final
TCS G/L is associated with the tax code that you assign with 0% rate.
Else those documents will not be fetched for reporting

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Q21. For 50 Lacs threshold check the sale consideration should be from 01.04.2020 or 01.10.2020?
How to handle it?

A21. For 50 Lacs check, the sale consideration should be considered from 01.04.2020.

In the note- 2948539, attachment "TCS_Process.pdf" page 7

Also in the attachment "Pre_Implementation_Steps.pdf" page 5

BADI method implementation help is given

We have provided details on BADI to be used, you will have to create Z implementation and pass the total
sale value from 01.04.2020 till 30.09.2020 taking into account all your billing docs, Fb70 invoices,
cancelations, credit notes, debit notes, disputed documents if any that you want to exclude.
The value that you pass through BADI will be read and considered when the first invoice is posted on
01.10.2020 and thereafter we will take care of the accumulation part.

Q22. Can we change/update PAN no or Aadhar no in between once the transactions have happened?

A22. No. This is not supported as of now.

Changing/updating the PAN/Aadhar no in between once the transactions are posted is not supported

Q23. What about TCS applicability on composite supply?

A23. In case of composite supplies, principal supply holds good.

If there is combination of goods and services then if the principal supply is for goods then TCS will be
applicable.

Q24. What about TCS applicability on job work?

A24. If there is a composite bill for job work charges and material value then TDS u/s 194c will be applicable
and no TCS is charged/collected.
If the job work charges and material value are posted as separate items then TCS u/s 206c is applicable on
material.

Q25. Accounting document is getting generated but billing doc is not created. Why?

A25. Ensure below note is implemented-

2973267 Multiple issue while posting SD billing document with TCS amount

Q26. Why is two step process in direct FI posting like parking and posting(FV70 and FBV0) not
supported?

A10. Accumulation table will get updated with the total accumulation/sales amount and TCS amount only
once the posting hits accounting.
If the invoice is parked and not released to accounting then tables J_1I_ACCUMHDR and
J_1IG_ACCUMDTL will not be updated; meanwhile if subsequent documents are posted the accumulation
would have been increased/decreased and if you now try to post the invoice document to accounting at this
point TCS will not be correct. So in order to have the right accumulation value and calculation of correct TCS
amount, document should be posted to accounting directly and two step of parking and posting is not
supported.

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2022-05-17 2963124

For any reason if you want to use parking and posting via FV70 and FBV0 then ensure that you dont do bulk
posting and do individual postings by selecting each document and go to FV70 screenclicking on "Simulate"
icon to retrigger tax calculation. This will ensure that correct TCS calculation will happen and accumulation
tables will be updated correctly.

Q27. Will Bapis, IDOCS, Function modules, Reports and Programs be extended as a part of
localization for TCS?

A27. No, TCS is not supported for IDOCs and BAPIs. As part of localization, we have not extended or
enhanced fields in standard BAPIs & IDOCs. Customers should handle the same with custom
development/consulting solution.

Q28. TCS calculation in Proform Invoice

A28. As per the current design, Accumulation tables J_1IGACCUMHDR and J_1IGACCUMDTL are updated
with TCS values only on account posting.
In a proforma invoice, there will not be any account posting so the accumulation tables will not be updated
and hence the calculation of TCS on right sale consideration value will not happen.
So we recommend to use a valid requirement routine to suppress JTCB and JTC1 conditions for Proforma
invoices.

If the recommendation is not followed then TCS will be calculated based on your condition record, but there
will not be any validation on whether 50 lacs is crossed or not.
So for all the proforma cases TCS will be calculated.

Software Components

Software Component Release

SAP_APPL 600 - 600

SAP_APPL 602 - 602

SAP_APPL 603 - 603

SAP_APPL 604 - 604

SAP_APPL 605 - 605

SAP_APPL 606 - 606

SAP_APPL 616 - 616

SAP_APPL 617 - 617

SAP_APPL 618 - 618

S4CORE 100 - 100

S4CORE 101 - 101

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S4CORE 102 - 102

S4CORE 103 - 103

S4CORE 104 - 104

S4CORE 105 - 105

Other Components

Component Description

XX-CSC-IN-FI use FI-LOC-FI-IN

This document refers to

SAP Note/KBA Title

2960994 Corrections to enable Tax Collected at Source in FI Customer Invoices

2949714 Section code needs to be updated for TCS billing document

2948539 Corrections to enable Tax Collected at Source in Outgoing Invoices

2948240 Data Dictionary Activity for Budget Change 2020 on Tax Collected at Source

This document is referenced by

SAP Note/KBA Title

2977827 FAQ on Tax Collected at Source (TCS) - Reporting

2898812 [WEBINAR] Amendment to Section 206C TCS - Updates

2976843 IN: Amendment to Section 206C Tax Collected at Source (TCS)

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