This document covers the functionality of the Tax collection at Source (TCS) on sale of goods. This feature describes how to do the basic setup for TCS deduction on sale of goods transaction, calculate TCS on transactions from customer or on group of customer , TCS on transaction when customer do not have PAN number, and so on.
As per section 206C (1H) TCS should be collected at the time of receipt of payment from customer in view of this interim accounting is introduced for this feature. Where TCS amount will be posted to interim account and added to invoice value at the time of issuance of invoice and liability of TCS will be recorded in the books at the time of receipt of payment.
Another important aspect of this feature is that if multiple customer have same PAN number than accumulate transaction amount will be taken to compare with threshold limit to determine the eligibility of transaction for TCS deduction.
[Asset 4582846]
Base amount for TCS deduction:
No specific clarification is available regarding base amount for TCS deduction on sale of goods, in absence of any specific provision or circular or clarification by CBDT, it is unclear as to whether TCS will be levied on GST charged in invoice or not.
There are two views whether TCS on Sales value including GST or excluding GST. Both views are supported by different analysis. However, till the clarification by CBDT, it will be more appropriate that TCS should be collected on Sales Value including GST.
PAN based accumulation of transaction of multiple customers:
In case of TCS on “sale of goods” deduction of TCS will be made based on PAN number. If multiple customers have same PAN number than all transactions executed by different customers have same PAN will be accumulated and compared against threshold limit prescribed by the government.
User has option to accumulate purchase threshold based on PAN number of vendors like customers. However, accumulation will take place based on vendor or customer within one legal entity. Inter legal entity accumulation will be out of scope.
The point of collection of tax
As per the interpretation of TCS on sales of goods u/s 206C (1H), tax should be collected ‘at the time of receipt’ . It is clarified under law that TCS on sales of goods will be collected when actual payment is received by the seller.
However to collect TCS on sale of goods, the seller needs to raise sale invoice including the amount of TCS, account in the books as a TCS liability even in actual sense it is not payable. Even though the TCS amount is debited to the buyer, the liability under Section 206C (1H) does not arise until the time the amount is collected. In order to cater this requirement new option “Tax liability on payment” is added under “Withholding tax group”.
On marking this option system will activate “interim account” field under the withholding tax code. At the time of posting of sale of goods invoice Tax amount will be posted to “Interim TCS payable account” and debit to “customer account”. When user receive payment from buyer at that time system generate “Related voucher” for posted invoice transaction to accrue TCS liability on payment.
TCS on Advance receipt of payment:
Every time the seller receives part of the sale consideration in advance, the seller is mandated to deduct TCS under Section 206C(1H). The difficulty arises in the calculation of the amount when TCS is deducted on multiple advance payment transaction and when payments transactions are adjusted against Invoice amount. Currently in the system user must manually adjust the TCS amount computed on invoice transaction to ensure that TCS amount on invoice is equal to TCS amount on payment.
The feature is supported in following or later versions of Finance:
Dynamics 365 Finance versions:
- 10.0.12
- 10.0.13