Input tax and TDS on Third rd party vendor

[former_member813023]

Dear All,

We have a scenario,

Vendor V1 will supplying service S1 to Company COMP - 100 + GST 18 = 118

Vendor V2 will supplying service S2 to Company COMP - 200 + GST 18 = 236

Vendor V3 - Reimbursement Vendor for Company COMP

services S1 and S2 will be taken by the company COMP from V1 and V2,

V1 will be raising an invoice of 118 including GST on COMP

V2 will be raising an invoice of 236 including GST on COMP

The total amount of 118 + 236 = 354 will be paid to V1 and V2 by V3 on behalf of COMP

V3 will raise a reimbursement PO on COMP for a value of 354 with out any GST.

COMP will be paying the amount 354 to V3.

But in the above case company COMP need to take input credit on the taxes that is 18+36 = 54 on V1 & V2 but its not directly in transaction with them.

How the COMP can take the input tax for the amount as V1 & V2 are raising the invoice on COMP.

Regards,

Vamsi

[sanilbhandari]

Hi

You need to work with V3 to provide you an invoice with details of basic service and GST, in case you want to claim input tax credit. Legally also COMP cannot claim tax credit unless, it recieves a GST Compliant invoice from V3. This would mean that V3's GSTR1 should reflect the details of GST and COMP's GSTR 2 should be auto-populated based on invoice from V3. If that is not happening, tax credit is not allowed legally for COMP and it has to show the tax amount as an expense in it's books.

Your tax owner should guide on the legal requirement part and this is not really a technical issue from the software. There should not be an expectation that IT does his job as well.

Thanks & Regards

Sanil Bhandari

[former_member813023]

Dear Sanil,

Thanks for your valuable feedback, In our scenario both V1 & V2 raising the GST invoice on COMP but those are paid by V3, And V3 raises a Service reimbursement invoice on COMP including the GST amount as a basic (without tax invoice).

As legally V1 & V2 are raising the GST invoice on COMP so Comp can avail the Input credit for the GST amount.

Hope its clear from my side.

Regards

Vamsi

[sanilbhandari]

Well in that case, you could use the functionality of alternative payee, where in V1 & V2 will provide normal invoices with GST. You could update V3 as alternative payee in vendor master. Now when you make the payment, V3 will be paid. You can in such a case claim GST input credit as well and also making the payment as you expect. The below blog might be a good starting point

https://blogs.sap.com/2020/12/29/alternative-payee-vs-alternative-payee-in-document.-is-it-the-same/

Thanks & Regards

Sanil Bhandari