The Budget 2025 has brought a significant relief by removing the TCS provision under Section 206C(1H) on the sale of goods, effective from April 1, 2025. Previously, sellers were required to collect TCS if the aggregate value of goods sold exceeded ₹ 50 lakhs, subject to other conditions. This often led to overlaps and compliance complexities with the TDS provision under Section 194Q, where buyers had to deduct TDS on similar transactions.
Section | Before 1st April 2025 | From 1st April 2025 |
206C(1H) - Purchase of Goods | 50,00,000 | Nil (No TCS Applicable) |
This blog post outlines the necessary steps within the FI and SD modules of SAP to ensure your system reflects this change and ceases TCS calculation for relevant transactions from the specified date.
Delimiting TCS Calculation in SAP FI Module
This change necessitates adjustments in your FI module of SAP S/4HANA (On-prem and Cloud) system to ensure compliance and avoid errors. Follow these recommendations:
A. Tax Codes with Only TCS 206C(1H):
- Discontinue the use of any tax codes in your SAP system that exclusively contain the TCS rate under Section 206C(1H) starting from April 1, 2025.
- Modify the description of these tax codes to clearly indicate "Not Applicable from April 1st, 2025" to prevent accidental selection by users.
B. Tax Codes with Combined GST and TCS 206C(1H):
- If you have existing tax codes that combine GST rates with the TCS rate under Section 206C(1H), prioritize using separate tax codes containing only the applicable GST rates.
- Create new tax codes specifically for GST rates if they don't already exist. This approach ensures clarity and simplifies future tax rate adjustments.
- Similar to point 1, update the description of the combined GST and TCS tax codes to indicate "Not Applicable from April 1st, 2025".
C. Avoid Modifying Existing Tax Codes with TCS:
- Refrain from directly modifying the TCS rates within existing tax codes that have been used in past financial postings. This can lead to inconsistencies when reversing documents posted before April 1, 2025.
- During year-end closing activities in April or May, you might need to post documents with posting dates prior to April 1, 2025. The original tax codes with TCS will be required for these historical postings.
- Altering previously used tax codes can compromise the integrity of your financial records.
Delimiting TCS Calculation in SAP SD Module
Here are the steps to delimit TCS calculation in your SAP SD system:
A. Modify the Validity End Date of TCS Condition Records:
The TCS calculation in SAP SD is typically managed through condition records maintained in pricing procedures. You need to identify and update the validity of these condition records to reflect the discontinuation of TCS collection from April 1, 2025.
- Identify TCS Condition Names: The standard condition names for TCS might be JTC1 and JTCB. However, these might be customized in your system. To verify the correct condition names mapped to your pricing procedure(s), consult the table J_1IEXCDEFN.
- Update Condition Records: Once you have identified the correct condition names, execute transaction VK12 (Change Condition). For each identified TCS condition record, modify the "Validity to" date to 31st March 2025.
Note: Ensure you perform this step for all relevant pricing procedures where TCS is currently configured.
B. Verify Copy Control Settings for Redetermination of Taxes:
When creating billing documents with reference to preceding documents (like deliveries or sales orders), the system's copy control settings determine how pricing conditions are handled. To ensure that the updated validity of the TCS condition records is considered, you need to verify that the pricing type is set to redetermine taxes.
- Access Copy Control Transactions: Navigate to the appropriate copy control transaction based on the preceding document:
- VTFL: For invoices created with reference to a delivery.
- VTFA: For invoices created with reference to a sales order.
- VTFF: For invoices created with reference to another billing document.
- (Choose the relevant transaction code(s) like B, C, or G based on your specific business scenarios).
- Check Pricing Type: Within the copy control settings for the relevant item category mapping, verify the "Pricing type" field. If it is set to "Fix values" or "Unchanged", the system will copy the JTC1 condition value from the source document without redetermining it. This could lead to unwanted TCS calculation even after March 31, 2025, if the source document was created before this date.
- Adjust Pricing Type (If Necessary): If the pricing type is set to "Fix values" or "Unchanged", consider changing it to a pricing type that includes tax redetermination (e.g., 'B' - Carry out new pricing). Evaluate the impact of this change on other pricing elements before making the modification.
C. Manage Pricing Dates for Invoices in the Current Financial Year (April 2025 onwards):
For invoices that you wish to post in the current financial year (starting April 1, 2025) and onwards, you need to ensure that the pricing date passed to the billing document is on or after 01.04.2025. This will ensure that the system does not consider the (now expired) TCS condition records during pricing.
- Impact of Goods Issue Date: Be aware that if the goods issue date (or service rendered date) in the preceding document was within the validity period of the TCS condition records (i.e., before or on 31st March 2025), this date might be proposed as the pricing date in the billing document, potentially leading to TCS calculation.
- Modifying Pricing Date: In such scenarios, you will need to modify the pricing date in the billing document (transaction VF02) to a date on or after 01.04.2025 to avoid TCS calculation.
- Pricing Date Control: The default determination of the pricing date in the billing document is controlled by the settings you have maintained for the pricing date field in transaction V/06 (Sales Document Item Category). Ensure your configuration aligns with your requirement to avoid unwanted TCS calculation. You might need to review and potentially adjust this configuration based on your business needs.
Additional Information
For users of the S/4HANA Cloud Public Edition, refer to SAP Note 3576728 for detailed steps and considerations related to this abolition. Similarly, customers utilizing S/4HANA On-premise environments should consult SAP Note 3574318 for the necessary adjustments within their systems to reflect the removal of this TCS requirement.
Conclusion
By carefully following these steps, you can effectively delimit the TCS calculation in your SAP FI and SD modules from April 1, 2025. Remember to thoroughly test these changes in a non-production environment before implementing them in your live system to ensure a smooth transition and accurate billing processes. Always consult with your SAP consultants for any complex configurations or specific business requirements.
