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In this blog, we delve into the critical events and processes involved in billing and tax calculations, with a particular focus on Tax Collected at Source (TCS). We will examine how specific events manage tax codes and update billing details. Furthermore, we’ll have a look at how convergent invoicing and contract accounting work together.
Document reversal is another important function. Because of its complexity it is available in a separate blog here: Tax Collected at Source Document Reversal for Indi... - SAP Community
Calculation With or Without Identification Number
Customers in India can have PAN or AADHAR identification numbers. However, in cases where a customer has neither, the TCS (Tax Collected at Source) percentage is significantly higher. Before proceeding with the TCS calculation, GST taxes must be added to the base amount, and it must be verified whether the threshold has been reached.
- Customer with AADHAR or PAN
When a customer provides AADHAR or PAN the TCS tax percentage is lower than when it is not provided. If the customer has provided both, the PAN takes priority. The identification numbers must be maintained for the Contract Partner. For SAP S/4HANA + SAP S/4HANA Cloud Private Edition the easiest way to do this is through the transaction BP -> Contract Partner -> Identification -> Identification number:
For SAP S/4HANA Cloud Public Edition the easiest way is by using the application Maintain Business Partner -> Contract Partner -> Identification -> Identification number:
- Customer without AADHAR or PAN
In this example a customer has not provided neither AADHAR nor PAN, seen as empty identification fields in the Contract Partner. Based on Indian tax laws, the TCS percentage for this customer must be set higher than for those with ADDHAR or PAN.
SAP S/4HANA + SAP S/4 HANA Cloud Private Edition
Identification Number Master Data
For correct TCS calculation in Convergent Invoicing it is at first important to maintain the identification number for the specific company code, as without it, a TCS not applicable tax determination will be called. For SAP S/4HANA + SAP S/4HANA Cloud Private Edition this is done in the table T001Z:
Threshold
For TCS calculation it is crucial to set up the threshold amount, this can be done in the table J_1IG_THLDV:
Tax Configuration
In contract accounting during the billing of the individual sales, it is important that every item has the required data assigned, to allow the system to automatically determine which taxes to calculate.
The posting area 2662 is used for India TCS Determination and is made up of individual account determinations. Account determinations are used to allow the system to accurately calculate the TCS amount on your sales. You can create and maintain the individual account determinations for India through the transaction FQC0 -> 2662 -> IN.
Except for the key items it is also crucial to maintain the function, with which a tax code is assigned. To see the tax code field double click the specific account determination.
However, if TCS is not applicable for the business partner, for tax condition type JTC1 the tax classification can be set at 1 TCS not applicable. And further according to the TCS tax classification, the posting area 2662 can be configured to have a tax code without TCS.
Billing & Invoicing
Before invoicing it is first required to bill the individual items. Use the transaction FKKBIXBIT_MON to find the items to be billed and click the bill button on the ribbon. Next step is to invoice the billed items.
In contract accounting when invoicing multiple invoices at the same time, either all together or separately, the system can differentiate between TCS applicable items and those which are not TCS applicable. Start the invoicing process by selecting the items and clicking the invoice button on the ribbon. This will generate a contract accounting document corresponding to the convergent invoicing billing document in the case of billing of all items together or many contract accounting documents in the case of invoicing all items individually. In both cases the system will correctly calculate the TCS amount.
TCS Accumulation view
The data from the invoicing is posted into contract accounting. To view the overall accumulation details for a certain business partner, use the transaction FKKIN_TAX_ACCUM_LST -> Buyer ID Number (PAN, AADHAR or Business Partner), which shows a detailed picture of the TCS accumulation for this person/organization. To see the detailed view of individual accumulation items, select a line with the correct buyer and seller and click Detail. The individual entries are kept in the table FKKID_ACCU_TAX_I.
SAP S/4HANA Cloud Public Edition
Identification Number Master Data
For correct TCS calculation in Convergent Invoicing it is at first important to maintain the identification number for the specific company code; otherwise, a tax determination indicating that TCS is not applicable will be triggered as this step is mandatory to activate the TCS functionality for the company code. For SAP S/4HANA Cloud Public Edition use the SSCUI 102739:
Threshold
For TCS calculation it is crucial to set up the threshold amount, this can be done in the SSCUI 103822:
Tax Configuration
In contract accounting during the billing of the individual sales, it is important that every item has the required data assigned, to allow the system to automatically determine which taxes to calculate.
Account determinations are used to allow the system to accurately calculate the TCS amount on your sales. TCS Account determinations can be maintained through the SSCUI 106665.
It is crucial here to maintain the function here, with which a tax code is assigned. To see the tax code field double click the specific account determination.
However, if TCS is not applicable for the business partner, for tax condition type JTC1 the tax classification can be set at 1 TCS not applicable. And further according to the TCS tax classification, the posting area 2662 can be configured to have a tax code without TCS.
Billing & Invoicing
Begin the process by selecting the items to be billed in the Manage Billable Items application. With all the items selected click on the bill button. This will create a convergent invoicing billing document.
And as such, when finished with the billing select the items to invoice and click the invoice button. This will generate a contract accounting document corresponding to the convergent invoicing billing document in the case of billing of all items together or many contract accounting documents in the case of invoicing all items individually. In both cases the system will correctly calculate the TCS amount.
TCS Accumulation View
The data from the invoicing falls into contract accounting. To view the overall accumulation details for a certain business partner, use the Display Accumulated Data - TCS, which shows a detailed picture of the TCS accumulation for this person/organization. To see the detailed view of individual accumulation items, select a line with the correct buyer and seller and click Detail. The individual entries are kept in the table FKKID_ACCU_TAX_I.
Events
In billing and tax processes, certain events are essential for accurate financial transactions. These events help manage tax calculations, billing details, and document updates. Below are some key TCS events and their functions:
FICA_IN_TAX_EVENT_8135 -> This event should only execute when the billing has a provider contract. If this condition is met it updates billing item details like region and country and allows for specific field changes based on the function modules.
FICA_IN_TAX_EVENT_2612 -> Determines the tax code and accounts for TCS using settings from posting area 2662.
FICA_IN_TCS_EVENT_2603 -> Stores data needed later for creating tax items and securing the accumulation table.
FICA_IN_TCS_EVENT_2648 -> Saves changes to the tables FKKID_ACCU_TAX_I and FKKID_ACCU_TAX_H in the database.
FICA_IN_TCS_EVENT_2663 -> Calculates the tax adjustment amount during a reversal.
The events are called automatically in SAP S/4HANA Cloud Private and Public Editions, but for the SAP S/4HANA OP-Premise they will need to be customized through the transaction FQEVENTS. To allow for customer customization on cloud, the TAX_EVENT_8135, 2612 and 2603 have their BAdIs provided by SAP.
Note
For detailed information about localization of Tax Collected at Source, refer to these SAP Notes:
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