I have below queries in O2C & P2P cycles.
1. How is Tax such as TDS, TCS, withholding tax, GST applicable in these cycles?
2. What is their effects on each processes?
3. What is the procedure for applying these taxes?
4. Impact of these taxes on customers-vendors?
5. Benefits to customers - vendors?
6. How it will impact the Financials at organization / client level if their is any cross business Functionality btw 2 countries transactions. E. G. Transaction between India & Australia OR between 2 states Maharashtra & karnataka within the same country?
Most of these questions should be answered by your tax business owner. I would still try to explain in short the use of each of these taxes. There are also enough resources available to explain to a layman, if you search:
TDS or Tax Deduction at source - TDS is a form of income tax in India. It has to be deducted from payments made by person or corporation to a supplier or person providing services depending on the nature of services, such as rent, commission etc. Usually the person or company receiving the payment is liable to pay income tax on income, but the Government of India has mandated for the tax to be deducted in advance. The person or entity receiving the amount will share the gross amount while filing his income tax returns and will adjust the TDS deducted against the total income tax liability. This is the concept. Typically in SAP you will create with holding tax type and tax codes to represent the various deductions . The tax types and codes are assigned in vendor master and when the advance payment or invoice is posted, the withholding tax also called as TDS is also. A posting example as below for expense of Rs 1000 with 10% TDS would be shown as below:
Expense A/c Dr 1000
To Vendor A/c Cr 900
To TDS Payable Cr 100
The below blog should help you understand how to set up TDS for India:
Goods and Services Tax (GST) in India is a n indirect tax which is applied on the value added during a sale or purchase transaction. It has replaced the old multiple tax regime such as VAT, Excise, CST, Service Tax etc in India. An entity is supposed to take a tax registration no in each state where it has sales and purchases. For eg, if XYZ limited has business operations in Karnataka and Delhi, it has to apply for two separate GST registrations in Delhi and Karnataka. This registration no is called as GSTIN.
When XYZ sells to a customer in Karnataka from Bangalore, the tax applicability is CGST & SGST. When XYZ sells from Karnataka to a customer in Goa, then IGST is applicable. Now suppose, XYZ is selling from Karnataka to a customer in Bangalore, the sales being of Rs 1000 with a tax rate of 18%, than the invoice will be posted with accounting transaction as:
Customer A/c Dr 1180
To Revenue A/c Cr 1000
To CGST Payable Cr 90
To SGST Payable Cr 90
When XYZ Purchases something from a vendor in Karnataka for Rs 500, the accounting entry for vendor invoice would look as below:
To CGST Input Dr 45
To SGST Input Dr 45
To Expense A/c Dr 500
To Vendor Payable Cr 590
The vendor will collect the GST from XYZ and pay to the Government.
At month end, XYZ can offset the input tax credit against the tax liability for GSTIN No in Karnataka and pay the net liability to the Government. In the above case, Rs 90 will be paid as the net liability to the government. This is just like any other indirect tax regime where input tax is offset against the input tax credit. OfCourse there are rules and tax rates are primarily based on HSN Code as approved by the GST Council.
The below blog has all the important OSS Notes as well as suggested configuration required for GST in India
Please note that Govt of India has also mandated e invoicing for firms with turn over of certain value in India. The below blog might be helpful to set up the same:
Here you must send in electronic form (JSON Format) the invoice for approval and get an acknowledgement from tax authority (Called as IRN). Your business owner can help you with more details on the same.
Now coming to sale of goods or services from India to another country, these are treated as export invoices and can be zero rated or with GST with refund of GST depending on business. The required configurations are also covered as part of tax procedure. On imports into India, in addition to IGST, there are custom duties which need to be paid. There are certain portion of customs duty, which you can take credit and some for which you can only expense out.
I hope the info provided will be of use to you.
Thanks & Regards