SAP Implementation

Business Process Document

Enterprise Area : 7.0 Financial Accounting &Controlling

SAP Scenario : 7.6 Account Receivable Transactions
SAP Process Group : 7.6.12 Extended Withholding Tax Process

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Document Sign-off sheet

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BSL BSL

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IBM IBM

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Document Control:

Author Muralee
File Name 440737972.doc
Created 15/11/2008 06:25:00
Last Edited
Number of Pages 12

Revision Revision
Version Process Owner Sign-Off
Date Description
1.0 13.11.2008 First Draft

Target Readership
1. Core team members
2. Process Owners

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Table of Contents

1. Process flow in SAP................................................................5

1.1 Process Group: Withholding Tax Process–TDS (Income Tax)............5
1.2 Withholding Tax Process – Customer........................................5
1.3 Scenarios considered for Withholding Tax Process:.......................5
1.3.1 Prerequisites:...............................................................5
1.3.2 Procedure...................................................................6
1.3.2.1 Withholding Tax Process(Income Tax)–Advance Received....................6
from Customer.........................................................................................................6
1.3.2.2 Issue of Sales Invoice/ Debit Note to the Customer................................6
1.3.2.3 Clearing Sales Invoice with Advance Payment (F-39)............................7
1.3.2.4 Clearing Sales Invoice (Project) with Advance Payment (F-39)............7
1.3.2.5 TDS Certificate Received from the Customer (J1INCUST)...................7
1.3.2.6 Withholding Tax Information (J1INMIS)..............................................10
1.4 Integration Areas...............................................................10
1.5 Performance Measures:......................................................10
1.6 Interface.........................................................................10
1.7 Gaps and solutions............................................................10
1.8 Configuration...................................................................10
1.9 Reporting Requirement.......................................................11
1.10 As is Process Referred.......................................................11
1.11 Checks, Validations any other Information.................................11
1.12 Special Organizational considerations......................................11
1.13 Authorization...................................................................11

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1. Process flow in SAP

1 Process Group: Withholding Tax Process–TDS (Income Tax)

This process Definition Document describes the process of Tax Deducted at

source from Advance Payment received from the Customer as well as on Sales
Invoice where TDS Income Tax is deducted . It also describes the process of
accounting TDS Certificate Received from the Customer.

2 Withholding Tax Process – Customer

3 Scenarios considered for Withholding Tax Process:

 Withholding Tax Process(IT) – Advance Payment Received from the

Customer
 Withholding Tax Process (IT) – Invoice/Debit Note raised on Customer
 Enter Withholding Tax Certificate (Income Tax) Received from
Customer(J1INCUST)
 Enter Withholding Tax Information- IT (J1INMIS)

3.1 Prerequisites:
 Creation of Tax Types
 Item code selected for billing which attracts TDS (IT) to be maintained in
TDS condition ( VK11)

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 Creation of TDS Section Wise Tax Codes in Customer master ( XD01)

3.2 Procedure

3.2.1 Withholding Tax Process(Income Tax)–Advance Received

from Customer

Advance Payment request will be processed by Commercial using T - Code F-

37. Withholding Tax details like Tax Type & Tax Code will be maintained in
Customer master XD01 in the ” Withholding Tax tab” under Company Code data.
Multiple TDS Codes can be maintained for one Customer. In case of multiple
codes, defaulted tax code will be applicable for TDS but it can be changed at the
time of transaction. Finance will Post the Advance Payment by using T- Code F-
29.

Following Accounting entry will be passed at the time of Advance Receipt from
the Customer.

Cheque Deposited but not cleared Dr.

TDS Certificate Receivable Account Dr.
To Reco Customer down Payment Account Cr.

3.2.2 Issue of Sales Invoice/ Debit Note to the Customer

Sales Invoice will be raised by Commercial & based on the item code & condition
type following accounting entries will get generated.

Receivable – Local Dr
TDS Certificate Receivable Account Dr
To Service Tax Clearing-Payable Account Cr
To Gross Sales Account Cr

In case Invoice Cancelled, then following Accounting entries will be created in

System

Gross Sales Account Dr.

Service Tax clearing –Payable Account Dr.
To Receivable –Local Cr
To TDS certificate Receivable Cr.

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3.2.3 Clearing Sales Invoice with Advance Payment (F-39)

This is the process of Adjusting the advance received against Sale Invoice.
System will reverse the Withholding Tax (TDS) which was deducted at the time of
Advance.

Following accounting entries will be generated at the time of clearing the

advance using T-Code F-39.

Reco Customer Down Payment Account Dr

To Receivable -Local Cr
To TDS Certificate Receivable Account Cr (To the
extent of TDS deducted on advance)

(To be explored –SAP to revert back)

3.2.4 Clearing Sales Invoice (Project) with Advance Payment (F-39)

(To be explored –SAP to revert back)

3.2.5 TDS Certificate Received from the Customer (J1INCUST)

TDS Certificate will be collected from the Customer by Commercial. Commercial

will hand over the TDS Certificate to Finance. Finance will enter the Details of
TDS Certificate by using T-Code J1INCUST (Enter withholding Tax Certificate
from Customer).

Enter Following Details OF TDS Certificate & execute the process.

Company Code
Section - TDS Section Code
Fiscal Year
Document Number
Posting Date
Certificate Number – Specific number of the TDS Certificate
Certificate Date – Date on which the certificate was issued

Accounting Entries when TDS Certificate is received from the Customer:

TDS certificate (IT) Received Account Dr

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To TDS Certificate (IT) Receivable Account Cr

Following are the different scenarios based on amount of TDS certificate

received.

Case 1 : TDS certificate ( Amt) received is less than amount deducted at the
time of invoice

At the time of entering TDS certificate amount, enter actual amount of Certificate
received from the Customer and the difference amount can be posted to
customer account manually through session J1INCUST.

Example:

Invoice TDS Net Invoice Receipt TDS

Amount(Gross) Deducted Amount from Certificate
(Debtor) Customer Received
100 20 80 90 10

Following Accounting entries will be generated:

TDS certificate Received Account Dr. 10

Customer Account Dr. 10
To TDS certificate receivable account Cr. 20

Case 2 : TDS certificate ( Amt) received is more than amount deducted at

the time of invoice.

At the time of entering TDS certificate amount, enter the actual amount of
Certificate received from the Customer and difference amount can be posted to
customer account manually.

Example:

Invoice TDS Net Invoice Receipt from TDS

Amount(Gross) Deducted Amount Customer Certificate
(Debtor) Received
100 10 90 80 20

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Accounting entries generated at the time of enter TDS certificate (J1INCERT)

TDS certificate Received Account Dr.20

To TDS certificate receivable account Cr.10
To Customer Account Cr.10

Case 3 : TDS certificate ( Amt) not received from the Customer

At the time of entering TDS certificate amount, enter the actual amount as ‘Zero’
& difference amount can be posted to customer account manually.

Example:

Invoice TDS Net Invoice Receipt from TDS

Amount(Gross) Deducted Amount Customer Certificate
(Debtor) Received
100 20 80 80 0

Following Accounting entries will be generated:

Customer Account (T-With special GL Indicator) Dr.20

To TDS Certificate receivable account Cr.20

Since the amount will not be recovered from the Customer process of write off by
way of Bad Debts as per PDD 7.2.5

Case 4 : TDS deducted , Payment received instead of TDS Certificate from

Customer

This case is similar to Case 3, only change is Receipt is booked in Customer

account against TDS certificate with indicator (T)

Example:

Invoice TDS Net Receipt TDS Payment

Amount(Gross) Deducted Invoice from Certificate Received against
Amount Customer Received TDS Certificate
(Debtor)

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100 20 80 80 0 20

Accounting entries generated at the time of entering TDS certificate (J1INCUST)

Customer Account (With Special GL Indicator ‘T’) Dr.20

To TDS Certificate receivable account Cr.20

Accounting Entries generated at the time of Receipt (F-28)

Bank Account Dr.20

To Receivable -Local Cr.20

3.2.6 Withholding Tax Information (J1INMIS)

This is a consolidated report for TDS. This report gives Customer wise TDS
Certificate receivable and which is yet to be received. Posting date of the
transaction is captured here, which will give us year wise TDS Certificate break
up
For all the above mentioned Exceptional cases, MIS report Mismatch will be
there with actual data. .

4 Integration Areas

 SD

5 Performance Measures:

6 Interface

 None

7 Gaps and solutions

 In case of Advances received From Project Customer, Knocking off
Advance against invoice will be on pro rata basis. So withholding tax
amount will reflect an inflated figure to the extent of advance pending

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for clearing. I.e. TDS deducted at the time of advance & TDS deducted
at the time of Invoice.
 While Knocking off Advance against an invoice, TDS Certificate
receivable account is not getting reversed.
 TDS certificate Receivable – Ageing is not available

8 Configuration

 TDS Types
 TDS Section Wise Codes

9 Reporting Requirement

 TDS Certificate Receivable/Received Report –Customer Wise/SAP

Segment/Profit centre wise
 Ageing of TDS Certificate Receivable – Customer Wise/Profit
Centre/SAP Segment Wise

10 As is Process Referred

 TDS Certificate Receivable Report

11 Checks, Validations any other Information

12 Special Organizational considerations

 Capturing TDS at the time of making Customer Invoice.

13 Authorization

Transaction Transaction Core End User Supervisor Accounts In

Description Code Team Charge
Post Incoming   
: F-28
Payment
 
Clear Customer
: F-39
Down Payments
Customer Line    
: FBL5N
item display

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Withholding Tax   
: J1INMIS
Information
Enter   
Withholding Tax
: J1INCUST
Certificate from
Customer
Enter Customer   
: FB70
Invoice

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