Tax Deducted at Source (TDS) & Tax Collected at Source (TCS) are now involved in Indian Billing and Payment system.
Any transaction with the customer or supplier above 5 Million Rupees would be under TDS & TCS.
TDS and TCS are applied after Good & Services Tax (GST) is charged. Which has become an issue in TDS being a customer.
Can we please add the ability for TDS & TCS integrated in manager. @lubos @Tut
The ability already exists. It is referred to in Manager as withholding tax. Read the Guides:
https://www.manager.io/guides/12346
https://www.manager.io/guides/36135
If the supplier is collecting TCS from us then how would we add that tax after GST? Because after adding GST to the taxable amount, TCS is to be calculated on that amount and after adding that amount it should be shown in amount payable.
First, let us get the terminology correct. Your supplier is not “collecting” tax from you in a withholding situation. Nor is your supplier deducting anything. Tax collected or deducted at the source (the terms mean the same thing) refers to a customer withholding as tax an amount that would otherwise be paid to the supplier in a normal situation. In other words, the customer is the source where the tax is withheld, to shorten the cycle of remittance to the tax authority. Withholding tax eliminates the supplier from the loop, reducing the opportunities for fraud and speeding up tax collection on taxes that would otherwise be paid by the supplier.
Next, you do not “add that tax after GST.” Withholding tax is simply not paid to the supplier for eventual remittance to the government. It is withheld from payment for a purchase invoice and remitted directly to the tax authority by the buyer (customer) of the goods or services. Without withholding tax, the supplier would eventually have to pay the tax authority. But you are doing it instead.
Further, Manager’s withholding tax capability allows you to withhold from your payment to the supplier any percentage rate or exact amount you want. When you withhold a percentage, the withholding is calculated on the total amount of the purchase invoice, including GST (or other tax codes applied at the line-item level). So your concern is already addressed.
Finally, in case this entire thread has wandered astray because of improper terminology, what do you do if the tax under consideration really is added as some form of surcharge or add-on. Then, you would apply it as a 100% custom tax code to a separate line item on the invoice. See Create and use tax codes | Manager. In that situation, however, the supplier would have included the extra tax on the sales invoice sent to you.
Just tell me how would i pass this in purchase invoice. These are the goods that i have received from my suppliers. They have given me trade discount after that GST is charged then TCS which you can clearly see.
That is in case of TDS where i can deduct the percentage at the time of payment to the supplier.
I have to pay my supplier 67560.02.(Ref: as per the above image) Which also includes 67.49 TCS which supplier would pay to the tax authority on my behalf. So he is collecting the amount. TDS and TCS are not same thing. Yes in both cases tax is collected and given to the government but in TDS customer deducts the tax while making a payment and in TCS, Suppliers collects the tax from the customer and deposits it to tax authority on customers behalf.
Both TDS and TCS can not be charged in a transaction between 2 parties. so there are laws and situation where one the parties i.e. Supplier or customer would be collecting or deducting the tax. In my case my supplier has to collect the tax and deposit it to the tax authority on my behalf.
That TCS would be my asset as i have already paid it in advance to my supplier at the time of my ITR filling.
I hope i have made it clear but if not you can just tell me how would i pass that above image in managers Purchase invoice. That would be all…Thanks in advance. 
@Xcode looks like your government is collecting tax for sales that didn’t take place yet down the supply chain, or at least this is what I understood from what you have provided so far. Is that right?
By the looks of things, compound tax rates could be the solution here but first we need more information on how it is calculated.
Hello Everyone,
TCS (“Tax Collected at Source”) Is a tax collected by supplier from customer and deposit it with Income Tax department in the name of customer. And customer will get the credit of this TCS while calculating Personal income tax.
For Example :- A supplier sold goods worth 10000 with @ 28 % GST.
Invoice price = 12800
Suppose Supplier is liable to collect TCS @1%.
so , TCS collected Is :- 128.
When Customer will calculate personal income tax He will set off this TCS against his personal tax liablity.
If @Omnipotent.inc is correct concerning the description of so-called tax collected at the source, then it can be handled with custom, multi-component tax codes, using different tax liability accounts for the various components.
I confess I have not encountered such a scheme, and it seems unjustifiable. The amount of income tax a customer might owe is financially unconnected to the price of goods or services that person buys, or the fact that the purchase was made in the first place.
hello @Tut , TCS is not unfair. it is only applicable on some products only ( like wine , Motar Vehicles valued over 1,000,000 , Etc ). This helps Income Tax department to get the information about those people who did not disclose their income and did not pay the tax.
TCS which is collected by the supplier - is introduced so that the small vendors who are usually very good at evading tax by not disclosing their actual income would be accountable and some tax would be received from them in a financial year instead of the end of the financial year. One can see videos on it on youtube.
TDS and TCS is only applicable after the amount between 2 parties exceeds over 5,000,000 (excluding Tax) in a year. Every ruppee after 5M would be charged TCS or TDS depending upon the following.
IF suppliers previous year turn over is more or equal to 100,000,000 and customers turn over is less then 100Million. Then supplier would collect TCS from customer on amounts above 5 million.
IF customers previous year turn over is more or equal to 100,000,000 and suppliers turn over is less then 100Million. Then customer would deduct TDS while making payment to supplier on amounts above 5 million.
IF both Supplier and customers previous year turn over is more or equal to 100,000,000. Then TDS would prevail over TCS customer would deduct TDS while making payment to supplier on amounts above 5 million. TCS would not be applicable as TDS prevails over TCS.
IF both Supplier and customers previous year turn over is less then 100,000,000. Then TDS TCS would not be applicable even if the amounts exceeds over 5 Million before tax.
So there has to be a method in which we would mention if the supplier or customer is eligible for TCS or TDS and we have to set it’s percentage of TCS or TDS while filling out the details. So the software can automatically start deducting TDS or collecting TCS on amounts after 5 million. That’s just my suggestion. You guys are better at figuring it out. i have mentioned the rules as per the government.
Now it is for every single goods or services. Not only just for these products. This was before the new amendments were made in the IT act. Now it is just between 2 parties on the above mentioned criteria.
The solution is as @Tut and I previously suggested and that’s to use compound tax rates.
@Xcode If you setup your tax code like this:
It should perfectly replicate your example:
You might want to create as many tax codes to accommodate for rates other than 0.1%, if any.
It’s actually 5.105% tax. Since the TCS after GST is 0.105% [ 0.1% × (1 + 5%) ]
The first image was a mistake. It’s now edited.
Out of interest, which country does this apply to. Just wondered if there was a localisation to help set it all up.
India.
@Ealfardan thanks that actually works. But we really need a proper integration for Indian user. It’s still a work around.
@tut @lubos Also we need to change Withholding Tax to TDS for Invoices to Customers. Please it would be a great help and ease for us. Kindly look into this.
@Ealfardan Can you also please tell me the tax code percentages for Subtracting 15% from payable and Then adding GST & TCS after 15% is subtracted.
Like in the above picture there is a trade discount of 15% subtracted from payable amount and then GST is added and then TCS in added. I want to allocate a account for Trade discount… but with simple discounts i cannot. Plus it becomes hard when their are multiple items in a invoice as i have to then place discounts on every item. Right now my work around is like this…
Is there a way i can subtract 15% in Tax codes itself?
I need a record the discounts in a specific ledger. That’s why i was asking. In tax codes you can specify that ledger.
Then the only option is the one you have used above with the discount on a separate line in the invoice
Why do you need to record discounts in a separate account ?
This will affect your average purchase cost as well which will be based on the gross price and so will over-value your inventory
I presume that is what you meant by “ledger” - there is no such entity as “ledger” in Manager. Using the names used in Manager helps everyone to understand what you mean
You’re welcome.
But that’s not a workaround. If you examine it more closely:
Withholding taxes are just a method of administering the collection of GST, no new taxes arise.
TCS/TDS are additional taxes on top of GST. This means that they should have separate tax codes/components.
Refer to this guide
Built-in discounts are charged to individual line accounts.
For more control over the accounting treatment of discounts, you can either directly post to intended account in a separate line or use non-inventory items.
Please do not ask other forum members to do your work for you. That violates the rules of the forum. What you ask is simple algebra.
