Tax Collected at Source

Tax Collected at Source Setup

Define TCS Regime

Use Regime to define rules applicable to all taxes assigned to it. You must complete this setup step before you move ahead with other setups.

Setups made for a regime are applicable to all transactions created for the organizations assigned to it. Information defined here is generic unless you assign different properties at the organization level.

  1. Navigate to Regime Registration window using Oracle Financials for India > Tax Configuration > Define Regime.

  2. Enter or select from the list of values, Tax Collected At Source, regime.

  3. Enter the description of the regime.

Registration Tab

Captures the registration details of the regime. These registration details are used in the reports that are generated. Enter the registration details in the registration value column by picking up the appropriate registration type and name. You can capture as many registration details as required.

  1. Indicate the Sequence number of the registration types to capture. This may not be serially numbered. You cannot use duplicate sequences.

  2. Select appropriate Registration Type from Primary Registration Number, Secondary Registration Number, and others.

  3. Select appropriate Registration Name from TAN No, AR Receipt Class, Batch Source Debit Memo, Batch Source Credit Memo.

  4. Enter the actual Registration value.

These registration details are applicable at the regime level and default on all the organizations that are assigned to the regime. You can change the default values at the organization level.

To implement SHE Cess Solution, Regime Registrations for GST and Tax Collected at Source needs to be updated with the SHE Cess Tax Type Accounts. To update TCS Regime, access Regime Registration window from Oracle Financials for India > Tax Configuration > Regime Registrations.

Note: It is advisable to use different Accounts for TCS SH Education Cess Tax Type - Interim Liability Account and Liability account.

Organizations must register with various Tax Collected at Source Authorities. This registration is the basis for all settling tax liability and tax repository updates. You setup TCS registration details using the TCS Regime. If the TCS Registration varies by organization, then you can change the default values at the organization level.

To create TCS Registration Details, access Regime Registration window from Oracle Financials for India > Tax Configuration > Regime Registrations > Registrations.

Assign Tax Types

TCS Tax Types are assigned to TCS regimes. All transactions with taxes of these Tax Types assigned are considered for TCS Repository updates. The following three Tax Types have been seeded and can be used for TCS Tax:

You cannot add additional Tax types for Tax definition and need to use only the seeded Tax types. You can assign TCS Tax Types to TCS Regime. Transactions for the Tax Types that are assigned to the regime are considered for TCS related processing and settlement. For each Tax Type, you specify GL Accounts. You can change these accounts for each organization.

To assign TCS Tax Types, access Regime Registration window from Oracle Financials for India > Tax Configuration > Define Tax Type.

Assigning Tax Accounts

For each Tax Type, you specify GL Accounts and also have a separate GL Account for each organization.

To assign GL Accounts for Tax Types:

  1. Navigate to Regime Registration window from Oracle Financials for India > Tax Configuration > Define Tax Type > Tax Account Details.

Regime Registration Details Region

Tax Type Tab

  1. Select or enter the Sequence number of the tax types to capture.

  2. Associate all three Tax Types - Tax Collected at Source, TCS Cess and TCS Surcharge.

  3. Enter the Description of the Tax Type.

  4. The Parent Tax Type is not applicable for Tax collected at source.

  5. % of Parent is not applicable for Tax collected at source.

Tax Accounting Details Region

Enter or select the Accounts that are used for accounting of Tax Collected at Source.

  1. Displays the Sequence number of the Account to capture.

    Choose from Interim Liability Account and Liability Account.

    Note: Refer Accounting section for detailed discussion on the accounts.

  2. Select accounting flex fields for each of the account in the Accounting Value field.

Apart from the final Liability Account, you must define one interim account to store the TCS that is not accrued. For example, Shipment is made but Invoice not raised would result in balance in Interim account. Defining separate accounts for each tax type and specific to each Organization in General Ledger helps in better tracking of TCS accounting.

Assign Organizations and Locations

Regime must be assigned to all organizations it applies to. Taxes defined under this regime default only for transactions created for those organizations.

As TCS is applicable on sale of specified goods, Inventory organizations and locations are considered for TCS setup. Assign Inventory organizations and locations to the TCS Regime. If the Registration details and the Tax Account details vary by organization, you can change the default values.

  1. Navigate to Regime Organization Registration window from Oracle Financials for India > Tax Configuration > Regime Registrations > Organizations to assign organization and location.

  2. Displays and defaults from the value specified in the Regime Registration window.

  3. Displays and defaults from Description as specified in the Regime Registration window.

Organization Details Region

  1. Select the Organization Type. For TCS, only Inventory Organization is applicable.

  2. Enter the Name of the Inventory organization that has to be associated to this regime.

Registrations Tab

Registration Details Region

  1. Registration Type defaults from the Regime Registrations window.

  2. Registration Name defaults from Regime Registrations window

  3. Registration Value defaults from the Regime Registrations window. You can edit this field.

  4. Check Defaults to default registration value at the regime level are retained. When registration value is modified, it is unchecked.

Define Organization Registrations

Organizations having their operations spanning across different states would register under each state. In such cases, you can define TCS Registration number for each Inventory Organization and Location combination. To assign organization and location's details, navigate to the Regime Organization Registration window from Oracle Financials for India > Tax Configuration > Define Regime > Registrations > Organizations.

Defining Organization Tax Accounts

You can have different GL code combinations for each of the Organization and Location. To enable this, you must assign Tax Accounts for Organization and Locations. Unless, different accounts are setup for each organization and location combination, the Accounts specified at Regime Registration level are used for all organizations.

  1. Navigate to Regime Organization Registration window from Oracle Financials for India > Tax Configuration > Define Regime > Registrations > Organizations, to create GL Accounts by Organization and location.

Tax Types Tab

Tax Details Region

  1. Tax Type defaults the value defined in the Regime Registrations window.

  2. Description defaults the value defined in the Regime Registrations window.

Account Details Region

  1. Account Name defaults the value defined in the Regime Registrations window.

  2. Account Value defaults the value defined in the Regime Registrations window. Select accounting flexfields for each account specific to the organization.

  3. Check the Defaults option o default registration value at the regime level are retained. When registration value is modified, it is unchecked.

Defining Item Classification

Under TCS Regime, items have to be classified into following categories:

You must classify the items under the above categories, which would be required for proper reporting. You can setup templates with possible Item classifications. Multiple items can be assigned to templates at a time. This feature enhances usability and minimizes time required to complete this setup.

To define Item Classifications, navigate to Oracle Financials for India > Tax Configuration > Items Definition > Define Item Classification.

Note: If item classification is not carried out for an item, when you book a sales order or when you try to complete a Receivables Invoice with TCS Taxes, you get the error:cannot find item classification for TCS regime and LocFGIN item of 2832 Organization ID.

Define TCS Tax Authority

In the base application, classify the supplier as India TCS Tax authority and register the supplier in Oracle Financials for India.

Define Tax Codes

Define Tax code for tracking TCS Taxes. You identify a TCS tax by defining a Tax code using the following Tax types:

To define a Tax code, access Tax code definition window from Oracle Financials for India > Tax Configuration > Tax Type.

Note: You need to define a different Tax Code each for TCS Cess and TCS Surcharge Cess. .TCS Cess should not be used for TCS Surcharge Cess even though the Tax percentage is the same. This is essential because a single transaction cannot have the same tax ID multiple times.

To carry out a transaction classified as TCS exempted transaction, you must define a tax code with zero Tax Percent and the Original Tax Percent that would have been normally charged. Similarly, to carry out a transaction classified as Concessional TCS transaction, you must define a tax code with reduced Tax Percentage that needs to be charged and the Original Tax Percent that would have been normally charged, if such transaction did not attract a concessional TCS rate.

Defining Tax Categories

Tax category should be defined for defaulting Taxes. You can create multiple Tax Categories with TCS Taxes to ensure that defaulting or selecting right Tax category results in correct TCS taxes with Surcharge and Cess. Apart from above, you need to create two additional separate Tax categories:

To define a Tax category, access Tax category definition window from Oracle Financials for India > Tax Configuration > Tax Categories.

Note: If the Tax category has other type of taxes, then the same would not appear in list of values of the TCS.

Defining Item Categories

Item category should be defined to default TCS taxes based on the selected Customer and Site combination. You can create Item Category to ensure the right Tax Categories with TCS Taxes is attached to corresponding items to ensure that defaulting and selecting right Tax Category results in correct TCS taxes with Surcharge and Cess. To define an Item category, navigate to the Item category definition window from Oracle Financials for India > Item Definition > Define Item Categories.

Define Threshold

You must define TCS Thresholds to ensure the system automatically tracks cumulative sales above a specific limit (current limit is 10 Lakhs) and starts charging Surcharge for sales when such Threshold is crossed. To perform Threshold Setup, navigate to the Thresholds setup window from Oracle Financials for India > Withholding Tax Setup > Vendor Threshold Grouping.

Defining Customer Registrations

Tax Identification or Permanent Account Numbers (PAN number) is allotted to eligible organizations. You must capture these details through the Customer Additional Information, Oracle Financials for India User Guide. To enter TCS Registration number for a Customer, access Customer Tax Information India Local window from India Local Receivables > Customers > Additional Information.