Calculation of Income Tax TDS and GST on purchase transactions
There are certain services on which GST applies along with the provisions of TDS under income tax. TDS shouldn't be calculated on GST amount, in some cases where payment terms are set as 100% advance, full order value has to be paid as advance payment. In such cases, amount paid to vendor is inclusive of GST and if TDS has to be deducted while paying amount to vendor, then TDS is deducted only on the base amount and not on the GST amount.
The following examples use illustrative GST and TDS rates. Actual calculation depends on the GST setup, the vendor's allowed TDS sections, and the configured tax rates.
Create a purchase invoice
- [!INCLUDE [open-search](../../includes/open-search.md)] Purchase Invoices, and then choose the related link.
- Select Vendor on Invoice Header.
- Select G/L Account for the service on the invoice line. Check GST Group Code and HSN/SAC Code. Set GST Credit to Availment or Non-Availment, as appropriate.
- Select TDS Section Code on the invoice line. The lookup shows sections allowed for the vendor.
Changing TDS Section Code recalculates tax for the document. Check the tax calculation after selecting the section and before posting the invoice.
For example, there's a purchase invoice for INR 10,000 and 18% GST (that is, 9% CGST and 9% SGST/UTGST in case of Intra-State or Intra-Union Territory transaction or 18% IGST in case of Inter-State transaction) has to be charged and Income Tax TDS @10% also to be charged.
GST calculation appears in the Fact Box as following:
Component Amount Transaction Value 10000 GST Base Amount 10,000 CGST 900 SGST 900 IGST 1800 TDS 1000 GL Entries for Income Tax TDS and GST in Intra-State purchase transactions are as following:
Particular Amount Service Account 10000 SGST/UTGST Receivable Account 900 CGST Receivable Account 900 TDS Payable Account -1000 Vendor Account -10800 GL Entries for Income Tax TDS and GST in Intra-State or Intra-Union Territory purchase transactions (reverse charge) are as following:
Particular Amount Service Account 10000 SGST/UTGST Receivable Account (Interim) 900 CGST Receivable Account (Interim) 900 TDS Payable Account -1000 Vendor Account -9000 SGST/UTGST Payable (Interim) Account -900 CGST Payable (Interim) Account -900 GL Entries for Income Tax TDS and GST in Inter-State purchase transactions are as following:
Particulars Amount Service Account 10000 IGST Receivable Account 1800 TDS Payable Account -1000 Vendor Account -10800 GL Entries for Income Tax TDS and GST in Inter-State purchase transactions (reverse charge) are as following:
Particular Amount Service Account 10000 IGST Receivable Account (Interim) 1800 TDS Payable Account -1000 Vendor Account -9000 IGST Payable (Interim) Account -1800