3522767 - Handling LDC scenario under section 206C (1H) in SD solution - S/4HANA Cloud Public Edition

In the Budget 2024 passed on 16th Aug 2024, provisions of Lower deduction Certificate (LDC) were extended to sale of goods under Section 206C (1H) with effective validity from 1st Oct 2024.

The Assessing Officer upon receipt of the application and, if satisfied, issues a certificate which authorizes the deductor/collector as mentioned in the Annexure to Form 13 to deduct/collect tax at the rate specified in the certificate. The said rate is applicable for the period (financial year) & amount specified on the certificate.

LDC rate and amount - to be applied at combination of TAN of the deductor and PAN of the deductee.

Once the sale consideration from the taxpayer exceeds the amount mentioned in the LDC, then the TCS would be applicable at normal rate.

LDC would be applicable only on amount exceeding the originally 50 Lakhs (see announcement to the section 206C in the SAP note 2976843).

Example: Goods sold to X covered u/s 206C(1h) for Rs.1.25 crore. X has a LDC from tax authorities for 60 lakhs

TCS on 1st 50 lakhs - (range 0-50 lakhs) - No TCS

TCS on next 60 lakhs - (range >50 lakhs - 1.10 crore) - zero or lower rate as mentioned in LDC certificate to be applied

TCS on next 15 lakhs - (range >1.10-1.25 crore) - transactions over the LDC amount - normal rate to be applied

NOTE: This KBA is only valid for SAP S/4HANA Cloud Public Edition

"Image/data in this KBA is from SAP internal systems, sample data, or demo systems. Any resemblance to real data is purely coincidental."

• S/4HANA Cloud Public Edition

This is the legal change required by Indian law.

SAP Standard solution for LDC certificate exemption for SD is planned not earlier than January 24th 2025. You can follow the workaround steps suggested below until the standard solution is delivered.

Maintain LDC Certificate in BP master

1. Launch “Maintain Business Partner” app and enter BP number.
2. Navigate to role FLCU00 – Customer (Fin. Accounting )
3. Under the tab Customer: Cntry-Specific Enh 2, go to the Maintain Certificates section.
   
   
4. Choose the certificate category as INLDC/ India: Lower Deduction Certificate.
5. Maintain the LDC certificate details.
   
   
6. Save your changes.

LDC Workaround for SD in Public cloud:

1. Create new Customer pricing procedure
   “Set Customer Pricing Procedures” (SSCUI : 101202)
   
   
2. Create new pricing procedure (Without JTCB and 364 routine) (SSCUI : 101117)
   
   
3. Set the pricing procedure determination for LDC customers (SSCUI : 101118)
   
   
4. Classify JTC1 condition for the newly created pricing procedure in “SSCUI : 101934”
   
   

Process execution:

1. With regular TCS: Below 50 Lakhs
   

   (Your Existing Pricing procedure with JTCB and JTC1, where JTC1 assigned with 364)
   

   Accumulation updated:
   
   
2. With Regular TCS : Above 50 Lakhs)
   (Your Existing Pricing procedure with JTCB and JTC1, where JTC1 assigned with 364)
   
   
   Accumulation updated:
   
   
3. Customer updates LDC certificate 
   Maintain Certificate in Maintain Business Partner:
   
   
   

   Update Customer Pricing Procedure
   
   

   Maintain Condition record with Lower rate
   
   

4. Billing document with LDC rate
   
   

Note: TCS Accumulation and certificate number is not updated for these transactions.

Points to Note -

1. Once the TCS threshold of 50 Lakhs is crossed and you have an LDC certificate, change your pricing procedure as given in Step 3.
2. Track the LDC exemption amount, and once the amount is exhausted, change the condition record to the original rate. This is an important step, failing to do so will result in TCS being collected at a rate lower than the applicable rate.
3. These manual steps are relevant until SAP releases an automated solution for TCS LDC. With this proposed automated solution, LDC certificate exemption would be handled without requiring the above manual steps. SAP intends to deliver this solution no earlier than January 24th 2025.
4. Customer needs to ensure that impact of these LDC transactions done in the system before the standard solution is released, is reflected correctly in the quarterly TCS return. This may require the user to make manual changes in the standard quarterly TCS return made available from SAP. 
5. Please note that all the steps detailed above for recording TCS with LDC certificate, before the standard solution is made available, are only applicable for goods under Section 206C (1H). 
6. In case of TCS in direct FI transactions, it is suggested to use the SD route for posting of documents.

3522683 - Handling LDC scenario under section 206C (1H) in SD solution - ECC
3522759 - Handling LDC scenario under section 206C (1H) in SD solution - SAP S/4HANA OP and S/4HANA Cloud Private Edition 

IN (India), TCS (Tax Collected at Source), LDC (Lower Deduction Certificate), PAN (Permanent Account Number), TAN (Tax Deduction and Collection Account Number- This is a ten-digit alphanumeric number issued by the Income Tax department to all persons responsible for collecting or deducting tax), 206C(1H), Union budget, 2024, FY 2025 , KBA , FI-LOC-SD-IN , India (aka XX-CSC-IN-SD) , FI-LOC-LO-IN , India , How To

SAP S/4HANA Cloud Public Edition all versions ; SAP S/4HANA Cloud all versions