Bills (Vendor Invoices) & TDS

When a vendor delivers goods or completes a service, they send you an invoice. In Udyamo ERP Lite, this vendor invoice is recorded as a Bill — the term is used deliberately to distinguish it from your outgoing sales invoices. A bill represents your obligation to pay the vendor. It is an accounts payable entry, a GST input credit record, and (where applicable) a TDS deduction point — all in one document.

Bills are where the financial reality of purchasing is recorded. The PO stated your intention to buy. The bill records what you actually owe. Getting bills right — with correct tax calculations, proper TDS deductions, and accurate vendor references — is essential for compliance, cash flow management, and clean books.

What You Will Learn

• The bill concept and how it differs from a Purchase Order
• Creating bills from a PO and creating standalone bills
• The vendor bill number and why it matters
• GST calculation on bills: CGST + SGST vs. IGST
• TDS deduction: how it works, which sections apply, threshold limits
• Bill status lifecycle: draft, approved, partially paid, paid, overdue, cancelled
• Automatic journal entry creation
• Step-by-step: creating a bill with TDS deduction

Prerequisites

• At least one vendor created (covered in Chapter 26)
• Purchase Orders created (covered in Chapter 27), if you plan to link bills to POs
• TDS sections configured (Settings > TDS Sections) if TDS is applicable
• Understanding of GST basics (intra-state vs. inter-state) is helpful

Bill vs. Purchase Order

A PO is a forward-looking document — it records what you intend to buy. A bill is a backward-looking document — it records what you owe for goods or services already received. A single PO can result in multiple bills (if the vendor delivers in stages), and a bill can also be created without a PO (for unplanned purchases or services).

Creating a Bill

From a Purchase Order

The most controlled way to create a bill is by converting an existing PO (using the Convert to Bill action described in Chapter 27). This pre-fills the vendor, line items, quantities, prices, and tax rates from the PO, ensuring consistency between what you ordered and what you record in your books.

Standalone Bill

For purchases that did not go through the PO process — emergency procurement, one-time services, small-value purchases — you can create a bill directly.

1. Navigate to Purchases > Bills and click New Bill.
2. Select the Vendor.
3. Fill in the bill details and line items manually.

Tip: Even when creating a standalone bill, you can optionally link it to an existing PO by selecting the PO in the Purchase Order field. This is useful when a PO exists but you did not use the Convert to Bill action.

Bill Fields

Header

Required: Always enter the Vendor Bill Number. This is the vendor's own reference number and is essential for reconciliation, communication with the vendor, and duplicate detection. If you receive two bills with the same vendor bill number from the same vendor, it is likely a duplicate.

Line Items

Tax Summary

GST on Bills

GST on purchase bills works identically to GST on sales invoices, but in reverse — the tax you pay on purchases is your input tax credit (ITC), which offsets the GST you collect on sales.

Intra-State Purchase (Same State)

When both your organization and the vendor are in the same state, the tax is split equally between CGST and SGST.

Example: Bill subtotal Rs. 50,000 at 18% GST

• CGST (9%): Rs. 4,500
• SGST (9%): Rs. 4,500
• Total tax: Rs. 9,000
• Bill total: Rs. 59,000

Inter-State Purchase (Different State)

When the vendor is in a different state from your organization, IGST applies.

Example: Bill subtotal Rs. 50,000 at 18% GST

• IGST (18%): Rs. 9,000
• Total tax: Rs. 9,000
• Bill total: Rs. 59,000

The system determines intra-state vs. inter-state automatically based on the vendor's state (from the vendor master) and your organization's state.

TDS on Bills

How TDS Works

Tax Deducted at Source (TDS) is a mechanism where the buyer deducts a percentage of the payment as income tax and remits it to the government on behalf of the vendor. The vendor receives the net amount (bill total minus TDS), and the TDS deducted is credited against their income tax liability.

For the buyer, TDS is an obligation — failure to deduct TDS when required attracts penalties and interest under the Income Tax Act.

When TDS Applies

TDS applies when:

1. The vendor has TDS Applicable enabled in their vendor master record
2. A TDS Section is assigned to the vendor
3. The payment amount exceeds the threshold limit for that section (in many cases, the system applies TDS once the threshold is crossed)

Common TDS Sections

Warning: TDS rates and thresholds are subject to change with each Finance Act. The rates shown above are illustrative. Always verify current rates and configure them correctly in Settings > TDS Sections.

TDS Calculation Example

Scenario: A bill of Rs. 1,00,000 (inclusive of 18% GST) from a job work contractor with TDS under Section 194C (rate 2% for business entities).

• Bill subtotal: Rs. 84,746 (value before tax)
• GST (18%): Rs. 15,254
• Bill total: Rs. 1,00,000
• TDS (2% on subtotal): Rs. 1,695
• Amount payable to vendor: Rs. 1,00,000 - Rs. 1,695 = Rs. 98,305

Tip: TDS is typically calculated on the bill amount excluding GST. The system computes TDS on the subtotal, not on the tax-inclusive total. This is in line with CBDT clarifications for GST-registered vendors who show GST separately on their invoices.

TDS in the System

When you create a bill for a TDS-applicable vendor, Udyamo ERP Lite:

1. Reads the TDS section and rate from the vendor master
2. Calculates the TDS amount on the bill subtotal
3. Displays the TDS amount on the bill
4. Reduces the balance due by the TDS amount
5. Records the TDS liability in the accounting journal entry

You do not need to manually calculate TDS — the system handles it based on the vendor's configuration.

Bill Status Lifecycle

When a bill is approved, the system automatically creates a journal entry that:

• Debits the purchase/expense account (increasing cost)
• Debits the GST input credit account (CGST, SGST, or IGST)
• Credits the accounts payable / vendor account (increasing liability)
• Credits the TDS payable account (if TDS applies)

This journal entry is linked to the bill through the journal_entry_id field, providing a direct audit trail from the bill to the general ledger.

Step-by-Step: Creating a Bill with TDS Deduction

Scenario: Your factory received machining services from Precision Machining Works (a job work vendor configured with TDS Section 194C at 2%). The vendor's invoice is for Rs. 75,000 plus 18% GST.

1. Navigate to Purchases > Bills and click New Bill.
2. Select the vendor: Precision Machining Works.
3. Enter the Vendor Bill Number: PMW/2025-26/0847 (from the vendor's invoice).
4. Set the Bill Date to the date on the vendor's invoice.
5. The Due Date auto-calculates based on the vendor's credit days.
6. Add a line item:
   • Item: Machining Services — CNC Turning
   • HSN Code: 9988 (manufacturing services)
   • Quantity: 1
   • Unit Price: 75,000.00
   • Tax Rate: 18%
   • Tax Amount: 13,500.00
   • Total: 88,500.00
7. Review the bill summary:
   • Subtotal: Rs. 75,000.00
   • CGST (9%): Rs. 6,750.00 (assuming same-state vendor)
   • SGST (9%): Rs. 6,750.00
   • Total: Rs. 88,500.00
   • TDS (2% of Rs. 75,000): Rs. 1,500.00
   • Balance Due: Rs. 87,000.00
8. Click Save to create the bill in draft status.
9. Review all details, then click Approve.

Upon approval, the system creates a journal entry:

• Debit: Job Work Expense — Rs. 75,000.00
• Debit: CGST Input Credit — Rs. 6,750.00
• Debit: SGST Input Credit — Rs. 6,750.00
• Credit: Accounts Payable (Precision Machining Works) — Rs. 87,000.00
• Credit: TDS Payable (194C) — Rs. 1,500.00

The vendor's outstanding balance is Rs. 87,000.00 (bill total minus TDS). When you pay the vendor, you pay this net amount.

Tips & Best Practices

Tip: Enter bills promptly when received. Delayed bill entry means delayed GST input credit claims and inaccurate accounts payable balances, which distorts your cash flow picture.

Tip: Always cross-check the vendor's bill against the PO before approving. Verify item descriptions, quantities, unit prices, and tax rates. Discrepancies should be resolved with the vendor before approval.

Warning: Do not approve a bill until you are satisfied that the goods or services have been received and the amounts are correct. Once approved, the journal entry is created and the liability is recognized. Reversing an approved bill requires cancellation and re-entry.

Tip: Use the Vendor Bill Number field to detect duplicates. If the system already has a bill with the same vendor bill number for the same vendor, investigate before creating another.

Quick Reference