Government proposes to levy tax on credit card purchases made abroad
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change from budget
In the 2023 budget, it was decided to levy tax up to 20 per cent on works related to LRS and foreign tour packages. Earlier this tax was five percent. It was decided to collect this tax at source itself, which is called TCS. Source means that the seller will collect it from the customer at the time of selling the goods or services. This tax will be separate from the sale amount and is remitted to the government. This is not the final tax. The person who has paid TCS as a buyer, if he is a taxpayer, can adjust it while paying the final tax. For this, he should take the TCS certificate from the seller. If the TCS deducted exceeds the tax liability, it can also be refunded.
applicable since
It was decided to implement this tax from July 1. However, it was also clarified that no TCS would be applicable for sending foreign remittances up to Rs 7 lakh under LRS. It has been proposed that after the limit of seven lakhs, TCS of 0.5 percent will be applicable, if the loan is taken for education. There will be five per cent tax for non-loan education and medical treatment. For all other works, there will be 20 per cent tax. International credit card transactions were also brought under its ambit. Following criticism from several quarters, the decision to bring credit card expenses abroad under the LRS has been deferred just before its implementation from July 1. It was not told when it would be brought under the ambit of LRS in future. But the decision to increase the rates of TCS was decided to be implemented from October 1.
what the government said
The Finance Ministry said that it has been decided that the rate of TCS is not going to change for all transactions under LRS and for foreign travel tour packages. It has been decided to give more time to implement the change in TCS rates and to include credit card payments in LRS. The purpose of postponing the decision is to give banks and card networks enough time to implement it. Presented answers to frequently asked questions on this issue to the Finance Ministry on Friday.
what was the problem
Experts are saying that the clarification of the Finance Ministry shows that there are problems in the government’s decision. More changes can be seen on this in the coming time because it is difficult to implement in the present form. It is also not in accordance with the spirit of ease of doing business. Significantly, the banks had said that our system is not ready for this tax change. Forex dealers and tour operators were also counting the same problem. It is being said that if the government wants to stop spending abroad, then it is against the basic spirit of LRS. If the move is aimed at widening the tax net, it would be complicated. Some experts say that this issue can be raised in the Parliament. If this issue is taken up in the monsoon session, then many confusions can be cleared.
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