The government will not count international credit card spending towards the LRS limit and has put off the implementation of the notification that had brought credit cards within the fold indefinitely.
It also deferred by three months implementation of new increased rates for TCS to October One.
For purchase of overseas tour program packages, the TCS shall continue to apply at the rate of 5% for the first Rs 7 lakhs per individual per annum. The increased rate of 20% will apply on expenditure above this limit, it said.
“To give adequate time to banks and card networks to put in place requisite IT based solutions, the government has decided to postpone the implementation of its 16th May 2023 e-gazette notification,” a finance ministry statement said, adding that this would mean that transactions through international credit cards while being overseas would not be counted as LRS and hence would not be subject to TCS.
The government will bring requisite legislative amendment in this regard in due course, it added.ET reported June 24th that the implementation of TCS on overseas credit card spending was uncertain.A detailed circular in the form of Frequently Asked Questions (FAQs) shall be issued to clarify various practical issues in implementing this provision.
Banks and the Reserve Bank had flagged the difficulty in executing the TCS regime on credit cards to the government.
Overseas credit card spending was brought within the fold of the Liberalised Remittances Scheme on May 16 after the finance ministry scrapped Rule 7 of the Foreign Exchange Management (Current Account Transactions) Rules, 2000.
As a result, foreign currency credit card spending came under the ambit of TCS, which is applicable on LRS. The government had raised the TCS rates on LRS to 20% from 5% in the latest budget barring transfers for education and medical treatment.
After facing social media backlash, the government on May 19th issued a statement saying overseas spend of upto Rs 7 lakh on credit cards would not be counted towards LRS and hence not face TCS.
The annual LRS spending limit is currently $250,000 per person, beyond which RBI’s approval is required.
