Banks race to fix foreign card spend tax collection snags
New Delhi, June 24, 2023
With just a week to go to implement 'tax collected at source' (TCS) on credit card transactions on specific foreign exchange transactions, banks are grappling with problems related to reporting the spends.
They are finding it difficult to identify the transactions and apply the required level of TCS. Besides, the Rs 7-lakh cut on spend may be difficult to implement. Several banks are yet to inform customers on how they propose to implement the norms, which were introduced by the FM at the time of the passage of the Finance Bill, amid a din in the House. While transactions done on debit card were earlier included, those made through credit cards were exempted and now face 20% TCS.
While banks have flagged the issue, the finance ministry hasn't provided clarity on the issue, with several bankers pointing out that it may be tough for them to report the transactions from July 1.
"We have to work out the reporting systems. Banks don't have it now. We will have to see what the notification is and then if there are different slabs, banks will have to work out the reporting system. This can only be done once the details are known. Work is going on but it will depend on the details," said a source.
The government has come under criticism for introducing TCS, especially a higher rate for overseas tour packages, which will quadruple to 20% as well as those made for maintenance of children studying abroad as only college fees and charges for on-campus residence paid directly to colleges will attract the earlier TCS.
"The differential treatment between debit cards and credit cards needed to be removed in the interest of uniformity and equity in the treatment of modes of drawal of foreign exchange and for capturing total expenditures under LRS for prudent foreign exchange management and to prevent by-passing of LRS limits. The RBI had written to the government on more than one occasion, pointing to the need to remove this differential treatment," the finance ministry had said earlier.
Officials in the tax department, however, concede that the decision may have been rushed through without fully weighing the consequences, which the ministry is now seeking to justify.
[The Times of India]
