The government hasn’t given up on its plan to bring credit cards under the Reserve Bank of India's Liberalised Remittance Scheme (LRS), even though it went back on its earlier order to include the same, sources told CNBC-TV18.
Credit card networks, banks and authorised dealers are gearing up for this eventuality and once systems are in place to account for individual forex remittances via credit cards, an implementation date will be considered, sources said.
Consequently, the rollout will take time and the levy date for the Tax Collected at Source (TCS) levy on credit cards will be much later than October 1, 2023, when the 20 percent TCS kicks in for individual foreign remittances above Rs 7 lakhs, irrespective of purpose and mode of payment.
While banks and authorised dealers are relatively better placed for the rollout, credit card networks and non-banking finance companies are mainly the ones that need time to become compliant with the LRS norms and the 20 percent TCS rate, sources say.
Card network companies like Visa, Mastercard, RuPay, Amex, Diners Club and as well as credit card issuing Non-bank Financial Companies (NBFC), all have to be ready for enabling the deduction of tax at source and report on card transactions above $2,50,000 under the liberalised remittance scheme and the purpose of the same.
Earlier on June 28, the finance ministry had said, "During meetings with the RBl, Banks and Card networks, some financial institutions have desired more time to modify their current lT systems to address issues arising from the implementation of the provision of TCS on credit card transactions.
And 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 May 16 e-gazette notification. 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."
Sources explain, “At that point in time, the decision to postpone the inclusion of credit cards under LRS was probably interpreted as indefinite which is not true. Once the card networks & NBFCs are ready, an implementation date will be decided.“
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