July, 2023 – Issue No. I

GST

GSTN has developed a functionality to enable the taxpayer to explain the difference in GSTR-1 & 3B. This feature is now live on the GST portal.  The functionality compares the liability declared in GSTR-1/IFF with the liability paid in GSTR-3B/3BQ for each return period. If the declared liability exceeds the paid liability by a predefined limit or the percentage difference exceeds the configurable threshold, taxpayer will receive intimation in the form of DRC-01B. Upon receiving intimation, taxpayer must file a reply in Form DRC-01B Part B, providing clarification.

INCOME TAX

Sub-section (1G) of section 206C of the Income-tax Act, 1961 (“the Act”) provides for Tax Collection at Source (TCS) on (i) foreign remittance through the Liberalised Remittance Scheme (LRS) and (ii) sale of overseas tour program package.  Through the Finance Act 2023, amendments were carried out in sub-section (1G) of section 206C of the Act. These amendments, inter alia, increased the rate of TCS from 5% to 20% for remittance under LRS as well as for purchase of overseas tour program package and removed the threshold of Rs.7 lakhs for triggering TCS on LRS. These amendments were to take effect from 1st July 2023.

The above two changes were not applicable when the remittance is for education or medical purposes. TCS is not applicable when it is less than Rs.7 lakhs. If it is through educational loan, it is 0.5%. If it is through others, it is 5%.

The Government had notified Foreign Exchange Management (Current Account Transactions) (Amendment) Rules, 2023 vide an e-gazette notification dated 16th May 2023 to remove the differential treatment for credit cards vis à vis other modes of drawal of foreign exchange under LRS in order to bring the credit card payments under this provision.

Now, the Government has taken the following decisions after considering the representations from the trade:

(i) 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. 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. Increased TCS rates to apply from 1st October, 2023.

ii) Threshold of Rs. 7 Lakh per financial year per individual in clause (i) of sub-section (1G) of section 206C shall be restored for TCS on all categories of LRS payments, through all modes of payment, regardless of the purpose. Thus, for first Rs 7 Lakh remittance under LRS there shall be no TCS. Beyond this Rs 7 Lakh threshold, TCS shall be

a) 0.5% (if remittance for education is financed by education loan);

b) 5% (in case of remittance for education/medical treatment);

c) 20% for others.

For purchase of overseas tour program package under Clause (ii) of Sub-section (1G), the TCS shall continue to apply at the rate of 5% for the first Rs 7 lakhs per individual per annum; the 20% rate will only apply for expenditure above this limit.

Increased TCS rates to apply from 1st October, 2023. The increase in TCS rates, which were to come into effect from 1st July, 2023 shall now come into effect from 1st October, 2023 with the modification as in (ii) above. Till 30th September, 2023, earlier rates (prior to amendment by the Finance Act 2023) shall continue to apply.

Earlier and new TCS rates are summarized as under:

Note:

(i) TCS rate in column two shall continue to apply till 30 th September, 2023.

(ii) There shall be no TCS on expenditures under LRS under clause (i) of Sub-section (1G) for the first Rs.7 lakh, irrespective of purpose.

(iii) Government is proposing to make necessary changes in the statutory provisions.