The new 20%TCS is trending on Twitter. Many people are against this new decision by the Central government. Let us look at what this decision means…
Twitter user @ajayrotti said, “TCS on international use of credit cards is not something you should go ahead with. It impacts a lot of business travelers who spend on behalf of the company. It serves no purpose with TCS on the employee's name and it can't be on company name! TCS is being introduced for the collection of data on transactions and not as a tax. Banks can be asked to share data on Credit card transactions. TCS as proposed is not a good idea from the perspective of "ease of business" And 20% is too high notwithstanding all that I have said above. It is clearly a provision that needs a rethink. The proposal to introduce it needs to be dropped. Overseas payments can't go unnoticed. Agreed. But please don't throw the baby with the bath water.”
@RMantri said, “What a disaster. This is going to be a compliance nightmare. The TCS rule too would add to the paperwork. Lots of business-related software, hosting, and IT expenses are done on personal credit cards and then reimbursed. All subject to LRS + TCS now? Is this some weird way to make the case for raising the LRS limit…”
@deepakshenoy “This is big. Removing rule 7 changes the game. Every international credit card transaction, from today, made by an individual => will be under LRS limits. Means 5% TCS till July 1. And 20% Tax collected at source after that. (Can be adjusted against other taxes)”
@connectgurmeet said, “20% TCS on credit card use outside India. The biggest risk to India's story is Finance think tank. Keep changing taxes n increase the burden on the same 4-5 cr people who pay tax -thru STT, capital gain, dividend, TCS, angel tax, fringe benefits tax, etc. Speed breaker mindset- instead of catching d erring people, make everyone suffer!”
@harshmadhusudan said, “ Anything that can be taxed in a global context can be tracked by definition. Additional TCS on tax-paid money which you will then recover during tax filing achieves what? Working capital for Govt? TDS is on what you owe-one doesn't owe anything here. Even so, 20%? Makes no sense. This is a classic Yes Minister move. First, it is backward-looking. India’s CAD stress was last year - this year and ahead it is rather benign. Second, once they started with a wrong premise (high TCS) then it becomes easy to add: but what about credit cards? No, the premise is wrong. 20% TCS LRS already partially impacted one of PM’s key projects. GIFT City as India’s “Hong Kong” needs the mainland’s liquidity to anchor it as an offshore yet onshore financial global center. At least we should exempt our own projects. IMHO wrong technocratic counsel to leadership. More broadly this is a classic defensive mindset. When America grew in the 19th century, it protected its manufacturing but kept its financial account more open. Hence, didn’t have to face the transition reckoning that Japan did (China is now) in terms of boosting suppressed consumption. India is a democracy. We don’t have any CCP here. All those “leaving Indian citizenship” numbers you see once you normalize them for population, pandemic year, China, etc comparisons adjusted for GDP are benign. The Indian capital is by and large happy to be in India. Why harass them?
In fact, not just Indian - but even global capital and talent find the financial bureaucracy to be overwhelming. If as a retail non-NRI foreign investor you have access to something like Interactive Brokers etc, the India section is always separate and needs more paperwork and so on. If you want to start a foreign co or invest in one that has an Indian subsidiary - then at least till recently you were harassed no end, because you were deemed to have round-tripped. As if genuine guys don’t want access to an India BPO or R&D center etc. This is the final License Raj. Talent is becoming more global - in an economic and cultural sense. There is a flow of influence from all sides to all others. Collaboration happens across boundaries. Barring obvious countries, India must gradually end Capital License Raj and invest more in tracking resources, etc. I understand the duality. But it is psychological more than any policy argument. We are afraid of letting go. Mostly out of good intentions. But we have to believe in ourselves. India is the only country of note which is not in global sovereign bond indices (in its own currency). I genuinely believe this PM-FM-FS-CEA-PMEAC-RBI team is the best we have ever had (outside of near-default emergencies when we had to reform.) It is a specific area, external finance, where there is some internal debate. It is healthy and I am sure it will be resolved eventually.”
