Govt. Reinstates Rule 7 to FEM (CAT) Rules, 2000 | Excludes ICC Usage Abroad from LRS Ambit
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- Last Updated on 3 July, 2023
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Notification No. G.S.R. 472(E); Dated: 30-06-2023
Earlier, the Ministry of Finance vide Notification No. G.S.R 369(E) dated May 16, 2023, omitted Rule 7 of the Foreign Exchange Management (Current Account Transactions) Rules, 2000.
Rule 7 of the Foreign Exchange Management (Current Account Transactions) Rules, 2000, stated the following –
“Nothing contained in rule 5 shall apply to the use of an International Credit Card for making payment by a person towards meeting expenses while such person is on a visit outside India.”
As per Rule 7 of CAT Rules, 2000, the usage of an International Credit Card for making payments towards meeting expenses during an overseas visit was not included in the LRS limit.
However, the Govt. vide notification no. G.S.R 369(E) dated 16.05.2023 revoked the exemption that was available on the usage of International Credit Cards (ICC) while travelling abroad. This means including the usage of International Credit Cards abroad under the purview of LRS. As a result, the limit of ICC transactions during foreign travel would be capped at USD 2,50,000. As the payment via International Debit Cards (IDC) was already included under the preview of the LRS therefore, it led to the differential treatment to usage of the ICC and IDC. Therefore, in order to bring uniformity and prevent the by-passing of the LRS Limits the govt. has decided to omit rule 7.The amended norms were made effective from 16.05.2023.
Later on with a view to give adequate time to Banks and Card networks to put in place requisite IT-based solutions, the Govt. vide press release dated 28-06-2023 postponed the applicability of the amended norms till further notice. Accordingly, the Govt. vide. Notification No. G.S.R. 472(E), Dated, 30-06-2023 has reinstated rule 7 to the FEM (CAT) Rules, 2000 w.e.f 16-05-2023. Therefore, till the time the amended norms are made applicable the usage of an International Credit Card while on a visit outside India will be out of the purview of the LRS.
However, it is to be noted that when a foreign transaction is made using an international credit card while being in India, it is treated as a remittance under the LRS [Clarified by Ministry of finance by releasing FAQs on 18-05-2023] and is therefore subject to TCS.
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