CA Deepak Rathore

CA DEEPAK RATHOREAs per GST law, A person supplying the services of exchange of foreign currency may exercise option to ascertain value in terms of 32(2)b for a financial Year. In service related to supply of foreign currency, including money changing, the problem of valuation always  arise, therefore Govt. has prescribed the consideration should be taken to the difference in the buying rate or the selling rate.

Comparison between GST and Service tax on Foreign Exchange Conversion Service

The Service of supply of foreign currency, including money changing will get cheaper with introduction of GST as the shown Below:

Value of Foreign Currency Exchange(In INR/Per Transaction) GST Rate applicable Under rule 32(2)b of CGST & SGST Rule 2017 Service Tax
Upto Rs. 1,00,000 1% of the Gross amount subject to minimum Rs. 250/- 0.14% of the amount of currency, subject to minimum of Rs. 35/-
From Rs. 1,00,001 to 10,00,000 Rs. 1,000 Plus 0.5% of the Gross amount exceeding Rs. 1,00,000 and upto 10,00,0000 Rs. 140 + 0.07% of the amount of currency exceeding Rs. 1,00,000
Above Rs. 10,00,000 Rs. 5,000 Plus 0.10% of the Gross amount exceeding Rs. 10,00,000 subject to Maximum amount of Rs. 60,000/- Rs. 770 + 0.014% of the amount of currency exceeding Rs. 10,00,000, subject to a maximum of Rs. 6000/-

32. Determination of value in respect of certain supplies. –

(1) Notwithstanding anything contained in the provisions of this Chapter, the value in respect of supplies specified below shall, at the option of the supplier, be determined in the manner provided hereinafter. (2) The value of supply of services in relation to the purchase or sale of foreign currency, including money changing, shall be determined by the supplier of services in the following manner, namely: –

(a) for a currency, when exchanged from, or to, Indian Rupees, the value shall be equal to the difference in the buying rate or the selling rate, as the case may be, and the Reserve Bank of India reference rate for that currency at that time, multiplied by the total units of currency:

Provided that in case where the Reserve Bank of India reference rate for a currency is not available, the value shall be one per cent. of the gross amount of Indian Rupees provided or received by the person changing the money:

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Provided further that in case where neither of the currencies exchanged is Indian Rupees, the value shall be equal to one per cent. of the lesser of the two amounts the person changing the money would have received by converting any of the two currencies into Indian Rupee on that day at the reference rate provided by the Reserve Bank of India.

Provided also that a person supplying the services may exercise the option to ascertain the value in terms of clause (b) for a financial year and such option shall not be withdrawn during the remaining part of that financial year.

(b) at the option of the supplier of services, the value in relation to the supply of foreign currency, including money changing, shall be deemed to be-

(i) one per cent. of the gross amount of currency exchanged for an amount up to one lakh rupees, subject to a minimum amount of two hundred and fifty rupees;

(ii) one thousand rupees and half of a per cent. of the gross amount of currency exchanged for an amount exceeding one lakh rupees and up to ten lakh rupees; and

(iii) five thousand and five hundred rupees and one tenth of a per cent. of the gross amount of currency exchanged for an amount exceeding ten lakh rupees, subject to a maximum amount of sixty thousand rupees.

Let us Understand with the help of Example, how to Calculate Value of Supply

Amount to converted in Rate as per USD RBI Reference Rate Value of Supply *
Rs. 65000 Rs. 65 per USD Rs. 63 per USD 1000*(65-63) =2000
Rs.65000 Rs. 65 per USD Not available 1% of of INR amount =Rs 650
EURO 6500 Not available Not available 1% of USD or EURO whichever is Lower
  • Applicable tax will be levied on the value of Supply.

Calculation of GST Liability Under Rule 32(2)b of CGST & SGST Rule 2017

Gross amount of currency exchanged GST
Rs. 6,500 Rs 250 i.e. 1% of 65000 or Rs 250 whichever is higher
Rs. 65,000 Rs 650 i.e. 1% of 65000 or Rs 250 whichever is higher
Rs. 6,50,000  Rs. 3750 i.e 1000 plus .50 % of 5,50,000
Rs. 65,00,000 Rs 10,500 i.e 5000 plus .10% of Rs.55,00,000
Rs 6,50,00,000 Rs 60,000 i.e 5000 plus .10% of Rs.6,40,00,000 subject to maximum of Rs 60,000

Higher transaction will enjoy lower tax in case of composition scheme as mentioned above.

Suggestion and Queries are always welcome @Deepakrathore.8888@gmail.com

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3 responses to “GST: Foreign Exchange Conversion Service”

  1. Gagan Goyal says:

    This looks Horrendous!!!
    Let’s take a figure of Rs 10 lakh to be converted by an Exporter in INR, then he has to pay Rs 1,000/- + Rs 5,000/- (0.5% of amt converted) = Rs 6,000/- plus 18% GST on that Totaling Rs 7,080/-.
    If this Exporter is working on 5% Profit margin, that is Rs 50,000/- out of Rs 10 lakh, the government will charge over 14% of his total income just to convert the currency.
    I think this requires some serious rethinking on the finance ministries part.

    • Aditya Khetawat says:

      Thanswhy government has exempted exporter from gst regime, indirectly they are collecting gst from exporters

  2. rahul jagtap says:

    Hello,

    We are manufacturer of machinery can we avail,GST credit on currency exchange service

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