The value of supply of services when purchasing or selling foreign currency, including money changing, shall be determined by the supplier of service in the following manner:-

There are two methods available for determine the value of supply for foreign exchange conversion services:-

First Method: – Calculation Based Under Rule 32(2)(a) of CGST Rule 2017

Where one currency exchanged is Indian Currency

√ Scenario 1:- RBI Reference Rate is available

Cases Formula
Purchase of  Foreign Currency (RBI reference Rate -Buying Rate)*Total units of currency
Sale of  Foreign Currency (Selling Rate-RBI reference Rate)*Total units of currency

Illustration 1: MR. Sachin authorized money changer sold US $ 500 @1 US $ = 70 Rs. RBI Reference Rate is 69 per US $.

In the above illustration the Value of supply is (70-69)*500= 500 INR.

GST Will be levied on 500 INR.

> GST is 500 * 18% = 90

Illustration 2: – MR. Sachin authorized money changer purchased US $ 500 @1 US $ = 70 Rs. RBI Reference Rate is 72 per US $.

In the above illustration the Value of supply is (72-70)*500= 1,000 INR.

GST Will be levied on 1000 INR.

> GST is 1000 * 18% = 180

√ Scenario 2:- RBI Reference Rate is not available

Value is 1% of Gross Amount of INR provided or received, by the person changing the money

In the above Illustration 1 if RBI reference rate is not available then value of supply is 1% of 35000= 350

> GST is 350*18% = 63

Where none of the currency exchanged is Indian Currency

Value= 1% of lesser of the Amounts If both the currency converted into INR then the amount received on converting to INR.

Illustration 2:- Mr. Sachin wants to convert 500 US dollar into UK pound.  USD 500 is converted into 300 POUNDS. Then first we have to calculate both the currency into INR then the value of supply would be 1% of the lesser amount in Indian currency. (RBI Reference rate is US Dollar is 1= INR 70 and UK pound is 1= 100 INR)

Now,

US dollar into INR is 500*70    = 35,000

UK pound into INR is 300*100= 30,000

Value of taxable service = 1% *30,000 (Lessor of 30,000 or 35,000) = 300/-

> GST is 300*18%= 54

Second Method: – Slab Based Under Rule 32(2)(b) of CGST Rule 2017.

Condition: Once opted, this method cannot be withdrawn during the remainder of the financial year

S.No Gross amount of currency exchanged Value of Supply
(A) (B) Result
1 Amount up to 1,00,000 1% of the gross amount of currency exchanged Rs. 250 Whichever is Higher (A) or (B)
2 An amount exceeding 1,00,000 rupees and up to 10,00,000  rupees;  0.50% of the (total amount of currency exchanged less 1,00,000) Rs. 1,000 A + B
3 Amount exceeding 10,00,000  0.10% of the (total amount of currency exchanged less 10,00,000)  + Rs 5,500 Rs. 60,000 Whichever is Lower (A) or (B)

Illustrations

S.No Gross amount of currency exchanged Value of Supply
(A) (B) Result (Value of Supply)
1 Rs. 8,000 80 250 250
2 Rs. 80,000 800 250 800
3 Rs. 8,00,000 3,500 1,000 4,500
4 Rs. 80,00,000 12,500 60,000 12,500
5 Rs.8,00,00,000 84,500 60,000 60,000

DISCLAIMER: The views expressed are strictly of the author. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of author.

Your queries and suggestions are most welcomed. Author may be reached out at [email protected]

Author Bio

Qualification: CA in Job / Business
Company: N/A
Location: New Delhi, New Delhi, IN
Member Since: 25 Oct 2018 | Total Posts: 1

More Under Goods and Services Tax

8 Comments

  1. Satish says:

    Dear Sir,
    1. Can exercise the both the options. For example if transaction value is upto one lakh we used 1st Option and for transaction value more than one lakhs second option in same FY.
    2. How to get RBI reference rate
    3. If we used this rule for valuation, we can input credit on our inward supplies.

    Please clarify us.
    Thank you

  2. Taxpert says:

    DISCLAIMER: The views expressed are strictly of the author. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of author.

    Your queries and suggestions are most welcomed. Author may be reached out at [email protected]

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