Deepak Gupta | Jul 27, 2017 |
GST On Foreign Exchange Conversion Service
As 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
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:
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 |
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 6500 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.
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