A special rule is laid down to determine the value of supply in case of an exchange of foreign currencies. The rule is as follows :
Option-1
Case 1: Transaction where one of the currencies exchanged is Indian Rupees
Taxable value is the difference between (the buying rate or selling rate of currency and the RBI reference rate for that currency at the time of exchange) multiplied by total units of foreign currency. However, if RBI reference rate for a currency is not available then the taxable value is 1% of the gross amount of Indian Rupees provided/received by the person changing the money.
For example, Mrs. X converted USD 100 into INR 7,600 (INR 76 per USD). RBI’s reference rate at the time of exchange was Rs. 75.
Now the value of supply will be: (76-75)*100 = Rs. 100. GST will be levied on Rs. 100.
In above example if RBI Rate is not available , than Value of Supply will be 1% of Rs 7600 i.e Rs 76 on which GST will be levied
Case 2: Transaction where neither of the currencies exchanged is Indian Rupees
Taxable value will be 1% of the lesser of the two amounts the person changing the money would have received by converting (at RBI reference rate) any of the two currencies in Indian Rupees.
Fore example if 1000USD is Converted to 790 GBP. Than value of supply will be lower of :
USD Converted to INR = 1000 USD to 84000 INR
GBP Converted to INR = 790 GBP to 82160 INR
Thus here value of supply will be 1% of Rs. 82160 (lower of two) - Rs 821.6 on which GST will be levied
Option-2
The person supplying the service may also exercise the following option to ascertain the taxable value, however once opted then he cannot withdraw the during the remaining part of the financial year:
Sr | INR Value | Value of Supply |
1 | Upto ₹1,00,000 | 1% of the Gross Amount of currency exchanged OR ₹250, whichever is higher |
2 | Exceeding ₹1,00,000 and upto ₹10,00,000 | ₹1,000 + 0.50% of the (gross amount of currency exchanged – ₹1,00,000) |
3 | Exceeding ₹10,00,000 | ₹5000 + 0.1% of the (gross amount of currency exchanged – ₹10,00,000) |
To read abour Value of Supply for transactions between related entities and branch transfers please read here
To read abour Value of Supply and treatement of various discounts please read here
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