Value of supply in case of sale or purchase of foreign currency, including money changing under GST


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Rule 32 of CGST Rule 2017. Determination of value in respect of certain supplies. –

(1)    Notwithstanding anything contained in the provisions of this Chapter (i.e. Chapter-IV: Determination of Value of Supply), 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:

For Better Understanding of above paragraph with Example:

When exchanged from, or to, Indian Rupees (INR) Value:
(Buying rate/Selling rate- RBI reference rate at that time) * Total units of Currency

Example:
Mr. Viraaj converted USD 1000 into INR 75,000 (INR 75 per USD). RBI’s reference rate at the time of exchange was Rs. 74.
Now the value of supply will be: (75-74) *1000 = INR 1000. GST will be levied on INR 1000

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:

For Better Understanding of above paragraph with Example:

When RBI reference rate for a currency is not available Value:
1% of the gross amount of Indian Rupees received or given by changing of money. (RBI has only Reference Rate for USD, EURO, GBP, YEN)

Example:
In above example, if the RBI reference rate is not available then 1% of INR 75,000 i.e INR 750 will be the  value of supply of service and GST will be levied on INR 750.

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.

For Better Understanding of above paragraph with Example:

When neither of the currencies exchanged is Indian Rupee Value:
1% of lesser of the two amounts the person changing the money would have received by converting any of the  two currencies at RBI reference rate.

Example:
Let’s assume that USD 10000 is converted into 5000 POUNDS. RBI reference rate at that time for USD is INR 75 per dollar, and INR 95 per POUND. In this case, neither of the currencies exchanged is Indian Rupee.
The value of supply is determined as 1% of the least amount on converting to INR. That is,
1. US Dollar converted into Indian Rupees = 10000$ * ₹75 = ₹7,50,000
2. UK Pound converted into Indian Rupees = £5000 * ₹95 = ₹4,75,000
Value of taxable service = 1% * 4,75,000 = ₹4,750/-

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.

For Better Understanding of above paragraph with Example:


Sl NoCurrency exchangedValue of Supply
1Upto ₹1,00,0001% of the Gross Amount of currency exchanged
OR
Rs. 250, whichever is higher
2Exceeding ₹1,00,000 and upto ₹10,00,000Rs. 1,000 + 0.50% of the (gross amount of currency exchanged – Rs. 1,00,000)
3Exceeding ₹10,00,000Rs. 5000 + 0.1% of the (gross amount of currency exchanged – Rs. 10,00,000) subject to maximum Rs. 60000/-
Example
Gross amount of currency exchangedGST
Rs. 9,000Rs 250 i.e. 1% of 9000 or Rs 250 whichever is higher
Rs. 90,000Rs 900 i.e. 1% of 90000 or Rs 250 whichever is higher
Rs. 9,00,000Rs. 5000 i.e 1000 plus 0.50 % of 8,00,000
Rs. 90,00,000Rs 13,000 i.e 5000 plus 0.10% of Rs.80,00,000
Rs 9,00,00,000Rs 60,000 i.e 5000 plus 0.10% of Rs.8,00,00,000 subject to maximum of Rs 60,000

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