1. Goods:

• Rule 34(1) of the CGST Rules: The applicable rate of exchange for taxable GST Act, 2017,  goods is notified by the Central Board of Indirect Taxes and Customs (CBIC) under section 14 of GST Act, 2017, the Customs Act, 1962. This rate typically reflects the selling rate of exchange for that currency on the date of the supply (as defined in section 12 of the GST Act). You can find the notified rates on the CBIC website or through official notifications.

2. Services:

• Rule 34(2) of the CGST Rules: The applicable rate of exchange for taxable GST Act, 2017, services is based on generally accepted accounting principles (GAAP). This usually involves using the average rate of exchange prevailing during the period the service was rendered (as defined in section 13 of the GST Act). There’s no specific notification issued by CBIC in this case.

Note:

• Option 1.15 under the GST Act doesn’t directly GST Act, 2017,  relate to foreign currency exchange rates. It refers to a specific valuation option available to foreign exchange service providers for determining the taxable value of their services. This option allows them to apply a fixed percentage on the gross amount of currency exchanged, depending on the transaction value.

EXAMPLE

. Supply of Goods or Services involving foreign currency:

• Scenario: A company in Maharashtra imports machinery from Germany for GST Act, 2017,  €10,000. The date of import is considered the “date of supply” for GST purposes.
• Determining value:
  • Option 1: Use the applicable reference rate for EUR as determined by GST Act, 2017, the Reserve Bank of India (RBI) on the date of import. Let’s assume the rate is ₹85/EUR. The taxable value would be INR 850,000 (10,000 EUR * 85).
  • Option 2: If tax invoices for the imported goods are unavailable, the registered person can estimate the value based on the prevailing market price of similar goods in India on the date of import.

2. Foreign currency exchange service:

• Scenario: A money exchange GST Act, 2017, bureau in Kerala converts USD 1,000 for a customer. The bureau applies a service charge of 1%.
• Determining taxable value:
  • Option 1: Use the gross amount of USD exchanged (USD 1,000) GST Act, 2017, multiplied by the applicable reference rate for USD as determined by RBI on the date of exchange. Assuming the rate is ₹80/USD, the taxable value would be INR 80,000 (1,000 USD * 80). The GST liability would be calculated on this value considering the specific service tax rate for money exchange services.
  • Option 2: As per GST guidelines GST Act, 2017,  for money exchange services, the supplier can also choose a fixed fee structure based on the transaction amount.

FAQ QUESTIONS

• Q: Who needs to consider exchange rates under GST?
  • A: Any registered person supplying or receiving taxable goods or services in a currency other than Indian rupees GST Act, 2017, (INR) needs to determine the value in INR for GST purposes.
• Q: What are the different rules for goods and services?
  • A: The rate of exchange for goods is defined by the Central Board of GST Act, 2017, Indirect Taxes and Customs (CBIC) under section 14 of the Customs Act, 1962, for the date of supply. (Rule 34(1))
  • For services, the rate is determined as per generally accepted accounting principles (GAAP) GST Act, 2017, for the date of supply. (Rule 34(2))

Specific Scenarios:

• Q: How do I find the applicable exchange rate for goods?
  • A: You can access the notified rates through the CBIC website or GST Act, 2017, publications. Alternatively, consult a chartered accountant or tax advisor for assistance.
• Q: What if I don’t have the exact date of supply for services?
  • A: Use the rate prevailing on the date the invoice is issued or the payment is received, whichever is earlier.
• Q: What happens if the invoice for inputs (goods used in production) is not available?
  • A: Estimate the value based on the prevailing market price of the goods on the relevant date specified in section 18 or 29 of the GST Act.
• Q: Can I use a different rate than the specified ones?
  • A: No, except in specific situations like foreign currency exchange services, where defined rules apply

CASE LAWS

1. Determination of Value under CGST Rules:

• Rule 34 of the CGST Rules, 2017: This rule prescribes the methodology for determining the exchange rate for transactions involving foreign currency:
  • Goods: For taxable goods, the applicable rate is notified by the Board under Section 14 of the Customs Act, 1962, GST Act, 2017, for the date of supply.
  • Services: For taxable services, the rate is determined as per generally accepted accounting principles (GAAP) GST Act, 2017,  on the date of supply.

2. Interpretations by GST Authorities:

• Circular No. 34/18/2017-GST dated 05.06.2017: GST Act, 2017, This circular clarified that the reference rate for goods shall be the “seller’s selling rate” notified by the RBI under Section 14 of the Customs Act.
• Circular No. 10/17/2017-GST dated 29.06.2017: GST Act, 2017, This circular further explained the application of GAAP for service transactions involving foreign currency, suggesting that the average rate for the relevant period could be used.

3. Relevant Case Laws:

• M/s. Hindustan Aeronautics Ltd. vs. UOI [2009 (108) ELT 837]: While not GST Act, 2017, directly related to GST, this case established that the “seller’s selling rate” under Section 14 of the Customs Act is the correct method for converting foreign currency for customs valuation purposes.
• Commissioner of Central Excise & Customs, Jaipur vs. M/s. Hindustan Zinc Ltd. [2014 (307) ELT 549]: This case reiterated the use of the “seller’s selling rate” for valuation of imported goods.

4. Recommendations:

• In the absence of GST Act, 2017, specific case laws on GST, consulting the aforementioned provisions and interpretations can provide guidance.
• For specific queries or complex scenarios, seeking advice from a qualified tax consultant is recommended.