When you convert currency for travel, make remittance payments abroad, or receive foreign money through exchange dealers, you might notice a small GST charge. This blog explains the GST implications on foreign exchange transactions under Rule 32(2) of the CGST Rules, 2017, in a simple and practical way.
Legal Provision: Rule 32(2) of CGST Rules
Rule 32(2) provides a special valuation method for determining the taxable value for currency exchange services. Instead of charging GST on the actual profit margin, the law allows a presumptive valuation method (fixed slab-wise value) to calculate GST.
This is primarily used by:
- Authorized money changers
- Banks and forex dealers
- Tour operators providing currency conversion services
Taxability and Applicability
- GST applies on foreign currency sale, purchase or conversion.
- Applicable on services provided by money changers to individuals or businesses.
- GST is charged @ 18% on the taxable value (not on total forex amount).
Presumptive Valuation Scheme (Default Method)
| Forex Transaction Amount (in INR) | Taxable Value (Deemed Value) |
| Up to ₹1,00,000 | 1% of gross amount (min ₹250) |
| > ₹1,00,000 and ≤ ₹10,00,000 | ₹1,000 + 0.5% of amount exceeding ₹1L |
| Above ₹10,00,000 | ₹5,500 + 0.1% of amount above ₹10L (max ₹60,000) |
GST @ 18% is applicable on the deemed taxable value.
Example Calculation
Suppose you exchange Rs. 5,00,000 worth of currency:
- First Rs. 1,00,000 = Rs. 1,000
- Remaining Rs. 4,00,000 = 0.5% of Rs. 4,00,000 = Rs. 2,000
- Total value for GST = Rs. 3,000
- GST @18% = Rs. 540
So, Rs. 540 is GST payable on this transaction.
Optional Method for Banks
Banks or authorized dealers can also opt for actual transaction value-based GST if they maintain proper accounts of profit margin per transaction. However, once selected, they must follow it consistently for the full financial year.
Key Points to Remember
- HSN Code 997157
- 18% GST applies on the calculated taxable value.
- Forex service providers can’t charge GST over and above the Rule 32(2) slab value.
- Choose correct valuation method – fixed slab vs actual margin.
Summary
Understanding Rule 32(2) helps both consumers and money changers stay compliant. If you deal with forex transactions regularly, make sure you are applying the right valuation method.
