Learn the concept of Valuation in case of supply of foreign currencies

Rule 32 of the CGST Rules, 2017 provides the valuation method for 5 specified supplies. This rule overrides other rules of valuation. 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 service as per the provisions of Rule 32(2)(a).

Let us understand the said provision through the practical Case Scenario.

Case Scenario

Tisha Money Exchangers sold USD $ @ Rs. 65 per USD. The RBI reference rate is Rs. 64.5 per USD as on that date. If Tisha Money Exchangers opt for compounding scheme under Rule 32(2)(b), what shall be the value of supply, if

(i) The number of units exchanged are USD 1,500.

(ii) The number of units exchanged are USD 5,000.

(iii) The number of units exchanged are USD 16,000.

Solution:

As per Rule 32(2)(b) of CGST Rules, 2017, at the option of the supplier of service, the value in relation to the supply of foreign currency, including money changing, shall be deemed to be the following:

Case	No. of units exchanged (in USD)	Gross amount of currency (GAC) exchanged ( No. of units * Actual rate of exchange)	Value of Supply Applicable			Value of Supply
(i)	1,500	1500 *  65  = Rs. 97,500	1% of GAC = Rs.975	Whichever is higher		Rs.975/-
			Rs. 250
(ii)	5,000	5000 * 65   = Rs. 3,25,000	Rs. 1000+0.5% of (GAC-1,00,000) = Rs. 1000+1125			Rs. 2,125/-
(iii)	16,000	16000*65 = Rs. 10,40,000	Rs.5500+0.1% of (GAC-1000000)= Rs.5540		Whichever is lower	Rs. 5,540/-
			Rs. 60,000

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