{"id":2075,"date":"2018-06-19T05:22:05","date_gmt":"2018-06-19T05:22:05","guid":{"rendered":"https:\/\/www.extravelmoney.com\/blog\/?p=2075"},"modified":"2024-08-19T06:44:45","modified_gmt":"2024-08-19T06:44:45","slug":"gst-on-foreign-exchange-transactions-in-india","status":"publish","type":"post","link":"https:\/\/www.extravelmoney.com\/blog\/gst-on-foreign-exchange-transactions-in-india\/","title":{"rendered":"How Much Tax You’ve To Pay On Foreign Exchange Transactions In India?"},"content":{"rendered":"\n
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In India, just like on other commodities and services, a tax is levied on foreign exchange transactions too. With the implementation of the Good and Service Tax (GST) on July 1, 2017, the tax structure for forex services has changed. Contrary to what people imagine, the GST to be paid on forex is actually very less. In fact, it would be just in the range of 0.058% to 0.18% of the total forex transaction! For example, in a forex transaction worth Rs. 1 Lakh, only Rs. 180 has to be paid as tax.<\/strong> In this post, you\u2019ll learn how much tax you have to pay on foreign exchange transactions in India.<\/span><\/p>\n\n\n\n

GST on foreign exchange services in India<\/h2>\n\n\n\n

When performing foreign exchange service like currency exchange, money transfer abroad or buying a forex card, through a money changer or bank in India, the only tax you\u2019ve to pay is the Goods & Services Tax (GST).<\/p>\n\n\n\n

As per the directive on July 1, 2017 from the Government of India, the GST for foreign Exchange transactions is as follows ;<\/p>\n\n\n\n

18% GST will be levied on the portion of the forex transaction which comes under \u201ctaxable value\u201d bracket. Don\u2019t let this \u201c18%\u201d scare you, read further! <\/span><\/p>\n\n\n\n

What does \u201ctaxable value\u201d mean?<\/p>\n\n\n\n

The \u201ctaxable value\u201d is not the final tax that we have to pay. It is simply the value that is liable to be taxed.<\/p>\n\n\n\n

There are 3 slabs of the \u201ctaxable value\u201d.<\/p>\n\n\n\n

Slab 1: Up to Rs 1 lakh <\/strong><\/h3>\n\n\n\n
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1% of the forex transaction is considered as the \u201ctaxable value\u201d, and minimum taxable value is set at Rs 250<\/strong><\/p>\n\n\n\n

What does a \u201cminimum taxable value\u201d of Rs 250 mean?<\/p>\n\n\n\n

1% of Rs 25,000 is Rs 250.
\nThat means for forex transactions up to Rs 25,000, the minimum taxable value is set at Rs 250 and 18% of this \u201ctaxable value\u201d is the GST to be paid, i.e, Rs. 45<\/p>\n\n\n\n

Thus the minimum GST to be paid in Slab 1 is Rs. 45<\/span><\/p>\n\n\n\n

The upper limit can be easily found for Slab 1<\/p>\n\n\n\n

Assuming you are transacting the maximum volume of forex in Slab 1, i.e, Rs. 1,00,000
\n1% of the volume of your forex transactions will be the \u201ctaxable value\u201d = Rs 1000
\n18% of the taxable value will be the final GST\/Tax you\u2019d have to pay on your transaction = Rs 180<\/p>\n\n\n\n

Thus the maximum GST to be paid in Slab 1 is Rs. 180.<\/p>\n\n\n\n

Slab 2: Rs 1 lakh to Rs. 10 lakh<\/strong><\/h3>\n\n\n\n
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1000 + 0.5% of the amount above 1 lakh is the \u201ctaxable value\u201d<\/strong><\/p>\n\n\n\n

For example, if the value of the transaction is Rs 5 lakh then ;<\/p>\n\n\n\n

Taxable value = 1000 (Slab 1) + 0.5% of the amount above 1 lakh (Slab 2) = 1000 + 2000 (0.5% of 4 lakh) = 3000<\/p>\n\n\n\n

Therefore the GST to be paid on a forex transaction worth Rs. 5 Lakh is Rs. 540 (18% of taxable value “3000”)<\/p>\n\n\n\n

Lower limit (1 lakh) of GST to be paid in Slab 2 = 18% of 1000 = Rs 180<\/p>\n\n\n\n

Upper limit (10 lakh) of GST to be paid in Slab 2 = 18% of (1000+(0.5% of 9 lakh)) = 18% of (5500) = Rs. 990<\/p>\n\n\n\n

Slab 3: More than Rs. 10 lakh <\/strong><\/h3>\n\n\n\n
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5500 + 0.1% of the amount above 10 lakh is the \u201ctaxable value\u201d<\/strong><\/p>\n\n\n\n

For example, if your forex transaction is around Rs. 20 lakh, then;<\/p>\n\n\n\n

Taxable value = 5500 + 0.1% of (amount above 10 lakh) = 5500 + 0.1% of (10 lakh) = 6500<\/p>\n\n\n\n

GST to be paid = 18% of 6500 = Rs. 1170.<\/p>\n\n\n\n

The maximum GST for forex transactions is capped at Rs. 60,000.<\/strong><\/p>\n\n\n\n

Now that you know the GST breakup, rest easy knowing that it does not take much in the form of paying taxes even for large forex transactions. Armed with this information, you can easily check if your bank or money changer is charging you unfairly by claiming a higher tax amount.<\/span><\/p>\n\n\n\n

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Also Read:<\/strong> How To Buy Forex Online In India<\/a><\/p>\n<\/blockquote>\n\n\n\n

Frequently Asked Questions<\/u><\/h3>\n\n\n\n

1. How much tax on currency exchange in India?<\/strong><\/p>\n\n\n\n

Tax\/GST is calculated on foreign exchange services not based on the type of transaction but based on the volume of the transaction.<\/p>\n\n\n\n

18% GST will be levied on the \u201ctaxable value\u201d portion of the transaction<\/p>\n\n\n\n

The taxable value is calculated differently for the 3 different slabs ;<\/p>\n\n\n\n