As understood commonly, GST is applicable on import of service, subject to place of supply provisions. But in foreign transactions, the invoice value in the foreign currency remains the same. However, it may change when one converts the value to the local currency. Of course, it is owing to currency value fluctuations.

But what about the taxable value and how to pay the right tax amount without incurring any fines or penalties? Let’s discuss it through this article.

In import of services (apart from associated enterprises), the taxable amount is valued per the below (Section 13(3) of the CGST Act Rule 34(2) of the CGST rules).

  • When the supplier payment is made within 60 days from the invoice date, the exchange rate per GAAP on the date of the payment.
  • When the supplier payment is made after 60 days from the invoice date, the exchange rate per GAAP on the 61st day. Now this value may vary from the actual value paid finally to the supplier. The linkage between the value of payment in books and the value on which GST is paid should be avoided.

The tax becomes due on or before the 20th of the succeeding month per the time of supply derived based on the above two situations.

Delays in payments attract heavy penalties and interests. Thus, GST must be paid on time, regardless of whether the vendor is paid or not – per the second scenario above, as it is not essential that the consideration should have been paid during the valuation of the taxable value.

But how to pay tax on value not even paid as a consideration to the supplier until then? The value of the taxable supply provision contained u/s 15(1) of the CGST Act says paid or payable. Thus, it isn’t customary for the value to have been paid, which is it could be paid later as well.

The definition of the word consideration u/s 2(31) confirms the understanding that the consideration includes any payment made or to be made.

So, whether a foreign exchange or loss would attract GST or not has two references addressing the concern. First, the foreign exchange or loss is considered as tax paid on the supplier’s final amount. Second, the foreign exchange or loss till the 61st day only is considered since GST becomes due on the 61st day.

We hope this answers your question. Call +91-7722063311 to know more.

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