Usd invoicing for residential customers

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

14 March 2014 A client company has done Invoicing in USD to Resident customers with instruction on the invoice to pay in INR at the spot rate at the day of payment .Is it Allowed ? IS there violation of any of the AS/Law in this ?What are the other repurcussions of the same?

Nikhil Kaushik

Nikhil Kaushik (Expert)
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18 March 2014 there is no violation. for all practical purposes it is INR billing only as the client will not pay in dollars but in spot equivalent in cash.

Querist : Anonymous

Querist : Anonymous (Querist)

15 April 2014 the sales invoice would be entered at the rate of exchange present on the day of invoicing but the cash received in INR would vary .The difference between the two would be Realised exchange difference.Right?
Also the service tax is collected on the invoice amount converted in INR .would this make any difference from service tax point of view.

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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02 August 2025 Here's the detailed insight on your query about USD invoicing to **resident customers** with payment in INR at spot rate:

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### 1. **Is invoicing in USD with payment in INR allowed?**

* Yes, it **is allowed** to issue invoices in foreign currency (USD) even to resident customers as long as the payment is actually received in Indian Rupees (INR).
* The instruction on the invoice to pay INR equivalent at the spot rate on the date of payment is acceptable.
* This is a **common commercial practice**, especially for companies dealing with imports/exports or multinational clients.
* There is **no violation** of accounting standards or foreign exchange regulations here, because the actual settlement is in INR.

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### 2. **Accounting treatment / AS impact**

* According to **Accounting Standards (AS) 11 on The Effects of Changes in Foreign Exchange Rates**,

* The **sales invoice** should be recorded at the **exchange rate prevailing on the date of invoicing**.
* When payment is received, if the exchange rate differs from the invoicing day, the difference is treated as a **realized foreign exchange gain or loss**.
* Hence, your understanding is correct — the realized exchange difference arises when cash is received at a different rate than invoiced.

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### 3. **Service Tax implications**

* Service tax is levied on the **value of taxable services**.
* When the invoice is raised in USD but payment is received in INR, for service tax purposes, the taxable value should be **converted into INR** based on the **exchange rate on the date of invoice** (or as prescribed by law).
* The **exchange difference (gain or loss)** that arises later when INR is received at a different rate is **not considered for service tax**.
* So, as long as service tax is calculated and paid on the INR equivalent of the invoice amount (at the invoicing date rate), there is **no issue**.

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### 4. **Other repercussions**

* There may be **currency fluctuation risk** due to difference between invoice date rate and payment date rate.
* Proper **disclosure in financial statements** regarding foreign currency transactions is important.
* The company should also maintain compliance with **FEMA regulations** — ensure all foreign exchange transactions are properly documented and repatriated (if applicable).
* No other direct regulatory repercussions arise from invoicing in USD with INR payment for resident customers.

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If you want, I can help draft a sample note for your accounts or explain the entries for such transactions. Would you like that?

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