Accounting entry for forex transaction

If the Payment is directly received in Bank from Foreign. No other Party involved [except RBI]. Then their Charges are Correct, but they can take GST on their services.

For Entry purpose, you just give Bank Charges.

ITC applicable.

NOTE: THERE ARE MANY IRREGULARITY IN AUTHORITIES & ENTITIES. WHAT TO DO, EVEN BANKS ARE SOME TIME DID WRONG CALCULATIONS.

@ anil

How you have deal with the situation

Kindly share your experience

In purchase entry, we show taxable value and after this we reverse taxable entry by journal.

the taxable value as stated by you is Rs 6534.17, that means the amount of foreign currency converted in INR is Rs 2034170/-,

the bank charges of Rs 6534.17 has been included in the amount of conversion as it is a consolidated amount being deducted from your bank account, it does not show up separately in the payment advice received from the bank. 

so the correct entry would be as follows

advance to supplier DR. 2027636 (2034170 - 6534)

to bank 2027636

(Being advance for import to supplier)

Bank charges Dr 6534

CGST 588

Sgst 588

to Bank 7710

(Being Bank Charges on foreign currency conversion and GST)

Yes, i do the same !

I do journal entry in Tally as under:-

Dr Bank charges Rs 500

Dr Input CGST 9% Rs 45

Dr Input SGST 9% Rs 45

Dr Input CSGT 9% on Forex Rs 535.74

Dr Input SGST 9% on Forex Rs 535.74

Cr Bank Rs 1661.48

I am also facing same issue.

What about Taxable value of GST on forex?

Where u have booked it?

Please reply.

Thanks

Exchange conversion charges are Not Actually charged by the bank to you. They are simply 'Value of Supply' arrived at to charge the appropriate GST amounts to you. Refer CGST and SGST Rules 32(2). 

For those of you still wondering how to accomplish this entry correctly in Tally, here is how you do it in Tally.

You can pass this entry in Tally under 'Purchase' Voucher (or create a new Voucher-type under Purchase Voucher category, say for example 'Expense'), and follow below steps:

1) In the settings of that Voucher-Type master, first enable zero-valued transactions as 'Yes'.

2) While passing the entry select 'Accounting Mode'. And make sure you can edit GST details (for this you need to go in F12: Settings > with: 'Show more configurations' as 'Yes' > in there, under 'GST Details' section: set the 'Modify Tax Rate details of GST' = Yes)

3) Select your Gst enabled 'Bank Charges' Ledger and enter the amount as 0 (zero), next you will see the 'GST Classification' selection box. Note: Leave blank the Classification/Nature entry field, Tally figures it out automatically. Now below this input field,...

4) If you see an input field to enter 'Taxable Amount' here, enter that Forex conversion amount on which GST is charged, (referring to original post example, say it's Rs 6534.17). NOTE: IF you DONT SEE TAXABLE VALUE input field, Press F12 (Configure option) at that GST classification window, and set the 'Allow override Assessable Value' to 'Yes'. Now you can enter that 'Taxable Amount'.

5) Next, select your applicable IGST, CGST, SGST ledgers and enter your GST amounts (mostly these will auto calculate correctly for you (in our example, CGST Rs 588.08 and SGST Rs 588.08 ).

6) While saving the entry, accept any conflict message with the 'Override without conflict' option.

7) Still, if that entry sits in the Mismatch / Uncertain transactions in your GSTR-3B / GSTR-2 report, then drill down to such entry from within the GSTR-3B report's mismatch section, select that voucher entry and click the option button called 'Accept As is', confirm/accept with 'Yes' if asked -to resolve the error.  Now you can see proper effect of this entry in your GST return -showing the applicable Taxable value and GST amounts, and at the same time, there is NO impact on your P&L, because your Books of Accounts will show Bank charges amount as Zero (Nil) for that entry....I would re-emphasise that the key here is to make sure you enabled the 'allow zero value transactions' in the desired voucher-type, otherwise, Tally will remove the 'Bank charges' ledger from that entry and the taxable value information along with it, leaving no scope to include it in back into your GST return computation; you will have to enable that setting and insert the 'Bank Charges' ledger again in that entry with the desired Taxable value, and then make sure it is included it in your GST report computation --do 'Accept as is' if required.

Hope this helps someone who is still looking for the solution.

BTW, there is also a helpful video on how to do this in Tally. You can search on you tube for GST on Bank Charges Entry in Tally Prime with Foreign Remittance.

I’ve traded in forex myself — or as we usually call it in Spain, forex mercado — and I can confirm that accounting can get tricky when it comes to tracking gains and losses, especially if you're dealing with multiple currency pairs and daily transactions.

In my case, I kept a separate journal for each trading day and used monthly summaries to calculate realized gains for reporting. It’s really important to separate unrealized and realized amounts properly.

Curious how others here approach it, especially from an accounting compliance angle.