EXCHANGE RATE FOR EXPORT INVOICE IN GST

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Respected Sir/Mem,

if i have made exports invoice dated 22/11/2019 for USD 10,000.00 (in GSTR-1 Converted in INR value @ 71.84 TT Buying Rate of 22/11/2019) =INR 7,18,400.00 Plus IGST Rs. 1,29,312.00 (paid in GSTR-3B)

in Shipping Bill Invoice Value is USD 10,000.00 @ 70.30 (CBIC Rate) = INR 7,03,000.00 Plus IGST Rs. 1,26,540.00

know i want to Know IGST Refund Amount = 1,29,312.00 or 1,26,540.00 ?

Replies (7)
Quick Summary
For export invoices under GST, exchange rate must be taken as per CBIC notified rate under Section 14 of Customs Act, not market or RBI rates. IGST refund is processed based on CBIC rate matching the shipping bill. Differences with invoice rate may create notional forex gain/loss in accounting but GST refund is strictly based on CBIC rate.

IGST Refund amount will be Rs. 1,26,540/- as Rule 34 of CGST Rules, 2017 inserted vide Notification No. 31/2019 – CT dt. 28.06.2019 with effect from 01.07.2019 specifically provides that in case of goods rate of exchange shall be the same as notified by Board under Section 14 of the Customs Act (i.e. CBIC Rate), for valuation purpose as on the date of supply of goods. Further you have to also amend the GSTR-1 as the value of supply of goods is declared in contravention to the rules prescribed. There may be issue in refund process also as details furnished in GSTR-1 will not tally with Shipping Bill Details. 

Thank you Sir for Such Wonderful Reply,

is this means we can not do accounting our export invoice at Current Market Rate ?

Because of Tacking CBIC rate of Exchange for Exports invoice it is Create Notional (Fictitious) Foreign Gain on Which we have to pay income tax.

 

in Actual we have made invoice on date of Receipt $ from Customer, Hence in reality we have no foreign gain or Loss.

i.e in Above Example we have received $ 10,000.00 @ 71.84 =INR 7,18,400.00 as on 22/11/2019

But as per CBIC rate Invoice Value is $ 10,000.00 @ 70.30 = INR 7,03,000.00

Result is (7,18,400.00 - 7,03,000.00 ) 15,400.00 Notional Gain on Which we have to Pay Income tax @ 30 % Rs. 4620.00 Plus 12 % Surcharge 554.00 Plus Cess 207.00 Total Tax is 5381.00

There is Two Effect 1. Income Tax 5381.00 paid on which is Actual not Income and (Come to 0.75% of Turnover)

                                2. My Turn over Recorded Less by Rs. 15400.00

This is only one Transaction effect it Become Huge Amount for Whole Year,

Last Year in my Books total Foreign Exchange Gain (Notional) have Reported is 1.20 Crore on which i have paid Income tax.

Mr Rajesh, As earlier discussed for GST law, you have to value the goods as per Rule 34 of CGST Rules, and for issuance of invoice you have to adhere to time of supply provisions & issue invoice accordingly. Further, Sec. 31(1) of Act specifically says that you have to raise invoice at the time of removal of goods or before that, thus invoice at the time of receipt of payment invoice can't be issued, as has to be issued while sending goods and accordingly to be recorded in books.

Now coming to the aspect of foreign gain or loss, at the end of year accounts are finally settled on the basis of payment received from buyer. Thus, when you record the invoice the USD rate was 70 per INR and when the payment received is USD rate was 69 per INR, hence balance amount booked as loss and vice-versa.

Thus, no question of notional gain or loss as per my understanding. Correct me if i am wrong.

 

 

 

Dear sir
My 2 Query here:

1. Import Purchases - At what exchange rate should we book import purchase in books as per accounting standards and from where we will get this rate.
2. Exports - at what exchange rate should we book exports sales in books as per accounting standards and where we will get this rate.

Rajesh, hope by the time I am answering the question you might have found your answer. Please revert back to this even if your query is resolved. 

I agree to the answer given by CA jatin duggal for raising of exports invoice and its recording in accounts. Also the said treatment of resulting foreign exchange gain or loss from recording transactions in accounts is correct.

You can see your transaction from this perspective that you raised your invoice on the day of removal of goods or before as per the GST law so you were supposed to receive the amount in Rs.750000 (i.e.USD10000 * 75 CBIC Rate) but after a few days you received Rs.760000 (i.e USD10000*76) as your payment so you are in gain of Rs.10,000 which is foreign exchange gain and shall be credited to profit & loss account. So your point of recording less turnover gets clear here. The gain of Rs.10,000 compensates your reduced turnover so in effect your are not paying extra Income Tax.

Please correct me if am wrong..

 

Thanks all of you

my all query is clear

1. Turnover Recorded less which is Compensated by Forex Gain.

2. i am not paying extra income tax b.coz their is not change if we recorded in turnover then our gross profit increase hence ultimately net profit increase or we recorded in forex gain then also our net profit will increase.

Hi Team,

Please let me know, what if we are providing services exports, there is no shipping bill in place.

Should we follow the exchange rate which is notified by Board under Section 14 of the Customs Act.

https://www.cbic.gov.in/Exchange-Rate-Notifications

Can we follow RBI Rate for services exports.

Awaiting a reply.
 

 

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