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Foreign bank charges

996 views 2 replies

Gurumurthi Ramnathan

B.Com

51 Points Posted on 17 April 2025

the clarification on the applicability of Gst under RCM for foreign bank charges

example: Mr A an axis Bank customer, export to Mr B in the USA a Citibank customer. Mr A raised an export invoice for Usd 25000/- and requested axis Bank to handle the realisation of the invoice amount. we received Usd 24950. the deduction is 10USd : forex charges by axis Bank which charged GST
USD 40 : charges for remittance services by the corresponding bank / intermediary bank

1. what is the GST impact. on the foreign bank charges for USD 40

Replies (2)

Rama chary Rachakonda

Master in Accounts & high court Advocate

9615 Points Posted on 18 April 2025

GST Impact on Foreign Bank Charges For the foreign bank charges of USD 40: - *Reverse Charge Mechanism (RCM)*: GST is applicable under RCM on import of services. - *GST rate*: The GST rate for import of services is 18% (9% CGST + 9% IGST or 18% IGST). Calculation of GST - *Convert USD to INR*: Convert the foreign bank charges (USD 40) to INR using the applicable exchange rate (assuming 1 USD = 80 INR, charges would be INR 3200). - *GST calculation*: Calculate GST on INR 3200 @ 18% = INR 576. GST Payment - *Recipient liable*: As the recipient of the service (Axis Bank), you're liable to pay GST under RCM. Accounting Treatment - *Debit*: Bank charges (INR 3200) - *Debit*: Input tax credit (INR 576) - *Credit*: GST payable (INR 576) Input Tax Credit You can claim input tax credit for the GST paid on foreign bank charges, subject to the provisions of the GST Act. By following these guidelines, you can accurately calculate and account for GST on foreign bank charges.