In India, tax is collected on every commodity and service including foreign exchange transactions. And after the implementation of the Goods and Services Tax on 1 July 2017, the tax structure in India has changed a bit including for the forex transactions. GST levied on forex services is actually relatively low, as opposed to what people believed. It is between the range of 0.058% to 0.18% of the total forex transactions. So, for instance, on the forex transaction of Rs. 1 Lakh, GST paid would be Rs. 180 only. 

What is Foreign Exchange?

Foreign Exchange (Forex) is referred to as the conversion of two different currencies, depending on the economic climate of the respective countries. The currency of a country is valued as per the laws of supply and demand in a free economy. The government of a country may also set the value of the country’s currency. Foreign exchange is managed on a global scale between banks and all the transactions fall under the control of the Bank of International Settlement. 

Factors Affecting Currency Value

The currency value is dependent on marketplaces related to trade, tourism, investment and geopolitical risk. People are required to pay for the goods and services they use in another country. Thus, a tourist needs to exchange their currency as they travel from one country to other. 

How to Calculate GST on Foreign Exchange?

GST on foreign exchange is calculated in the following manner:

• GST on forex is calculated depending on the amount of forex currency transactions. 
• The calculation is divided into 3 slab categories 
• For each slab category, a different tax percentage is calculated 
• Tax percentage is calculated on a different taxable value for each slab 
• The total amount paid is calculated by adding taxable value and respective tax percentage to it 

Foreign Currency Conversion Tax Slab

Goods and Service Tax is paid when performing foreign exchange services like money transfer, currency exchange, or buying a forex card through a bank of India or money changer.

Taxable Value: It is basically the value that has to be paid and not the final amount that we have to pay. 

Slabs	Taxable Value	Tax Percentage
Slab 1	Upto Rs. 1 Lakh	1%
Slab 2	Between 1 Lakh to 10 Lakhs	Rs. 1000 + 0.5% on the amount above Rs. 1 Lakh
Slab 3	Greater than INR 10,00,000	5,500+0.1%

Slab 1

Less than or equal to INR 1,00,000:

1% of the gross amount of currency exchanged, subject to a minimum of INR 250, i.e minimum GST payable is INR 45.

For e.g: On a transaction of Rs 1 lakh, the taxable value would be 1% of 1 Lakh which is Rs.1000. 18% of taxable value is paid on the final amount which is Rs. 180

Slab 2

Greater than INR 1,00,000 but lesser than INR 10,00,000:

INR 1000+0.5% of the gross amount of currency exchanged.

For e.g: On a transaction of Rs.5 lakh, the taxable value would be 1000 (slab1)  + 0.5% (slab 2, the amount above Rs. 1 Lakh) 1000+(0.5% of 4 Lakh) which 1000+2000  =3000. 

The total GST paid will be 18% of taxable value i.e 18% 3000= Rs.540

Slab 3

Greater than INR 10,00,000:

INR 5,500+0.1% of the gross amount of currency exchanged, subject to a maximum of INR 60,000 which is caps GST payable at INR 10,800.

For e.g: On a transaction of 20 Lakh, the taxable value is 5,550+0.1% (amount above 10 Lakh) which is 5,550+0.1%(of 10 Lakh) =Rs.6,500. 

The total GST paid would be 18% of 6,500 = Rs.1170

Foreign Currency  Conversion Tax Calculator 

To make your foreign currency conversion easy tryout conversions here: Tax Calculator

Best International Money Transfer Services in India

The following are the best international money transfer services in India:

• Fly Forex: Fly Forex is a new-age digital platform facilitating international money transfers. It is a cost-effective service that uses real-time exchange rates that are cheaper than banks. It ensures safe and secure transfer and has global licensed partners. It provides a hassle-free service with a 100% online application and KYC process
• Money2India: ICICI bank-supported remittance service that supports money transfers to India only. This provides quicker service to ICICI bank users. It offers competitive exchange rates and 24/7 customer service.
• MoneyGram: It is another popularly used money transfer platform for international transactions. It provides value-for-money services with broader accessibility payment methods, credit card and debit cards, bank loans and online and in-person services. 
  

Also Read: How to get an education loan for studying abroad?

FAQs

So, we hope this blog has provided you with relevant information on what GST on Foreign Exchange in India is.  And if you are planning to study abroad, contact Leverage Edu for full assistance. You can also call us at 1800572000 and book a free session today!