A recurring panic: someone exchanges ₹5 lakh, sees "GST 18%" on the receipt, and works out that they have been charged ₹90,000 in tax. They have not. GST on money changing is charged on a deemed value of the service — a small slab of the amount — not on the amount itself. Once you have seen the arithmetic once, the receipt stops being alarming.
The rule behind it
Rule 32(2)(b) of the CGST Rules sets a deemed value of supply for foreign exchange transactions. The 18% rate is applied to that deemed value. The slabs are fixed and they are the same at every authorised dealer in the country, which makes this one of the few numbers on a forex quote you can verify yourself.
- Up to ₹1,00,000 — 1% of the gross amount, with a minimum deemed value of ₹250.
- ₹1,00,001 to ₹10,00,000 — ₹1,000 plus 0.5% of the amount above ₹1,00,000.
- Above ₹10,00,000 — ₹5,500 plus 0.1% of the amount above ₹10,00,000, and the deemed value is capped at ₹60,000.
Three worked examples
- 1Exchanging ₹50,000. Deemed value is 1% = ₹500. GST at 18% = ₹90. Not ₹9,000.
- 2Exchanging ₹5,00,000. Deemed value is ₹1,000 + 0.5% of ₹4,00,000 = ₹3,000. GST at 18% = ₹540.
- 3Exchanging ₹25,00,000. Deemed value is ₹5,500 + 0.1% of ₹15,00,000 = ₹7,000. GST at 18% = ₹1,260.
Notice what happens as the amount grows: the tax rises, but far more slowly than the amount. The cap means the deemed value never exceeds ₹60,000, so GST on a money-changing service is never more than ₹10,800 however large the transaction.
GST on the service charge is separate
Two different things get taxed on a forex bill and they are easy to confuse. The deemed value above covers the currency conversion. Any service charge or delivery charge the dealer adds is a normal supply of services and carries GST at 18% on its full amount. So a ₹500 service charge carries ₹90 of GST in the ordinary way.
A properly itemised invoice shows both lines. If yours shows a single GST figure with no working, ask for the breakdown — you are entitled to it, and it is the quickest way to tell a transparent dealer from an opaque one.
What to check on your receipt
- The deemed value should match the slab arithmetic above for your amount. It is fixed by rule; there is no dealer discretion in it.
- GST should be exactly 18% of that deemed value, plus 18% of any service and delivery charges.
- The dealer's GSTIN should be printed. Without it the invoice is not a tax invoice.
- If you are a business, your own GSTIN should be on the invoice, or you cannot take credit for the tax.
