Exchange rate notified under the Customs to be used for supply of goods in India but billed in foreign currency – AAR Uttarakhand
by ReinHeads Team | Apr 1, 2020
| Facts |
- Bharat Heavy Electricals Ltd (‘the Applicant’) entered into an Engineering Procurement & Construction (‘EPC’) contract with the Chief Engineer/Projects-II, Chennai for Coal based Thermal Power Project
- Under the said contract, the price was mentioned in three currencies namely Indian Rupee, USD and Euro
- Accordingly, for certain supplies under the contract, billing would be done by the Applicant in foreign currency
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| Issue before the Authority for Advance Ruling (‘AAR’) |
- In case the goods are supplied within India and billing is to be done in foreign currency, which exchange rate is to be applied i.e., rate prescribed for export of goods or rate prescribed for import of goods; and
- Any other clarification regarding the application of rate to convert foreign currency into Indian rupees to pay GST
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| Discussion and Findings of the AAR |
- Transaction Value means the price actually paid or payable for supply of goods/ services and the same is used for valuation of supply under the GST regime
- Section 15 of the Central Services and Goods Tax Act, 2017 (“the CGST Act”) provides for the mechanism to determine the value of supply of goods or services between unrelated persons wherein the price is the sole consideration of the supply
- Where it is not possible to determine the value of supply as per Section 15 of the CGST Act, the value of supply is to be determined as per the relevant provisions of the CGST Rules, 2017
- Rule 34 of the CGST Rules, 2017 specifies that exchange rate under the Customs Act, 1962 will be applicable for determination of value of taxable goods under the CGST Act
- The Government of India under the Customs Act, 1962 have issued notifications from time to time to determine the exchange rate of conversion of the foreign currencies applicable on import and export of goods
- The AAR referred letter submitted by the Applicant wherein it was intimated that normally the foreign currency price in the contract is to cover imported content of the material used in setting up of power station in India. In such cases, an Indian company usually imports goods, make foreign currency payment to their supplier and in turn recovers the foreign currency from the customer
- In the view of above, the AAR held that the value of goods, supplied within India and billed in foreign currency, shall be determined as per the provisions of Rule 34 of CGST Rules, 2017 and rate of exchange for imported goods (as notified under Section 14 of the Customs Act, 1962) shall be applicable.
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