GST on Foreign Exchange in India: The Definitive Guide for 2025

If you work with clients outside India or receive money in foreign currency, you’ll often see small GST-related charges on your transactions. These apply because converting or handling foreign currency is treated as a taxable service in India.

For exporters, freelancers, and online sellers, knowing how this tax works helps you avoid confusion, manage costs, and handle documents like Foreign Inward Remittance Certificate (FIRC) or Bank Realisation Certificate (BRC) correctly—especially when your exports are zero-rated.

Continue reading this guide to understand the GST rates on foreign exchange in India, how it is calculated, and what it means for your international payments and regular filings.

Understanding GST on Foreign Exchange Transactions

When you exchange currency or receive money from overseas, the service provider, usually a bank or authorised forex dealer, performs a taxable service under GST. This tax applies not to the money you’re receiving, but to the service of converting or facilitating the transaction. For exporters, freelancers, and SaaS businesses, understanding this helps you avoid confusion when reviewing bank charges or filing returns.

Here are the key points you should be clear about:

• Foreign exchange service refers to converting one currency into another (e.g., USD to INR) or processing an inward remittance.
• GST applies only to the service value, not the full amount you receive in foreign currency.
• Banks, AD-II licence holders, and authorised fintechs charge GST on the forex service they provide.
• Rates vary based on slabs defined by the government, and the taxable value is calculated using RBI reference rates.
• Export transactions remain zero-rated, but forex conversion charges for receiving money can still carry GST.

GST Rates and Calculation Methods for Currency Exchange

When you exchange currency or receive money from overseas, the GST you pay depends on how your bank or payment provider calculates the value of the service. These rules are applied consistently across banks, authorised dealers, and fintech platforms. Knowing how this value is computed helps you verify the charges and avoid paying more than necessary.

Foreign exchange conversion services carry 18% GST, and the taxable value is computed using one of two methods prescribed under Rule 32 of the CGST Rules, 2017.

Method 1: Calculation-based

Used when one currency is INR and an RBI reference rate is available.

• The taxable value is the difference between the transaction rate and the RBI reference rate, multiplied by the units of currency exchanged.

Suppose you convert $4,000 into INR. Your bank offers a rate of ₹84.50 per USD, while the RBI reference rate for the day is ₹84.10.

The taxable value will be the difference between the two rates:

→₹84.50 – ₹84.10 = ₹0.40
→₹0.40 × 4,000 = ₹1,600

GST at 18% will be applied on this ₹1,600 service value.

• If the RBI reference rate is not available, the taxable value becomes 1% of the total INR amount received or supplied.
• This method is commonly used for routine USD–INR or EUR–INR conversions where the RBI publishes daily rates.

Method 2: Slab-based 

Here, the service value is derived from fixed slabs based on the INR value of the transaction:

Banks and authorised dealers must follow the same calculation method for the entire financial year, so the way your charges are computed stays consistent. 

GST Calculation Methods for Forex Transactions

Zero-Rated Supplies: GST on Export of Services

When you export services to clients outside India, the GST framework treats these transactions differently from domestic supplies. Exports fall under the category of zero-rated supply, which means the exported service itself is not taxed, and you retain the right to claim credits on the input taxes you’ve already paid. This helps reduce your overall cost of servicing global customers and keeps your pricing competitive.

Here are the key points you should know:

• Export of goods and services is treated as a zero-rated supply under GST, meaning GST is not charged on the value of the exported service.
• You are still eligible to claim Input Tax Credit (ITC) on goods and services used to deliver your export services.
• To qualify as an export of service, the supplier must be in India and the recipient must be outside India.
• The payment has to be received in convertible foreign currency (or in INR wherever permitted by RBI rules).
• The place of supply must be outside India for the service to be considered an export.
• Most businesses file a Letter of Undertaking (LUT) on the GST portal so they can export services without paying IGST upfront.
• If an LUT is not filed in time, you may need to pay IGST first and then claim a refund later, which affects cash flow.

FIRC, BRC, and Documentation for Foreign Inward Remittances

When you receive money from an overseas client, your bank issues documents that act as proof of the inward remittance. For exporters, freelancers, and SaaS businesses, this proof is what links your export invoices to the money received from abroad. Without it, refund applications under zero-rated supplies can face delays or queries.

That’s why understanding documents like FIRC, BRC, and FIRA helps you stay prepared during GST verification.

Here’s what you should know:

• Foreign Inward Remittance Certificate and Bank Realisation Certificate serve as primary proof of receiving foreign currency.
• A FIRC confirms the receipt of funds into India and is often required for FEMA compliance and GST refund claims.
• A BRC links the payment to a specific export invoice, which is crucial for validating the export of goods or services.
• The Reserve Bank of India discontinued physical FIRCs for most export‐related remittances in 2016; banks now issue Foreign Inward Remittance Advice (FIRA) and e-FIRC.
• GST authorities review your BRCs or FIRCs/FIRAs while processing refund applications to verify that the export payment was actually received.
• Maintain proper records—invoices, FIRAs, bank statements, and payment credits—to support zero-rated export claims.
• E-BRCs available on the DGFT portal are now commonly used to validate export payments during GST refund applications and audits.

Key Considerations for GST Compliance on Foreign Exchange

If you receive payments from abroad or convert currency regularly, keeping your GST compliance in order is simpler than it seems. You just need the right documents, the right channels, and a clear understanding of how GST applies to your foreign exchange activity.

Here are the essentials you should always keep in mind:

• Register for GST when your turnover crosses the threshold, even if most of your income comes from exports.
• Mark every export invoice as zero-rated, and ensure the invoice follows GST format requirements.
• Keep detailed records of all foreign exchange transactions—conversion slips, bank charges, GST deductions, FIRC/BRC, and payment advice.
• Stay updated on GST changes, especially rules linked to international transactions and export benefits.
• Use RBI-authorised banks or dealers for foreign currency conversions to stay fully compliant with regulations.
• Remember that travel card usage attracts GST, but only on the service fee for loading or reloading the card.

Checklist: GST Compliance for Foreign Exchange Transactions 

• GST registration completed (if turnover exceeds threshold)
• Export invoices marked as zero-rated
• FIRC/BRC collected for all international receipts
• GST on forex service fees reviewed for accuracy.
• Only RBI-authorised channels are used for foreign currency conversion.
• Regularly track updates on GST rules for international transactions.
  

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Conclusion

GST on foreign exchange becomes much easier to manage when you know that it applies mainly to the service fee charged for converting or processing foreign currency—not the value of the currency itself. Having clarity on how banks compute these charges helps you understand your statements better and stay on top of your compliance.

For exporters, GST continues to be favourable because export services are treated as zero-rated. This allows you to claim input tax credit and keep your tax outflow lower. To support your claims and ensure smooth refunds, keep essential documents organised, including FIRAs, BRCs, invoices, and bank statements.

With clear records and an understanding of how GST applies to foreign exchange transactions, staying compliant becomes far simpler.

FAQs

1. Is GST applicable on foreign currency conversion?

Yes. GST applies to the service fee charged by banks or authorised dealers when you convert foreign currency. 

2. How is GST calculated on foreign exchange transactions?

GST is calculated using either the RBI reference rate method or the slab-based method. The RBI method uses the difference between the transaction rate and the RBI reference rate, while the slab method applies fixed percentages based on the INR value of the exchange.

3. Are international payments for export services subject to GST in India?

No. Payments you receive for exporting services are treated as zero-rated under GST, so you don’t charge tax on them.

4. What is the role of FIRC and BRC in GST compliance for exporters?

FIRC and BRC serve as proof of receiving foreign currency for exports. These documents are required to claim GST refunds on zero-rated supplies and meet compliance.

5. What is the GST rate on loading an international travel currency card?

GST of 18% applies to the service fee for loading or reloading a travel or forex card. The tax is only on the service component.

6. Do I need to file a Letter of Undertaking for zero-rated exports?

Yes. Filing an LUT on the GST portal allows you to export goods or services without paying IGST upfront, while still enabling you to claim input tax credit.