Rule 32 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
A money changer sells USD 10,000 at ₹86 when the RBI reference rate is ₹85.60. The customer pays ₹8,60,000. GST is not charged on ₹8,60,000 — the currency itself is money, outside the levy.
What is taxable is the service of exchanging it, and Rule 32(2) measures it in one of two ways.
Method (a) — the value is the difference between the buying or selling rate and the RBI reference rate for that currency at that time, multiplied by the units. Where no RBI reference rate is available, the value is 1% of the gross amount of Indian Rupees provided or received. Where neither currency is Indian Rupees, it is 1% of the lesser of the two rupee amounts the two currencies would convert to at RBI reference rates that day. Method (b) — an optional slab method. The option under (b) is exercised for a financial year and cannot be withdrawn during the remaining part of that year.
Method (a): the RBI reference rate difference
Value = |transaction rate − RBI reference rate| × units of currency.
Selling USD 10,000 at ₹86 against a reference rate of ₹85.60:
Value = (86 − 85.60) × 10,000 = ₹4,000. GST at 18% = ₹720.
Buying USD 10,000 at ₹85.20 against the same reference rate:
Value = (85.60 − 85.20) × 10,000 = ₹4,000.
The method measures the spread — which is exactly what the money changer earns.
Two fallbacks:
No RBI reference rate for the currency. The value is 1% of the gross amount of Indian Rupees provided or received. This covers exotic currencies for which the RBI publishes nothing.
Neither currency is Indian Rupees. A USD-to-EUR conversion. The value is 1% of the lesser of the two amounts the person changing the money would have received by converting either currency into Indian Rupees on that day at the RBI reference rate.
Method (b): the slab method
At the supplier's option, the value is deemed to be:
| Gross amount of currency exchanged | Deemed value |
|---|---|
| Up to ₹1,00,000 | 1%, subject to a minimum of ₹250 |
| Above ₹1,00,000 up to ₹10,00,000 | ₹1,000 + 0.5% of the amount exceeding ₹1,00,000 |
| Above ₹10,00,000 | ₹5,500 + 0.1% of the amount exceeding ₹10,00,000, subject to a maximum of ₹60,000 |
Worked:
- ₹80,000 exchanged → 1% = ₹800. Value ₹800.
- ₹15,000 exchanged → 1% = ₹150, below the floor. Value ₹250.
- ₹5,00,000 exchanged → ₹1,000 + 0.5% of ₹4,00,000 = ₹1,000 + ₹2,000 = ₹3,000.
- ₹2,00,00,000 exchanged → ₹5,500 + 0.1% of ₹1,90,00,000 = ₹5,500 + ₹19,000 = ₹24,500.
- ₹10,00,00,000 exchanged → ₹5,500 + 0.1% of ₹9,90,00,000 = ₹1,04,500, capped at ₹60,000.
The cap of ₹60,000 is what makes the slab method attractive to high-volume dealers. On a very large transaction, method (a) has no ceiling; method (b) does.
The election, and why it is annual
The third proviso to Rule 32(2)(a): a person supplying the services may exercise the option to ascertain the value in terms of clause (b) for a financial year, and such option shall not be withdrawn during the remaining part of that financial year.
Three practical points:
It is per financial year, not per transaction. You cannot use method (a) for narrow-spread trades and method (b) for wide-spread ones.
It is irrevocable within the year. Once exercised, you live with it until 31 March.
It applies to the supplier, so it should be exercised consistently across the registration. Where a business has multiple registrations, consider whether the election is intended to be uniform.
Which method is better depends on the spread relative to the slab. A dealer running a 0.5% spread will generally do better under method (b) at high values because of the cap; a dealer running a 0.1% spread on large tickets may do better under method (a).
What is being valued
The service, not the currency. Section 2(75) puts foreign currency within "money", and s.2(52) and s.2(102) exclude money from both goods and services. But s.2(102) expressly includes activities relating to the use of money or its conversion, by cash or any other mode, from one form, currency or denomination to another, for which a separate consideration is charged. Securities and money under GST →
That is the supply Rule 32(2) values.
Place of supply for these services within India is under s.12(12) of the IGST Act — the location of the recipient of services where the recipient is registered or the address is on record, otherwise the location of the supplier.
Practical notes
- Record the RBI reference rate at the time of the transaction where method (a) is used. Reconstructing intraday reference rates later is difficult.
- Document the annual election in a board or partner resolution before the year begins.
- Card-based forex and prepaid travel cards carry issuance and reload fees that are separate taxable services — they are not part of the Rule 32(2) value.
- Remittance charges and SWIFT charges are separate supplies, not within the exchange value.
- Rule 32(2) is within Rule 32, which opens "at the option of the supplier" — the special valuation is itself optional, but in practice there is no workable alternative for money changing.
Key takeaways
- Method (a): spread against the RBI reference rate, multiplied by units.
- No reference rate → 1% of the gross rupee amount; no rupee leg → 1% of the lesser rupee equivalent.
- Method (b): slabs of 1% / ₹1,000 + 0.5% / ₹5,500 + 0.1%, floor ₹250, cap ₹60,000.
- The method (b) option is annual and irrevocable within the year.
- The currency is not taxed — only the exchange service.
- Remittance and card fees are separate supplies.
Read next
- Securities and Money Under GST
- Rule 32(3): Air Travel Agent Commission
- Valuation Rules 27 to 35 Explained
- GST on Financial Services
Disclaimer: Positions stated as on 5 September 2026, based on the CGST Rules as amended to 31 March 2026 (ICAI Bare Law, 12th edition).