Rule 34 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.
An exporter raises one invoice in USD covering equipment and installation. Two different exchange rates apply to the two components, on the same date, under the same rule.
Rule 34 splits goods from services, and the split is not cosmetic — the CBIC notified rate and the accounting rate routinely differ by a rupee or more.
Rule 34(1) — goods. The rate of exchange is the rate notified by the Board under section 14 of the Customs Act, 1962, applicable on the date of time of supply in respect of such goods. Rule 34(2) — services. The rate is the one determined as per the generally accepted accounting principles, on the date of time of supply in respect of such services. Both are keyed to the time of supply, not the invoice date, the payment date, or the shipping date.
Goods: the customs notified rate
Section 14 of the Customs Act, 1962 requires the Board to notify exchange rates for the purpose of valuing imported and export goods. The rates are notified periodically — historically fortnightly — and published with separate buying and selling rates for each currency.
Rule 34(1) borrows that rate for GST purposes. The practical consequences:
- the rate is fixed and published, so there is no judgment;
- it usually differs from the bank rate at which the money is actually received;
- the difference between the notified rate and the realised rate is an exchange gain or loss in the books, and is not a change in the value of supply;
- there is no need to revise the invoice or issue a credit or debit note for exchange movement.
That last point is important and often mishandled. An exchange fluctuation between invoicing and realisation does not alter the taxable value.
Services: generally accepted accounting principles
Rule 34(2) does not name a rate. It points at GAAP, which in India means the applicable accounting standard.
Under Ind AS 21 (or AS 11 for entities not on Ind AS), a foreign currency transaction is recorded on initial recognition at the spot exchange rate on the date of the transaction — with the standards permitting an average rate for a period where rates do not fluctuate significantly.
So a business that consistently uses the RBI reference rate, the SBI TT selling rate, or a monthly average rate, applied under a documented policy in accordance with the standard, is applying Rule 34(2) correctly.
The flexibility is real but conditional: the policy must be consistent and compliant with the standard. Picking a favourable rate transaction by transaction is not GAAP.
Both are keyed to the time of supply
This is where errors cluster. Rule 34 says the rate applicable on the date of time of supply — determined under s.12 for goods and s.13 for services.
So for goods:
- the time of supply is the earlier of the invoice date and the s.31 due date;
- the exchange rate is the notified rate on that date.
For services:
- the time of supply is the earlier of invoice (if within the s.31 period) and receipt of payment, or the date of provision of service where the invoice is late;
- the accounting rate is taken on that date.
A system that converts at the invoice date will be right most of the time and wrong exactly when the invoice was issued late — which is also when the liability moved to an earlier month. When the invoice is late →
Where it matters most
Exports with payment of IGST. The IGST paid on the shipping bill is the amount refunded under Rule 96. A mismatch between the invoice value converted under Rule 34 and the shipping bill value is a common cause of refund holds.
Imports of services under reverse charge. The recipient self-invoices in INR. The rate is the GAAP rate on the s.13(3) time of supply — which for associated enterprises is the date of the books entry.
Long-dated contracts. Milestone billing across months means a different rate for each milestone.
Advances in foreign currency. For services, the advance is taxable on receipt, converted at that date's rate; the balance converts at its own time of supply.
Key takeaways
- Goods — the rate notified by the Board under s.14 of the Customs Act.
- Services — the rate determined per generally accepted accounting principles.
- Both are taken on the date of the time of supply, not the invoice or payment date.
- Exchange gain or loss on realisation is not a change in the value of supply.
- A single invoice covering goods and services may need two rates.
- The GAAP option requires a consistent, documented policy.
Read next
- Rule 35: When the Price Is Tax-Inclusive
- When the Invoice Is Late: What the Time of Supply Becomes
- Refund of IGST Paid on Exports
- Valuation Rules 27 to 35 Explained
Disclaimer: Positions stated as on 5 September 2026, based on the CGST Rules as amended to 31 March 2026 (ICAI Bare Law, 12th edition).