Let’s face it; when you are exchanging currency for your dream vacation, you’re really only thinking about your travel plans and not about the taxes. You walk up to the money changer, make the payment, and walk away with foreign currency notes (or a forex card), completely unaware that there is a silent tax built into that transaction: GST.
In India, GST on currency exchange is charged in two parts: 18% on service fees or commission, and a slab-based GST on the amount of currency exchanged (ACE). For amounts up to ₹1 lakh, it’s 0.18% of ACE; between ₹1-10 lakh, it’s ₹180 + 0.09% of ACE; and for over ₹10 lakh, it’s ₹990 + 0.018% of ACE.
I know that this may feel a little too difficult to understand. You may still be like, “So how much am I actually paying in taxes?” And honestly, I get it. These percentages and slabs can make anyone feel like they need a finance degree to understand a simple forex transaction.
Understanding the GST Breakdown on Currency Exchange (With Examples)
As I mentioned before, when you exchange currency in India, GST applies not to the entire amount like a flat tax, but on two parts:
1. GST on Service Fees/Commission/Charges
Every time you exchange currency (whether it’s cash, forex card, or wire transfer), there is a service fee that the service provider can charge you. On that fee, the government charges 18% GST.
For example, suppose a money changer charges ₹200 as a service fee, then GST = 18% of ₹200 = ₹36. Total fee = ₹200 + ₹36 = ₹236
This GST always applies to the fee/commission only. It does not apply to the total amount of currency you are buying or selling. That is handled separately under slab-based GST (described in the next point).
2. Slab-Based GST on Amount of Currency Exchanged (ACE)
The government imposes GST on the amount of currency exchanged (ACE) in a slab-based manner, meaning that the GST rate is dependent upon the amount of currency you are exchanging.
Here’s how it works:
| Amount of Currency Exchanged (ACE) | GST rates | Minimum GST | Maximum GST |
|---|---|---|---|
| Up to ₹1 lakh | 0.18% of ACE | ₹45 | ₹180 |
| Between ₹1 lakh and up to ₹10 lakh | ₹180 + 0.09% of ACE | ₹180 | ₹990 | Above ₹10 lakh | ₹990 + 0.018% of ACE | ₹990 | ₹10,800 |
Example 1: You exchange ₹20,000, GST = 0.18% of ₹20,000 = ₹36. Since ₹36 is less than the minimum GST threshold, you will be charged ₹45 as GST.
Example 2: You exchange ₹90,000, then GST = 0.18% of ₹90,000 = ₹162 (falls under the maximum limit). So, GST charged = ₹162
Example 3: You exchange ₹3,50,000, GST will be ₹180 + 0.09% of ₹3,50,000 = ₹180 + ₹315 = ₹495.
Example 4: You exchange ₹15,00,000, GST will be ₹990 + 0.018% of ₹15,00,000 = ₹990 + ₹2700 = ₹3690.
Total GST Amount You’re Paying on Currency Exchange
Let’s put it all together. Say you’re exchanging ₹3,50,000 to buy foreign currency and the money changer charges you a ₹300 service fee.
GST on service fee: 18% of ₹300 = ₹54
Slab-based GST on ₹3,50,000: ₹180 + 0.09% of ₹3,50,000 = ₹495
Total GST = ₹54 + ₹495 = ₹549
So, on top of the foreign exchange rate markup and service fee, you are also paying ₹549 in GST. While this doesn’t seem like a big amount for a large transaction, it adds up, especially if exchanging money a few times or for a large group/family.
Can You Avoid GST on Currency Exchange?
In short, no, as it is a government-mandated tax. Whether you go to your bank, a retail online forex marketplace such as BookMyForex or an airport travel money changer, GST will be added on top of your transaction.
I know that paying GST on foreign exchange can seem like rubbing salt in the wound when you are already paying a service fee and exchange rate markup! However, you can mitigate your overall costs by:
1. Using forex platforms with low or zero service fees.
2. Limiting multiple small transactions (which might attract the minimum GST repeatedly)
3. Using reliable forex providers that display the GST amount transparently upfront
4. Booking forex online, where rates are better than banks or offline money changers
5. Understanding the slabs to spot unfair charges in case someone is overcharging under the GST label
6. Comparing the total cost (rate + service charges + any other fees + GST) and not just looking at the exchange rate
7. Keeping transaction receipts. This can help if there’s a discrepancy or refund claim later
What If You Cancel Your Forex Order? Is GST Refunded?
Let’s say you booked your forex order online but then changed your mind and cancelled your order (maybe your trip was cancelled, or you found a better deal somewhere else). Now you’re probably thinking: “Will I receive the GST back too?”
In most situations, the service fee (if applicable) is deducted as a cancellation charge, and the remaining amount will be given back to you.
The GST that was charged on that service fee is generally not refundable, since it’s a tax imposed by the government. In fact, even if the provider has agreed to refund the base fee, the tax portion may not come back to you.
That being said, policies vary from forex provider to forex provider. Some providers may offer full refunds inclusive of GST if the transaction has not been processed at all. Others may hold GST even on an unprocessed order.
As such, it is crucial to thoroughly read the cancellation and refund policy before confirming your forex booking, if there is any uncertainty surrounding your travel plans.
About the Author
Bhawna Nijhawan is the Content Manager at BookMyForex and the go-to person for creating engaging, informative content that resonates with the platform’s diverse audience. With over 8 years of experience in content writing and more than 4 years in the forex industry, she knows exactly how to simplify complex forex topics into something everyone can relate to.
