Foreign Exchange Fluctuation- Forex gains from invoice and Payment date

[Shan S]

When i raise invoice the forex rate is around 89 and when payment is received exch rate becomes 92 and with bank charges the amount received in the bank.

For GST exch rate as per customs 89 is shown in invoice.

For IT presumptive taxation- Gross amount to be taken with exch rate of 92, so the 3rs of forex gains to be shown in any different schedule? for ITR 4

and also there will be a difference in GST total invoice turn over and ITR filing Gross Income, is that fine?

[YAGAY and SUN]

Yes, it is quite common for the GST turnover and the turnover/gross receipts reported in ITR-4 to differ in export of services due to exchange-rate fluctuations and bank deductions.

For GST, the taxable value of the export invoice is determined using the applicable exchange rate rules (typically the RBI/customs-based rate prescribed for GST valuation) on the date of time of supply. Thus, if your invoice is USD 1,000 and the GST exchange rate is Rs. 89, the export turnover reported for GST purposes would be Rs. 89,000.

For Income Tax (ITR-4 / Section 44ADA), professional receipts are generally recognized based on the amount actually realized in INR. If USD 1,000 is ultimately converted at Rs. 92 and the bank credits Rs. 91,800 after Rs. 200 bank charges, the gross professional receipt would ordinarily be Rs. 92,000 and not Rs. 91,800 (bank charges are an expense, though under 44ADA separate expense deduction is not claimed). The additional Rs. 3,000 arising from exchange fluctuation is not normally shown in a separate schedule in ITR-4; it forms part of the professional gross receipts itself. Therefore, gross receipts of Rs. 92,000 in ITR-4 versus export turnover of Rs. 89,000 in GST records is not unusual.

A practical reconciliation would be:

• GST export turnover: Rs. 89,000
• Forex gain on realization: Rs. 3,000
• Gross receipts for Income Tax/44ADA: Rs. 92,000
• Less bank charges: Rs. 200 (not separately relevant under 44ADA)
• Net bank credit: Rs. 91,800

If the difference is material, keep a reconciliation of invoice value, FIRC/BRC, bank advice, and forex conversion statement. During any scrutiny, this adequately explains why GST turnover is lower than the gross receipts reported in ITR-4. Many exporters and freelancers have such differences due solely to exchange-rate movements between invoicing and realization.

AI Summary

Forex fluctuation treatment explains why GST turnover and income tax gross receipts can differ in export services. Exchange-rate fluctuations can create a difference between GST export turnover and income tax gross receipts. GST valuation follows the applicable exchange-rate rule on the relevant date, while income tax receipts under presumptive taxation are generally taken at the amount actually realized in INR. Forex gain arising between invoice date and realization becomes part of gross professional receipts, and bank charges affect only the net bank credit. A reconciliation of invoice value, bank realization, forex gain, and bank advice is useful where the mismatch is material.