TaxTMI 
TaxTMI 
Foreign exchange fluctuation income booked
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....oreign exchange fluctuation income booked<br> Query (Issue) Started By: - Raam Srinivasan Swaminathan Kalpathi Dated:- 28-7-2026 Last Reply Date:- 29-7-2026 Goods and Services Tax - GST<br>Got 3 Replies<br>GST<br>The client had booked foreign exchange translation and transaction income on account of appreciation in US$ rate. This was religiously reported in GSTR-9C for reconciliation purposes. Dep....
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....artment is now demanding GST on this amount. This simply is a notional entry to be mandatorily provided as per Accounting Standard-11 and Rule 34. There is no supply here. There are case laws of the Service-tax era. Sincerely request experts to provide their valuable suggestions. Thanks Reply By Sadanand Bulbule: The Reply: The Department's demand is legally untenable as foreign exchange ....
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....gain is a mandatory accounting adjustment under AS-11/Ind AS 21, not a taxable supply. Under Section 7 of the CGST Act, GST requires a supply of goods or services, whereas currency appreciation pertains strictly to "money," which is explicitly excluded from tax under Section 2(52/102). Furthermore, Rule 34 of the CGST Rules fixes export valuation at the time of supply, meaning subsequent exchan....
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....ge rate gains do not increase taxable turnover. Reporting this gain in GSTR-9C merely reconciles P&L accounting standards with GST returns, and filing a CA-certified reconciliation explaining this non-supply entry is sufficient grounds to have the demand dropped. Reply By Sanjeev Agarwal: The Reply: A concise response (within 2,500 characters) could be as follows: In my view, the demand is....
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.... not legally sustainable if it is based merely on the inclusion of foreign exchange fluctuation income in the GSTR-9C reconciliation. The amount represents notional accounting income arising from year-end restatement of foreign currency monetary items in accordance with AS-11/Ind AS 21. It is an accounting adjustment and not consideration for any supply of goods or services. GSTR-9C requires re....
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....conciliation of turnover as per the audited financial statements with turnover declared in GST returns. Consequently, items such as foreign exchange fluctuation gain appearing in the Statement of Profit and Loss are disclosed only for reconciliation purposes. Such disclosure does not determine taxability under the CGST Act. GST is leviable only on a "supply" under section 7 of the CGST Act. A n....
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....otional foreign exchange translation gain does not involve any supply, consideration, or independent transaction with a customer. It merely reflects the impact of exchange rate movement on outstanding foreign currency monetary assets or liabilities as on the balance sheet date. It is also important to distinguish between: (i) realized foreign exchange gain arising on actual settlement ....
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....of an underlying taxable supply, which ordinarily forms part of the value of that supply in accordance with section 15 read with Rule 34 of the CGST Rules, and (ii) unrealized/translation gain recognized at the year end under AS-11, which is purely notional and does not arise from any supply. The Service Tax jurisprudence has consistently recognized that mere foreign exchange fluctuati....
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....on or accounting entries, in the absence of an independent service, do not constitute a taxable service. The same principle supports the GST regime since the charging event continues to be "supply" and not accounting recognition. Therefore, if the amount reflected in GSTR-9C is purely an unrealized foreign exchange translation gain recognized under AS-11, it is only a reconciliation item and ca....
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....nnot be subjected to GST merely because it appears as "Other Income" in the financial statements. The reply to the notice should clearly explain the accounting treatment, distinguish realized and unrealized gains, and emphasize that no taxable supply has occurred. Reply By Raam Srinivasan Swaminathan Kalpathi: The Reply: My sincere appreciation for the support provided by both the respected e....
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....xperts. Most obliged.<br> Discussion Forum - Knowledge Sharing ....