2020 (4) TMI 66 - AAR - GST

Valuation - Rate of Exchange - goods are supplied within India and billing is to be done in foreign currency - application of rate to convert foreign currency into Indian rupees to pay GST. Determination of Transaction Value - HELD THAT - Transaction Value' is the price actually paid or payable for supply of goods and/or services. We also observe that Section 15 of the Act provides the provisions for determining the value of goods and services. It provides the mechanism to know how to calculate the value of goods or services when supply of goods and services is made between unrelated persons and when the price is the sole consideration of the supply - Since the issue in hand is related to valuation of goods supplied within India and billing is being done in foreign currency, thus Rule 34 of the Rules is to be applied here. Which rate of exchange (import or export) shall be applicable as notified by the Board under section 14 of the Customs Act, 1962, to determine the value of goods? - HELD THAT - In exercise of the powers conferred by Section 14 of the Customs Act, 1962, the Government of India issued notification time to time to determine the rate of exchange of conversion of the foreign currencies relating to imported and export goods. In this context, we have peruse the letter dated 23.12.2019 of the applicant wherein they intimated the authority that normally the foreign currency price in the contract is to cover imported content of the material used in setting up of Power Station in India wherein Indian company usually imported goods, make foreign currency payment to their supplier, in turn foreign currency from the customer - in the present case rate of exchange of imported goods shall be applicable in as much as the foreign currency price in the contract is to cover imported content of the material used for intended purpose.

Summary

Issues Involved:
1. Application for advance ruling on valuation issue under CGST/SGST Act, 2017.
2. Determination of exchange rate for billing in foreign currency for goods supplied within India.

Analysis:

Issue 1: Application for Advance Ruling on Valuation Issue
The applicant, M/s. Bharat Heavy Electricals Ltd, sought an advance ruling under Section 97 of the CGST/SGST Act, 2017 regarding the valuation of goods supplied within India. The application was admitted as per Section 97(2)(c) of the Act, which allows for seeking advance ruling on the determination of the time and value of supply of goods or services. The applicant was requested to provide clarification on the provisions of the Foreign Exchange Regulation Act related to billing in foreign currency for domestic clearances. The applicant submitted their defense reply, stating that the foreign currency price in the contract covers the imported content of materials used in setting up the Power Station in India.

Issue 2: Determination of Exchange Rate for Billing in Foreign Currency
The ruling authority examined the legal provisions under Section 15 of the Act, which specifies the transaction value as the basis for valuation of goods and services under the GST Regime. It was noted that when the value of supply cannot be determined under Section 15, the relevant Rules of Chapter IV of CGST Rules, 2017 are to be applied. Specifically, Rule 34 of the Rules deals with the rate of exchange for determination of value of taxable goods. The authority observed that the rate of exchange for imported goods should be applicable in cases where billing is done in foreign currency to cover the imported content of materials used for the intended purpose.

Conclusion:
The ruling authority ordered that the value of goods supplied within India and billed in foreign currency should be determined under Rule 34 of the CGST Rules, 2017. The rate of exchange for imported goods, as notified by the Board under section 14 of the Customs Act, 1962, shall be applicable in such cases.