Why is GST deducted when I receive a foreign payment?
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Short answer
The GST is on your bank's currency conversion service, not on your export. Rule 32(2) of the CGST Rules, 2017 values a service of buying or selling foreign currency either by the bank's spread over the RBI reference rate or, at the bank's option, by fixed slabs starting at 1% of the amount exchanged up to ₹1 lakh, with a minimum of ₹250.1 HDFC Bank, for example, publishes GST on currency exchanged of 0.18% for amounts up to ₹1 lakh, minimum ₹45.2
A freelance editor in Chennai receives a dollar payment, and the bank's credit advice shows a small GST deduction. Since exports are zero-rated, it looks like a mistake. It is not: the GST is on a different service.
What service is the GST charged on?
The GST is charged on the bank's service of buying your foreign currency and paying you rupees. Rule 32(2) of the Central Goods and Services Tax (CGST) Rules, 2017 sets a special value for any supply of services "in relation to the purchase or sale of foreign currency, including money changing".1 Your export to the client is a zero-rated supply under section 16 of the Integrated Goods and Services Tax (IGST) Act, but the bank's conversion service to you is a separate, domestic supply.13
How is the value worked out?
The bank chooses one of two methods under rule 32(2):1
- Spread method. The value is the difference between the bank's buying rate and the RBI reference rate at that time, multiplied by the units of currency. If no RBI reference rate exists for the currency, the value is 1% of the gross rupee amount.1
- Slab method. The value is deemed to be 1% of the amount exchanged up to ₹1 lakh, minimum ₹250; ₹1,000 plus 0.5% for amounts above ₹1 lakh up to ₹10 lakh; and ₹5,500 plus 0.1% above ₹10 lakh, with a cap of ₹60,000.1 A bank that opts for slabs must keep to them for the whole financial year.1
GST is then charged on that value. HDFC Bank, for example, publishes GST on the amount of currency exchanged as follows:2
| Amount exchanged | GST as published by HDFC Bank |
|---|---|
| Up to ₹1 lakh | 0.18%, minimum ₹45, maximum ₹180 |
| ₹1 lakh to ₹10 lakh | ₹180 plus 0.09% |
| Above ₹10 lakh | ₹990 plus 0.018%, maximum ₹10,800 |
Your bank's figures may differ if it uses the spread method. Check its schedule of charges.
Can you get the GST back?
If you are GST-registered, usually yes. Section 16 of the IGST Act allows input tax credit for making zero-rated supplies, and an exporter supplying under a Letter of Undertaking can claim a refund of unutilised credit.3 Give the bank your GSTIN so its GST invoice is in your registration's name, then match it in your credit statement. If you are not registered, the GST is a cost.
For worked examples, other bank charges and less settled cases such as conversion by a platform abroad, see GST on foreign currency conversion. Confirm credit claims with a chartered accountant.
How did we verify this?
We checked this page against the sources below on 28 October 2026. Read our methodology or report an error.
Frequently asked questions
Is my export taxed because GST appears on the credit advice?+
No. Export of services is a zero-rated supply under section 16 of the IGST Act. The GST on the advice is on the bank's conversion service and fees.13
Can I claim the conversion GST back?+
A GST-registered exporter can generally take it as input tax credit, since section 16 of the IGST Act allows credit for making zero-rated supplies, and claim a refund of unutilised credit under an LUT.3 Make sure the bank has your GSTIN.
Is there a maximum GST on one conversion?+
Under the slab method, the value is capped at ₹60,000. HDFC Bank publishes a maximum GST of ₹10,800 on currency exchanged above ₹10 lakh.12
Does the bank also charge GST on its fees?+
Yes. GST applies to the bank's own commission and charges, such as a remittance certificate fee, as well as to the conversion value.2
This page is general information for Indian service exporters, not tax or legal advice. Rules change and outcomes depend on your facts, so confirm with a chartered accountant before acting.
Keep reading
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