GST: Indians travelling overseas may need to pay more for foreign currency notes

NEW DELHI: Indians travelling overseas may need to pay more for foreign currency notes they buy at home before leaving if the customs department has its way and imposes goods and services tax (GST) on their import into the country. Banks say they are perplexed at the customs department levying integrated GST ( IGST) on such consignments, which are exempt from basic customs duty, and have sought a clarification from the government.

Imports of currency could face 12% IGST if the government decides in favour of the customs department, which will make the notes costlier. A notification under GST categorically exempts rupee notes transfer to the Reserve Bank of India but not by banks.

The move has led to foreign currency consignments getting stuck. “Stocks have been held up at the ports as there is a lack of clarity on the issue,” said a bank official. These officials say money doesn’t qualify as ‘goods’ as defined by law under the new tax framework.

Industry expects the government to sort out the matter quickly. “Clearly, the intention cannot be to levy IGST on import of foreign currency,” said Pratik Jain, leader, indirect taxes, PwC. “We should expect a clarification from the government soon.”

Banks and RBI import foreign currency. Notes are covered under the customs Act entry that includes unused postage, revenue or similar stamps of current or new issue in the country in which they have recognised face value, stamp impressed paper, bank notes, cheque forms, stock, and share or bond certificates. But paper money is exempted from customs duty and additional customs duty as per a notification of 2003.

The IGST and Central GST (CGST) laws have a similar entry, notifying the rate of tax applicable on bank notes at 12%, exempting “rupee notes sold to RBI”.

This has prompted the customs authorities to impose IGST on import of foreign currency notes. The banking industry feels that currency should not fall within the purview of GST as ‘goods’ under the GST law. It says this definition specifically excludes money and securities while covering every kind of movable property.