Valuation Rules

Service Tax
Valuation of Taxable Service

A money changer is involved in converting one currency to another

There can be 2 cases

1. Conversion of foreign currency into Indian Currency or vice versa
2. Conversion of one foreign currency into another.

#### Conversion of foreign currency into Indian Currency or vice versa

Rate used is

Difference of Buying Rate or Selling rate less RBI Reference Rate

If RBI Reference rate is not available, then value shall be 1% of Gross amount received or charged

#### Conversion of one foreign currency into another.

Following method is folloed

1. Both currency are converted into Indian Rupees at RBI Reference rate
2. Lower of the above is determined
3. 1% of this lower is Value of taxable service

Note:-

Money changer also has the option to opt for abatement scheme

Exam Questions

Question 8
Mr. Ram who has entered into a roll over contract approached NDBC Bank for selling
US \$ 35,000 at the rate of Rs. 60 per US \$. RBI reference rate for US \$ is Rs. 60.50 per US \$ at
that time. However, rate of exchange declared by CBEC for the day is Rs. 61.50 per US\$.
Calculate the value of taxable service.

Question 9
Siddhi Ltd. exported some goods to Samson Inc. of USA. It received US \$ 9,000 as
consideration for the same and sold the foreign currency @ Rs. 61 per US dollar. Compute the
value of taxable service under rule 2B of the Service Tax (Determination of Value) Rules, 2006
in the following cases:-
(a) RBI reference rate for US dollar at that time is Rs. 62 per US dollar.
(b) RBI reference rate for US dollars is not available.
What would be the value of taxable service if US \$ 9,000 are converted into UK £ 4,500. RBI
reference rate at that time for US \$ is Rs. 63 per US dollar and for UK £ is Rs. 101 per UK Pound.

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