06 May 2017
You have to raise bill as per Exchange rate prevailing during Custom clearance date, when it realised you have to book exchange rate during realisation any fluctuation should be booked as Exchange gain/loss
24 July 2024
When preparing an export invoice in USD and considering exchange rate fluctuations, here’s how you can calculate exchange loss as per statutory rules:
### Steps to Calculate Exchange Loss:
1. **Invoice Preparation in USD**: - Prepare your export invoice in USD, specifying the goods, quantity, price per unit, and total amount in USD.
2. **Exchange Rate Determination**: - The exchange rate to be used for conversion should ideally be the rate prevailing on the date of export as per RBI guidelines. This rate can be obtained from: - **RBI Reference Rates**: The Reserve Bank of India (RBI) publishes daily reference rates for major currencies. These rates can be accessed on the RBI's official website or through authorized banks. - **Authorized Dealer Banks**: Banks authorized by RBI also provide exchange rates for transactions. You can check with your bank for the exchange rate applicable on the date of export.
3. **Calculation of Exchange Loss**: - Once you have the exchange rate applicable on the date of export, convert the total invoice amount from USD to INR using this rate. - If, due to currency fluctuations, the rate at the time of realization (when the payment is actually received) differs from the rate on the date of export, an exchange loss or gain may arise.
4. **Recording Exchange Loss**: - Exchange loss is typically accounted for in your books as an expense. It represents the loss incurred due to unfavorable exchange rate movements between the date of export and the date of realization of payment. - The exact treatment of exchange loss in your accounting records should comply with accounting standards (such as Indian Accounting Standards or IFRS).
5. **Statutory Rules and Compliance**: - Ensure compliance with RBI regulations and any applicable tax laws regarding foreign exchange transactions and reporting of exchange gains or losses.
### Example Calculation:
- Suppose you export goods with an invoice value of USD 10K - Exchange rate on the date of export: 1 USD = 75 INR - Total invoice amount in INR: 10K USD * 75 INR/USD = 7.50L INR
If, at the time of realization, the exchange rate has changed to 1 USD = 74 INR, the actual amount received would be:
The exchange loss in this case would be 7.50L INR - 7.40L INR = 10,000 INR.
### Conclusion:
It's crucial to accurately determine the exchange rate on the date of export for proper invoicing and to anticipate any potential exchange gains or losses. Utilizing RBI reference rates or rates provided by authorized banks ensures compliance with statutory rules and helps in calculating exchange losses or gains accurately. If unsure about the process or the specific rules, consulting with a financial advisor or tax expert can provide further clarity and ensure compliance with all regulatory requirements.
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