Global Tax Guru: Export price in foreign currency is to be converted with RBI notified exchange rate

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Tuesday, September 18, 2007

Export price in foreign currency is to be converted with RBI notified exchange rate

Every month The RBI issue exchange rate for export and import for a month. We have different rate for Export and import.Even though both are part of international business.But in day to day business we have fluctuating exchange rate.It changes almost every day.Therefore, it may be poosible that price paid to your buyer or importer may be different in rupee terms .In dollar or other foreign currency,it may be same.The invoice price and remittance paid to foreign person is same.The loss or gain may be in rupees terms to you.
Most of company hedge the foreign currency payment but they have to pay hedging charge to the bank.The recent rise in rupee became loss of profit margin in rupee payment for export cargo.However,the import into India is becoming cheaper on account of rupee rising.
Other option is receive price in more stable currency with respect to Rupees.