Executive Summary

Through Circular No. 264/10/2026-GST, the CBIC clarified that the omission of Rule 96(10) of the CGST Rules is applicable retrospectively from October 23, 2017. This provides massive relief to exporters who faced severe litigation and refund recovery notices for claiming IGST refunds while simultaneously utilizing certain concessional import duty notifications.

Background

Rule 96(10) restricted exporters from claiming refunds of IGST paid on exports if they had availed specific customs duty exemptions (like Advance Authorization or EPCG schemes) on imported inputs. This led to widespread confusion, inadvertent violations, and subsequent aggressive recovery notices from tax departments demanding the return of disbursed IGST refunds along with heavy interest.

What Has Changed

Status of Rule 96(10): Circular 264 addresses the retrospective omission of Rule 96(10) with effect from October 23, 2017, removing the provision that had resulted in widespread litigation and disputes for exporters.

Pending Refund Recoveries: Pending recovery demands and related proceedings arising from Rule 96(10) are to be dropped, with previously granted refunds regularised under the revised framework.

Key Provisions

• Retrospective Omission: The restrictive conditions of Rule 96(10) are entirely deleted from the statute books effective October 23, 2017.

• Closure of Proceedings: Any ongoing show-cause notices (SCNs), adjudications, or appeals seeking to recover IGST refunds based solely on the violation of Rule 96(10) will be dropped.

• Regularization: Refunds already granted to exporters during this period are regularized and protected from future audits on this ground.

Applicability

• Covered Entities: Exporters of goods, export houses, and entities operating under Advance Authorization, EPCG, or EOU schemes.

Practical Implications

• Litigation Relief: Crores of rupees locked in tax demands and appellate tribunals will be immediately unblocked.

• Export Pricing: Exporters can aggressively price their global contracts without the contingent liability of refund recoveries hanging over their balance sheets.

What Should We Do

• Audit Ongoing Litigation: Identify any pending SCNs or appeals related to Rule 96(10) and immediately file supplementary submissions citing this circular to quash the proceedings.

• Review Contingent Liabilities: Reverse any contingent liabilities or provisions created in the financial statements regarding these disputed refunds.

KGS Perspective

The retrospective omission of Rule 96(10) is a monumental victory for the export community. It cures a deeply flawed drafting error that penalized genuine exporters. Corporate tax teams must aggressively clear their litigation dockets using this definitive clarification.

Conclusion

Circular 264 permanently resolves one of the most litigated bottlenecks in GST export refunds, restoring financial certainty for India's cross-border trade sector.

Source / Regulatory Reference

• Regulator: Central Board of Indirect Taxes and Customs (CBIC)

• Notification / Circular / Regulatory Reference: Circular 264/10/2026-GST [Dated 26 October 2026]

• Official Document Link: [https://www.cbic.gov.in](https://www.cbic.gov.in)