Indirect Tax Update No. 39

Click the 'View PDF' option above to download the PDF

Refund on exports – Omission of Rules 89(4A), 89(4B) and 96(10) clarified

Rule 96(10) was introduced in the Central Goods and Services Tax Rules, 2017 w.e.f. 23 October 2017, with the intention to prevent double benefit to exporters, so that exporters who benefited from IGST exemption on procurement under specified notifications could not also claim IGST refunds on export of those goods.
The said Rule was omitted with effect from 8 October 2024 vide Notification No. 20/2024-Central Tax. The omission was made considering the practical difficulties faced by exporters in obtaining export refunds due to the restrictions imposed under Rule 96(10). Therefore, the GST Council, in its 54th Meeting, recommended its removal.
The Rule was omitted without a savings clause. Hence, divergent views emerged on the question as to whether the deletion would apply only prospectively or whether it would also affect pending proceedings relating to periods prior to 8 October 2024.

To address the uncertainty and ensure uniform implementation across field formations, the Central Board of Indirect Taxes and Customs ("CBIC") has issued clarification in Circular No. 264/10/2026-GST dated 26 October 2026.
The Circular takes note of the judgment dated 6 August 2026 passed by the Hon'ble Supreme Court in Special Leave Petition (Civil) No. 24550 of 2025, in the matter of Goodluck India Limited & Anr. v. Union of India & Ors. along with other connected matters. The Supreme Court, in the said decision, had held that, in the absence of any savings clause or sunset provision accompanying the omission of Rule 96(10), the omission would apply to all proceedings pending as on the date of such omission.
While arriving at this conclusion, the Supreme Court relied upon the Constitution Bench decision in Kolhapur Canesugar Works Ltd. v. Union of India [(2000) 2 SCC 536], wherein it was held that Section 6 of the General Clauses Act, 1897 does not automatically apply to the omission of a rule.
The Apex Court reiterated that, where a rule is omitted, pending proceedings can continue only where there is an express provision for their continuance, or a legal device has been incorporated in the statute/rules to preserve such proceedings.

The omission of Rule 96(10) shall be treated as being effective retrospectively from 23 October 2017, being the date from which the rule originally came into force.
All pending proceedings concerning Rule 96(10) are required to be dealt with in accordance with the Supreme Court's judgment.
The same principle shall apply, mutatis mutandis, to the omission of Rules 89(4A) and 89(4B) of the CGST Rules.
Field formations accordingly have been advised to deal with pending proceedings related to Rule 89(4A), 89(4B) & 96(10), in accordance with the said judgment of the Hon’ble Supreme Court.