The Central Board of Indirect Taxes and Customs (CBIC) has clarified that the omission of Rule 96(10) of the Central Goods and Services Tax Rules, 2017, will apply retrospectively from October 23, 2017, providing significant relief in pending proceedings concerning restrictions on exporters’ IGST refunds.
Through Circular No. 264/10/2026-GST dated October 26, 2026, the Board has directed field formations to deal with pending proceedings in accordance with the Supreme Court’s ruling on the effect of omitting the rule without a saving clause.
The Board has further clarified that the same treatment will apply, with necessary modifications, to the omission of Rules 89(4A) and 89(4B) of the CGST Rules.
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What Has Changed?
Rule 96(10) was omitted with effect from October 8, 2024, through Notification No. 20/2024-Central Tax. The issue subsequently arose whether its omission would operate only prospectively or also affect proceedings relating to earlier periods.
The latest circular expressly clarifies that the omission will be effective retrospectively from October 23, 2017—the date from which Rule 96(10) had been brought into effect.
This changes the departmental treatment of pending disputes involving the omitted restriction. Tax authorities have now been instructed to apply the Supreme Court’s judgment when dealing with such proceedings.
Why Rule 96(10) Was Introduced
According to the circular, Rule 96(10) was introduced to prevent exporters from obtaining a double benefit.
The restriction was intended to ensure that exporters who benefited from IGST exemptions on procurement under specified notifications could not also claim refunds of IGST paid on export of those goods.
However, the restriction created difficulties for exporters in obtaining export refunds where specified concessional or exemption notifications had been used for inputs.
The issue was considered at the 54th GST Council meeting held on September 9, 2024. Subsequently, Rule 96(10) was omitted through the CGST (Second Amendment) Rules, 2024, with effect from October 8, 2024.
Supreme Court Ruling Behind the Clarification
The CBIC has relied on the Supreme Court’s judgment dated August 6, 2026, in M/s Goodluck India Limited & Anr. v. Union of India & Ors., Special Leave Petition (Civil) No. 24550 of 2025, along with connected matters.
As recorded in the circular, the Supreme Court held that, in the absence of a saving clause or sunset clause accompanying the omission of Rule 96(10), the omission applies to all proceedings pending on the date of omission.
The central issue was whether proceedings under an omitted rule could continue when the law had made no express provision preserving them.
Pending Proceedings Require Express Preservation
The circular states that the Supreme Court relied on the Constitution Bench judgment in Kolhapur Canesugar Works Ltd. v. Union of India, reported in (2000) 2 SCC 536.
As explained by the Board, that judgment held that Section 6 of the General Clauses Act, 1897, does not apply to the omission of a rule.
The Supreme Court reiterated that proceedings under an omitted rule can continue only where an express provision permits their continuation or where a legal mechanism has been incorporated into the statute or rules to preserve them.
In the case of Rule 96(10), the absence of such a provision forms the basis for applying the omission to proceedings pending when the rule was removed.
CBIC Directs Uniform Treatment Across Field Formations
The clarification has been issued under Section 168(1) of the CGST Act, 2017, to ensure uniform implementation across departmental field formations.
Paragraph 6 of the circular expressly states that the omission of Rule 96(10) will be effective retrospectively from October 23, 2017. It accordingly advises officers to deal with pending proceedings concerning the rule in accordance with the Supreme Court’s judgment.
The instruction addresses doubts raised by both taxpayers and tax officers following court decisions on the retrospective effect of the omission.
Similar Treatment for Rules 89(4A) and 89(4B)
The Board has extended the same approach to the omission of Rules 89(4A) and 89(4B).
The circular uses the expression mutatis mutandis, meaning that the treatment will apply with the modifications necessary for those provisions.
Accordingly, the clarification is relevant not only to proceedings under Rule 96(10), but also to proceedings involving the omitted Rules 89(4A) and 89(4B), subject to the applicable circumstances.
What It Means for Exporters
The clarification is particularly significant for exporters whose proceedings concerning Rule 96(10) were pending as on October 8, 2024, the date of omission.
It provides an express departmental direction to apply the Supreme Court’s ruling to those proceedings, including disputes concerning earlier periods during which the restriction operated.
However, the circular does not expressly provide for automatic reopening of cases that have already attained finality, nor does it announce an automatic refund of every amount previously recovered. Its operative direction concerns the treatment of pending proceedings in accordance with the judgment.
The CBIC has asked authorities to issue suitable trade notices publicising the clarification and to report any implementation difficulties to the Board.
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