The Central Board of Indirect Taxes and Customs (CBIC) has clarified that payments for export of services received through specified repatriable Indian rupee accounts can satisfy the payment condition under the Integrated Goods and Services Tax Act, 2017. It has also recognised RBI-compliant set-offs of export receivables against import payables and the net retention mechanism used by reinsurance brokers.
In a separate clarification concerning export of goods, the Board has stated that GST refunds should not be recovered under Rule 96B of the Central Goods and Services Tax Rules where an authorised dealer bank has written off the requirement to realise export proceeds, wholly or partly.
The clarifications have been issued through Circular No. 263/09/2026-GST, dated October 26, 2026, following references from field formations on issues relating to GST refunds. The Board has invoked its powers under Section 168(1) of the CGST Act to ensure uniform implementation.
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Service export payments through repatriable rupee accounts recognised
The circular addresses uncertainty over whether service export payments received through repatriable rupee accounts meet the requirement under Section 2(6)(iv) of the IGST Act.
CBIC has clarified that this condition is fulfilled where payment for services exported by an Indian exporter is received in convertible foreign exchange or through repatriable rupee accounts, including a Special Non-Resident Rupee (SNRR) account, an INR Nostro account, or another similar account for repatriation of foreign exchange.
The clarification is significant for transactions in which export consideration is settled in Indian rupees through permitted banking channels.
However, the circular addresses the payment requirement specifically. Satisfaction of this condition does not, by itself, establish that a transaction qualifies as an export of services; the remaining statutory conditions must also be met.
Earlier clarification covered Special Rupee Vostro Accounts
The Board has referred to Circular No. 202/14/2023-GST, dated October 27, 2023, which recognised payment of service export proceeds in Indian rupees from Special Rupee Vostro Accounts of correspondent banks of partner trading countries, opened by authorised dealer banks.
That clarification was subject to the conditions and restrictions under the Foreign Trade Policy, 2023, applicable RBI circulars, and permissions or approvals required under other laws.
The latest circular addresses additional permitted account arrangements.
Referring to the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023, CBIC notes that receipts and payments for exports to countries other than Nepal, Bhutan and members of the Asian Clearing Union may be made in Indian rupees or any foreign currency. Permitted rupee settlement channels include INR Nostro or Rupee Vostro arrangements and repatriable accounts such as Special Rupee Vostro Accounts and SNRR accounts.
Clarification for stock brokers serving overseas clients
The circular separately considers stock brokers providing services to overseas clients, including Foreign Portfolio Investors, Non-Resident Indians and Overseas Citizens of India, who pay brokerage in Indian rupees.
CBIC has clarified that payments to brokers through repatriable INR accounts, including SNRR and Non-Resident External (NRE) accounts, may satisfy Section 2(6)(iv) of the IGST Act.
For payments through Non-Resident Ordinary (NRO) accounts, the Board states that, in accordance with RBI guidelines, the payments should be routed through repatriable INR accounts, such as SNRR or NRE accounts, to satisfy the statutory payment condition.
The distinction makes the banking route relevant when assessing whether brokerage received in rupees meets that condition. The circular does not independently determine whether every service supplied by a stock broker to an overseas client qualifies as an export.
RBI-compliant set-offs satisfy the payment condition
CBIC has also clarified the treatment of export receivables adjusted against import payables.
The Board notes that set-off is a valid settlement method under FEMA regulations. Accordingly, where export receivables are set off against import payables in accordance with RBI directions, the payment condition under Section 2(6)(iv) of the IGST Act will be treated as fulfilled.
This recognises permitted settlement through adjustment of reciprocal obligations, even where the transaction does not involve a separate inward remittance for the full export receivable.
The circular refers to earlier RBI guidelines allowing set-offs subject to conditions, including goods against goods and services against services. It states that those conditions would cease to apply with the Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026, coming into effect from October 1, 2026.
The operative qualification remains that the set-off must comply with applicable RBI directions.
Reinsurance brokers’ net retention mechanism accepted
The circular provides a specific clarification for Indian reinsurance brokers whose commission from foreign reinsurers is settled through net retention.
Under this arrangement, the foreign reinsurer or broker authorises the Indian broker to retain commission or brokerage from funds held before remitting the net premium outside India. The commission is therefore settled without a separate inward remittance in foreign exchange.
CBIC explains that FEMA regulations treat the foreign reinsurer or broker as having paid the commission through this authorisation. The service exporter’s obligation to realise and repatriate the export proceeds is extinguished through the net retention mechanism.
Consequently, the Board has clarified that this arrangement may be treated as satisfying Section 2(6)(iv) of the IGST Act.
As with the other service-related clarifications, this addresses receipt of consideration rather than conclusively determining the transaction’s overall eligibility as an export of services.
Goods export realisation period follows RBI framework
For export of goods, CBIC has reiterated the consequences under Rule 96B where sale proceeds are not realised, wholly or partly, within the period permitted under FEMA, including an extension.
The circular states that the refund attributable to the unrealised proceeds is liable to be deposited or recovered, together with applicable interest, within 30 days from the expiry of the prescribed or extended period.
The Board has clarified that the period for realisation must follow the period, or extended period, prescribed under RBI FED Master Direction No. 16/2015-16, dated January 1, 2016, identified in the circular as last amended on June 5, 2026, and as amended from time to time.
The circular therefore does not prescribe a separate fixed realisation period for GST purposes. It links the requirement to the applicable RBI framework.
No refund recovery where authorised dealer bank writes off realisation
A significant clarification concerns cases where an authorised dealer bank writes off the requirement to realise export proceeds.
The circular notes that Rule 96B already provides against recovery where the RBI has written off the realisation requirement, wholly or partly, on merits.
CBIC has now expressly clarified that recovery of the refund amount under Rule 96B should also not be undertaken wherever the requirement of realisation has been written off, wholly or partly, by an authorised dealer bank.
This provides clarity for exporters whose outstanding proceeds have been dealt with through an AD bank write-off. The clarification concerns a write-off of the realisation requirement by the bank; it does not state that an exporter’s own accounting write-off is sufficient.
Implications for exporters and financial intermediaries
The circular recognises several permitted methods of settling export consideration beyond a separate inward foreign currency remittance. It provides specific guidance for service exporters receiving rupee payments, stock brokers dealing with overseas clients, businesses using permitted set-offs, and reinsurance brokers retaining commission before remitting net premiums.
For goods exporters, the clarification on AD bank write-offs is particularly relevant to refund recovery proceedings involving unrealised export proceeds.
The practical effect will depend on the relevant payment route, compliance with RBI directions, and evidence of any extension or write-off. Other statutory conditions governing export status and refund eligibility continue to apply.
The Board has asked field formations to issue suitable trade notices publicising the circular and to report any implementation difficulties.
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