Sangeetha Prathap

The Directorate General of Foreign Trade (DGFT) has issued Policy Circular No. 07/2025-26 laying down clarifications for exporters seeking refund claims, Input Tax Credit (ITC), or redemption of Advance Authorisations (AAs) impacted by the erstwhile Rule 96(10) of the CGST Rules, 2017. The clarification addresses longstanding difficulties faced by exporters whose refund and redemption processes were hindered due to the restrictive interpretation of Rule 96(10) during the period between October 13, 2017 and January 09, 2019.

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Rule 96(10), in its earlier form, restricted exporters from claiming refund of IGST paid on export of goods or services if they had simultaneously availed specified duty exemption benefits on inputs—such as under the Advance Authorisation, EPCG, and EOU schemes—and also claimed IGST refund on exported products. Several exporters were adversely affected because the Rule blocked refunds even in cases where IGST had genuinely been paid in cash on import consignments under the AA scheme.

The controversy surrounding Rule 96(10) intensified after the Supreme Court's decision in Cosmo Films, where the Court examined the mandatory fulfilment of a pre-import condition to claim IGST exemption under the Advance Authorisation scheme. While upholding the Revenue’s appeal, the Court directed that affected exporters be permitted to claim refund or ITC wherever admissible. Further, Rule 96(10) was declared ultra vires by the Kerala High Court in Sance Laboratories Pvt. Ltd. for being manifestly arbitrary and contrary to Section 16 of the IGST Act, and similar challenges were raised before other High Courts.

Considering these challenges and ongoing exporter difficulties, the Government omitted Rule 96(10) prospectively by Notification No. 20/2024-Central Tax dated October 8, 2024, notably without a savings clause. DGFT noted that the absence of transitional mechanisms had resulted in undue hardship for exporters seeking to redeem their Advance Authorisations.

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The circular recalls DGFT’s earlier notifications issued in response to Customs Notification No. 79/2017-Customs (October 13, 2017), which imposed a pre-import condition for IGST exemption under AA. This condition was later withdrawn on January 10, 2019 through DGFT Notification No. 53/2015-2020, following Customs Notification No. 01/2019-Customs. DGFT highlighted that exporters continued to face redemption difficulties even after withdrawal of the pre-import requirement, particularly because of the interplay with Rule 96(10).

To align with the Supreme Court’s directions and the clarifications already issued in Trade Notice No. 07/2023-24 (June 08, 2023) and Trade Notice No. 27/2023 (September 25, 2023), DGFT has now explicitly clarified that Export Obligation Discharge Certificates (EODCs) shall not be withheld if all other conditions of the AA scheme are duly satisfied and any one of the following applies:

First, where the exporter paid IGST in cash at the time of clearance of goods under the AA scheme during the affected period. Second, where the exporter did not avail exemption from IGST or Compensation Cess (except Basic Customs Duty). Third, where the exporter complied with the pre-import and other procedural conditions prescribed under the AA scheme during that time.

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DGFT has issued the circular to all Regional Authorities, customs authorities, and exporters to ensure uniform implementation and to remove procedural bottlenecks arising from the erstwhile Rule 96(10). The circular confirms that affected exporters shall receive the benefit of ITC or refund wherever eligible and that redemption of Advance Authorisations should not be withheld merely because of the now-omitted Rule 96(10).