GST Rule 96(10) Omission Now Retrospective: Circular 264 and Your Pending Export Refund

Picture this. You exported goods, paid IGST on the shipment, and claimed the refund. Months later a show-cause notice arrives. It does not dispute your export. It does not dispute your documents. It says one thing: your inputs came through a concessional route, so Rule 96(10) of the CGST Rules bars your refund. The demand runs into lakhs, with interest on top.

For years, that notice was hard to fight. Then the rule itself was deleted — and on 26 October 2026, the Central Board of Indirect Taxes and Customs (CBIC) confirmed that the deletion reaches all the way back to the day the rule was born. If your case is still pending, that changes everything about it.

In short: Circular 264/10/2026-GST, dated 26 October 2026, says the omission of Rule 96(10) of the CGST Rules is effective retrospectively from 23 October 2017, following the Supreme Court's judgment of 6 August 2026 in Goodluck India. A show-cause notice, demand or refund rejection resting solely on Rule 96(10) cannot continue in a pending proceeding.

What did Rule 96(10) actually do?

Rule 96 governs refunds of IGST paid on exports. Sub-rule (10) was the exception that swallowed the refund for a large class of exporters. It said a person claiming refund of IGST paid on exports should not have received supplies on which the benefit of certain specified notifications had been availed.

The idea was simple enough: no double benefit. If you already got your inputs cheap — tax-free or at a concessional rate — you should not also pocket a full IGST refund on the export. The five notifications named in the rule were Notification 48/2017-Central Tax (supplies against Advance Authorisation, to Export Oriented Units, and capital goods under the Export Promotion Capital Goods scheme), Notification 40/2017-Central Tax (Rate) (the 0.05% intra-state rate for merchant exporters), Notification 41/2017-Integrated Tax (Rate) (the 0.1% inter-state rate), and Notifications 78/2017-Customs and 79/2017-Customs (IGST and cess exemptions on imports under Advance Authorisation, EPCG and EOU schemes). Capital goods received under the EPCG scheme were carved out of the bar.

In practice the bar bit hard. An exporter who bought from a supplier using an Advance Authorisation, or who imported inputs under an exemption, could watch a genuine IGST refund get denied — even though the export itself was real and the IGST had genuinely been paid. Demands in these cases often added interest and penalty, so the stakes could dwarf the refund itself.

How did a 2017 rule end up deleted?

Rule 96(10) came into force on 23 October 2017, weeks after GST itself, and courts soon split on it. The Gujarat High Court upheld it prospectively in one early case; the Kerala High Court later called it manifestly arbitrary and unconstitutional. Meanwhile the GST Council took the practical route. At its 54th meeting on 9 September 2024, noting the difficulty exporters faced in getting refunds where a concessional notification had been used on inputs, it recommended deleting the rule. Notification 20/2024-Central Tax, dated 8 October 2024, omitted Rule 96(10) — but prospectively, from 8 October 2024 only.

That one word, prospectively, created the next fight: what happened to notices already issued for earlier years? The Bombay High Court answered first, in a batch led by Hikal Limited in September 2025: it quashed notices and orders based on the omitted rule, holding that proceedings which had not attained finality must lapse. Then the Supreme Court settled it for the whole country.

Why does deleting a rule kill cases that are already running?

On 6 August 2026, the Supreme Court decided Goodluck India Limited v. Union of India (SLP (Civil) No. 24550 of 2025, with connected matters).

When Parliament repeals an Act, section 6 of the General Clauses Act, 1897 usually preserves pending proceedings. But Rule 96(10) was not an Act — it was a rule, subordinate legislation. The Court relied on the Constitution Bench decision in Kolhapur Canesugar Works Ltd. v. Union of India [(2000) 2 SCC 536], which held that section 6 does not apply to the omission of a rule. Where a rule is omitted, pending proceedings can continue only if some express provision or legal device preserves them. Notification 20/2024 carried no saving clause and no sunset clause. So the proceedings had nothing left to stand on.

Here is the analogy I give clients. Think of a club rule deleted from the rulebook, with no line saying old fines still stand. A fine that is still being disputed falls away, because the rule it rested on is gone. But a fine you already paid, never challenged, and closed for good stays paid — the deletion does not dig up settled history. That is exactly the line Circular 264 draws: it speaks of pending proceedings, and the Bombay High Court's version of the same line was "transactions past and closed" surviving. Pending falls. Closed stays closed.

What does Circular 264 actually order?

Circular 264/10/2026-GST, issued under section 168(1) of the CGST Act by Commissioner (GST) Gaurav Singh, does three things. First, it clarifies that the omission of Rule 96(10) is effective retrospectively from 23 October 2017 — the date the rule itself came into force. Second, it advises field formations to deal with pending proceedings concerning Rule 96(10) in accordance with the Supreme Court's judgment. Third, it extends the same treatment, mutatis mutandis, to the omission of Rules 89(4A) and 89(4B) — the companion refund restrictions for exporters in the same position, omitted by the same October 2024 notification. It also asks for trade notices to publicise the position. A circular under section 168(1) binds departmental officers, which is why this one matters in a live proceeding: your officer cannot simply carry on as if the judgment did not happen.

Who benefits — and who does not?

You are squarely inside this relief if a notice, demand, recovery action or refund rejection against you rests solely on Rule 96(10) and the proceeding is still pending — before the adjudicating officer, in appeal, or in a writ that has not reached finality. That includes a refund claim that was rejected only because of the rule. In the Bombay High Court's batch, such refund claims were restored for fresh consideration.

You are not automatically inside it in three situations. One, your matter has attained finality — an order no longer open to challenge, or a transaction past and closed. Circular 264 does not reopen those, and anyone who tells you otherwise is guessing. Two, your notice cites Rule 96(10) plus other independent grounds — say, a mismatch in shipping bills or an ineligible credit claim. The 96(10) leg falls, but the other legs still have to be answered on their merits. Three, your refund has other conditions still to meet. The circular removes one bar; it does not waive shipping-bill and export-general-manifest matching, the section 54 refund procedure, or time limits.

An illustration: the ₹18 lakh notice that now reads differently

Take an illustration — not a real case. A Surat textile exporter pays ₹18 lakh as IGST on an export consignment and claims it back. The inputs came from a supplier operating under an Advance Authorisation, so the officer issues a show-cause notice in 2023 demanding the refund back with interest, citing Rule 96(10) alone. The exporter replies, the matter drags on, and it is still pending in 2026.

After Circular 264, the reply practically writes its first paragraph: the rule on which the entire demand rests was omitted without a saving clause, the Supreme Court in Goodluck India held that such an omission applies to proceedings pending on the date of omission, and the Board has now clarified that the omission is effective from 23 October 2017. The officer must deal with the proceeding on that footing. The exporter still has to show the export, the IGST payment and the shipping-bill matching — but the one ground that blocked the refund is gone.

What to do now: five steps

First, pull out every notice, order or refund rejection you hold and check the ground. If Rule 96(10) — or Rules 89(4A) or 89(4B) — is the only ground, flag the file. Second, put Circular 264 and the Goodluck India judgment on record in writing: a reply to the show-cause notice, a submission in appeal, or a representation to the jurisdictional officer asking that the proceeding be closed or the refund released for fresh consideration. Quote the circular number, the date, and paragraph 6. Third, answer any other ground in the same notice separately and fully — do not let a good 96(10) point distract you from a live second ground. Fourth, watch your limitation and appeal clocks. A favourable circular is not a reason to miss a filing date while waiting for the officer to act. Fifth, if your refund is restored for fresh consideration, re-check the file under Rule 89(4) and section 54 before celebrating: matching, documentation and timelines still decide whether money actually arrives.

Five mistakes to avoid

Assuming the refund arrives automatically. The circular directs how pending proceedings are to be dealt with; it does not order payment in any individual case. Treating a closed case as reopened. Finality is a real line here — take advice before spending money on a matter that is past and closed. Ignoring the other grounds in a mixed notice. The 96(10) leg falling does not answer them. Sitting on a pending reply because "the circular will handle it". Officers act on submissions, and trade notices take time to filter down. And citing the circular without the judgment. The circular's authority comes from Goodluck India; a reply that cites both is harder to brush aside than one that cites either alone.

Frequently asked questions

Does Circular 264 reopen a case that is already decided and final? No. The circular speaks of pending proceedings, and the courts have preserved transactions that are past and closed. If your order has attained finality, get specific advice before assuming any route back — the circular by itself does not reopen it.

Will my IGST refund now be paid automatically? Not automatically. What falls is the Rule 96(10) bar. Your claim still has to satisfy the other refund conditions — export proof, shipping-bill matching, the section 54 procedure and time limits — and in the High Court cases, claims were restored for fresh consideration rather than paid on the spot.

What are Rules 89(4A) and 89(4B), and why does the circular mention them? They were companion refund restrictions for exporters in the same concessional-input position, omitted by the same October 2024 notification. Circular 264 says the same retrospective treatment applies to them, with necessary changes. If your pending matter cites one of them instead of Rule 96(10), the same argument applies.

My notice cites Rule 96(10) and something else. Does the whole notice fall? Only the Rule 96(10) part falls on this ground. The other grounds survive and must be answered on their own merits. Read the notice ground by ground before deciding how strong your position is.

My refund was rejected under Rule 96(10) years ago and I never appealed. What now? That is the hardest position. If the rejection attained finality, Circular 264 does not by itself revive it. Do not file a fresh claim on the assumption that it does — take advice on whether any remedy, such as a writ on the peculiar facts, is genuinely open, and weigh its cost before proceeding.

If a pending notice or a stuck refund is sitting on your desk citing Rule 96(10), this is the week to move it. The Supreme Court has spoken, the Board has told its officers to follow, and the only thing left is putting the two documents on your file. Our GST refund application team handles export refunds end to end, and if you are setting up the export leg itself, our Import Export Code registration page covers the first step. For a quick sense of what a filing engagement costs, try the compliance fee calculator. If your export was paid through an unusual route, read our guide on export proceeds after Circular 263 alongside this one — the two circulars together settle most of the refund fights exporters were facing this month. And if you export under a Letter of Undertaking rather than paying IGST, our LUT guide for exporters covers the RFD-11 route.