Summary: CBIC Circular No. 263/09/2026-GST dated 26 October 2026 clarifies the conditions for recognising export proceeds under GST, particularly the requirement in Section 2(6)(iv) of the IGST Act that consideration for exported services must be received in convertible foreign exchange or Indian rupees wherever permitted by the Reserve Bank of India. Building upon Circular No. 202/14/2023-GST, the clarification addresses receipts through repatriable rupee accounts, including SNRR, INR Nostro and NRE accounts, payments to Indian stockbrokers serving overseas clients, settlement of export receivables against import payables through RBI-permitted set-offs, and commission retained by Indian reinsurance brokers from premiums collected on behalf of foreign reinsurers. The circular also explains the application of Rule 96B of the CGST Rules concerning recovery of GST refunds where export proceeds for goods are not realised within the period prescribed under FEMA, including permitted extensions and authorised write-offs. These clarifications may assist exporters facing refund disputes involving permissible settlement mechanisms. However, eligibility remains subject to applicable RBI directions, documentary evidence, statutory time limits and other GST conditions. Exporters should maintain proper banking records, reconciliation statements, evidence of netting arrangements and documentation supporting realisation or authorised write-offs.
Export Proceeds in Rupees, Set Offs and Net Retention: Circular 263/09/2026 Widens the Door for Export of Services
The definition of export of services in Section 2(6) of the IGST Act has five limbs, and the fourth one has caused more refund rejections than the other four combined. It requires that payment for the service be received by the supplier in convertible foreign exchange or in Indian rupees wherever permitted by the Reserve Bank of India. Officers processing refunds have read the words wherever permitted by the RBI narrowly, and exporters whose clients paid through rupee accounts, or settled by netting, or whose brokerage was retained before the remittance went out, have found their refunds rejected or their supplies treated as taxable. Circular No. 263/09/2026 GST dated 26.10.2026 addresses this directly and, read with the earlier Circular 202/14/2023, puts most of these settlement modes on a sound footing. It also deals with the time limit for realisation of export proceeds for goods under Rule 96B.
SNRR and Nostro accounts
Circular 202 of October 2023 had already accepted that export proceeds received in Indian rupees from a Special Rupee Vostro Account of a correspondent bank of the partner country satisfy the fourth limb. The new circular extends the same reasoning to other repatriable rupee accounts. It notes that under the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023, receipt for exports to countries other than Nepal, Bhutan and the Asian Clearing Union members may be in rupees or in foreign currency, and that rupee receipts may come through an INR Nostro account of a correspondent bank or through repatriable accounts such as SRVA and SNRR. Since these are permissible accounts for receipt of export proceeds under FEMA, the circular clarifies that payment for export of services received in convertible foreign exchange, or in a repatriable rupee account such as an SNRR account, an INR Nostro account or any similar account meant for repatriation of foreign exchange, satisfies the condition in Section 2(6)(iv).
Stock brokers serving overseas clients
The circular picks out stock brokers specifically. Indian brokers serve foreign portfolio investors, non resident Indians and overseas citizens of India and are paid in rupees. The circular clarifies that payment to brokers through repatriable rupee accounts, namely SNRR and NRE accounts, satisfies the export condition. Where the client pays from an NRO account, the circular says the payment should be routed through a repatriable account, SNRR or NRE, as the RBI guidelines require, for the condition to be met. Brokers should therefore look at the source account of each receipt rather than the mere fact that it came in rupees from a non resident.
Set off of export receivables against import payables
This is the clarification with the widest reach. Many service exporters have a two way relationship with the same overseas party, with services going out and services or goods coming in, and the parties settle the net. Till now, set off was permitted by the RBI only with conditions and only goods against goods or services against services, and the department often treated the netted portion as not received in foreign exchange. The circular records that set off is a valid method of settlement under FEMA, and that with the Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026 taking effect from 01.10.2026, the earlier conditions would no longer apply. It then clarifies that where export receivables are set off against import payables in accordance with RBI directions, the condition in Section 2(6)(iv) is treated as fulfilled. The qualifying phrase is in accordance with RBI directions, so exporters should keep the AD bank’s acceptance of the netting on record along with the reconciliation.
Reinsurance brokers and net retention
The fourth clarification deals with a settlement mode that is peculiar to reinsurance broking. The Indian broker collects the premium, retains its commission, and remits the net premium to the foreign reinsurer. There is never a separate inward remittance for the commission. Under FEMA the foreign reinsurer is treated as having paid the brokerage by authorising the Indian broker to retain it before remittance, and the obligation to realise and repatriate export proceeds is extinguished through that net retention. The circular accepts this and clarifies that the commission so retained satisfies Section 2(6)(iv).
Realisation period for export of goods under Rule 96B
The second part of the circular turns to goods. Rule 96B says that where sale proceeds of exported goods are not realised within the period allowed under FEMA, including any extension, the refund already paid is to be deposited back to the extent of non realisation with interest within thirty days of the expiry of that period, except where the requirement of realisation has been written off by the RBI on merits. The circular clarifies that the time limit for realisation for the purpose of the IGST Act is the period, or extended period, prescribed in the RBI’s FED Master Direction No. 16/2015 16 dated 01.01.2016 as amended from time to time, the last amendment being on 05.06.2026. It also clarifies that where the AD bank has written off the realisation requirement wholly or partly, no recovery under Rule 96B is to be made. The reference to the AD bank is notable since Rule 96B speaks of a write off by the RBI, and the circular effectively accepts the delegated write off by the authorised dealer as sufficient.
What exporters should do
Service exporters whose refunds were rejected on the ground that payment was received in rupees through SNRR or Nostro accounts, or by netting, or by retention, now have a clarificatory circular to rely on in appeal. The circular does not say it is prospective and, as a clarification of an existing condition in the statute, it should apply to pending matters. For current and future transactions, the paperwork becomes the key. The FIRC or bank advice should identify the account from which the rupee payment came. Netting arrangements should be documented and accepted by the AD bank. Reinsurance brokers should keep the statement showing the gross premium, the retained commission and the net remittance. For goods exporters, the realisation tracker should be maintained with reference to the Master Direction period and any extensions obtained from the bank, and any write off by the bank should be preserved as the answer to a Rule 96B demand.
This circular belongs to a family of clarifications since 2023 that have gradually aligned the GST reading of export receipts with the FEMA framework instead of treating the two as separate worlds. That is the right direction. The purpose of the fourth limb is to make sure the consideration for the export actually comes into the country in a form the RBI recognises. Once the RBI recognises it, the tax officer has no reason to insist on a particular colour of money.
