Summary: CBIC Circular No. 264/10/2026-GST dated 26 October 2026 addresses the legal consequences of omitting Rule 96(10) of the CGST Rules, which previously restricted IGST refunds to exporters availing specified concessional benefits on inputs. Although Rule 96(10) was omitted through Notification No. 20/2024-Central Tax with effect from 8 October 2024, disputes continued regarding its applicability to earlier transactions and pending proceedings. The circular discusses the Supreme Court’s decision in Goodluck India Limited v. Union of India, dated 6 August 2026, and the principle laid down in Kolhapur Canesugar Works Ltd. v. Union of India concerning omission of rules without saving provisions. According to the supplied account, CBIC has directed field formations to apply the judgment to pending Rule 96(10) proceedings and extended similar treatment to Rules 89(4A) and 89(4B), which were omitted through the same notification. The clarification offers significant potential relief to exporters facing refund recovery notices, adjudication proceedings and pending appeals. However, recovery of amounts already paid, refund limitation and the position of concluded proceedings require separate examination. Exporters should review pending disputes, preserve relevant records and consider supplementary submissions relying on the circular and applicable judicial decisions.
Introduction
Few provisions in the GST rules have had as troubled a life as sub rule (10) of Rule 96. It was inserted with effect from 23.10.2017 to stop an exporter from enjoying two benefits at once, namely IGST exemption on inputs procured under advance authorisation, EOU or similar notifications and a refund of IGST paid on the export of the finished goods. The intention was understandable. The drafting was not. The rule was amended several times, its scope kept shifting, and exporters who had paid IGST on exports and taken refunds in the ordinary course found themselves facing recovery notices years later on the ground that one of their inputs had come in under a concessional notification.
The GST Council in its 54th meeting on 09.09.2024 recommended that the rule be dropped, and it was omitted with effect from 08.10.2024 through Notification No. 20/2024 Central Tax. The omission was prospective on the face of the notification, which left a large body of pending demands for the period from October 2017 to October 2024 in limbo. Several High Courts held that the omission, having no saving clause, wiped out pending proceedings as well. The department took the opposite view and the matter went up. Circular No. 264/10/2026 GST dated 26.10.2026 records the outcome.
The Supreme Court in Goodluck India
On 06.08.2026 the Supreme Court decided Special Leave Petition (Civil) No. 24550 of 2025 in Goodluck India Limited v. Union of India along with connected matters. The court held that in the absence of any 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 court relied on the Constitution Bench in Kolhapur Canesugar Works Ltd. v. Union of India, which held that Section 6 of the General Clauses Act does not apply to the omission of a rule, and that where a rule is omitted, pending proceedings can continue only if there is an express provision for their continuance or some legal device in the statute or rules to preserve them. Notification 20/2024 contained no such provision.
What the circular clarifies
The Board has accepted the judgment without reservation. The circular clarifies that the omission of Rule 96(10) is effective retrospectively from 23.10.2017, the date the rule was first brought in, and directs field formations to deal with pending proceedings concerning Rule 96(10) in accordance with the Supreme Court’s judgment. The practical effect is that any show cause notice or demand founded on Rule 96(10), whether at the notice stage, at adjudication or in appeal, cannot be sustained.
The circular then goes one step further than the judgment strictly required. It says the same treatment applies mutatis mutandis to the omission of Rules 89(4A) and 89(4B). Those sub rules governed the computation of refund of unutilised credit for exporters who had received supplies under the same concessional notifications, and they were omitted by the same notification. Exporters with pending disputes on refund computation under Rules 89(4A) and 89(4B) therefore get the benefit of the same reasoning.
Who benefits and how
The first category is exporters facing recovery of IGST refund under Rule 96(10). Those notices and orders should now be dropped, and where the matter is in appeal the appellate authority should set aside the demand. A short additional submission enclosing the circular and the judgment should be enough. Where any amount was recovered or paid under protest during the pendency of such proceedings, a refund claim lies, and the limitation question will have to be addressed with reference to the date of this circular and the judgment, since the payment was made under a demand that has turned out to be without legal basis.
The second category is exporters who, out of caution, switched from export on payment of IGST to export under LUT and claimed refund of unutilised credit, and who were then met with a reduced refund under Rules 89(4A) or 89(4B). Those computations can now be revisited for the pending periods.
The third category is the harder one. Exporters who, on receiving a notice, reversed the refund with interest and closed the matter without contest. Whether such a person can now seek the money back depends on whether the payment was made in the course of a proceeding that was pending on 08.10.2024 or whether the matter had attained finality before that. The circular speaks of pending proceedings, following the judgment, and does not reopen concluded matters. Each case will turn on its own timeline.
A note on the method
There is a broader lesson in this circular that goes beyond Rule 96(10). When a rule is omitted by notification without a saving clause, the Kolhapur Canesugar principle applies and pending proceedings fall with it. The Board has now accepted that principle in terms and has applied it to three sub rules. The same argument will be available whenever the Government omits a rule in future and tries to pursue old demands under it. Draftsmen will presumably start adding saving clauses to every omission. Until they do, the taxpayer has the Supreme Court and this circular on its side.
The circular is two pages long and does exactly one thing. It ends a dispute that has run for the better part of six years and that affected a large number of exporters, many of them in the EOU and SEZ belt around Sri City and Chennai. It is the rare circular that one can read with unmixed satisfaction.
