Exporters have raised concerns about the adverse impact of Rule 96(10) of the CGST Rules, 2017, which restricted refunds of IGST on exports under certain exemptions. Although the rule was deleted in October 2024, its legacy has left unresolved cases and financial burdens for exporters. The rule’s intent to prevent double benefits created administrative confusion and litigation. Amendments aimed at resolving these issues only partially addressed the challenges, and court rulings, including those by the Madras and Kerala High Courts, declared the rule arbitrary and unenforceable. Exporters have petitioned for the retrospective deletion of Rule 96(10) to mitigate the financial and legal impact on past cases.
SPECIMEN LETTER FOR DELETION OF RULE 96(10) SINCE INCEPTION
We propose to send the bellow letter to CBIC to pursue them for deletion of Rule 96(10) since inception. We urge every reader affected by this atrocious rule to do the same for the pursuit of a united front.
To
GST COUNCIL
Subject: Request for Retrospective Relief from the Provisions of Rule 96(10) of CGST Rules, 2017
Dear Sir/Madam,
Prefatory Statement:
We are M/s….. engaged in the manufacturing and export of (description of your export product). We have been issued SCN for the period 20..-20.. for demand amounting to Rs…… on account of erroneous refund claimed of IGST amount paid at the time of export of above mentioned goods which was in contravention of provisions of Rule 96(10).
We would like to bring to your attention the significant hardships we have been facing due to the above SCN and ultimately the provisions of Rule 96(10) of the Central Goods and Services Tax (CGST) Rules, 2017, and respectfully request this esteemed department to consider our following submissions and grant us the relief through deletion of this impugned rule 96 (10) since its inception.
Submissions:
1.0 Rule 96(10) of the Central Goods and Services Tax (CGST) Rules, 2017, has been one of the most contentious provisions in India’s Goods and Services Tax (GST) framework’s history, particularly for the export sector.
2.0 Initially introduced with the intention of curbing double benefits to the exporters, the rule’s implementation sparked significant challenges for exporters, leading to confusion, litigation, and financial strain. Despite several amendments and judicial decisions, Rule 96(10) remained a complex and problematic provision until its eventual deletion in October 2024. However, its legacy continues to affect many exporters, with numerous cases still unresolved, due to 96(10) still on the statute till October 2024.
3.0 The Introduction of Rule 96(10) – A Restriction on Refund Claims
When Rule 96(10) was first introduced, its primary objective was to restrict exporters from claiming refunds of Integrated Goods and Services Tax (IGST) paid on exported goods if they procured those goods from suppliers who had already availed specific exemptions under customs notifications. The rule targeted exports where the supplier had benefited from the following schemes namely:
- Export Oriented Units (EOUs) importing goods without payment of Customs duty (BCD) and IGST under Notification No. 78/2017-Customs (October 13, 2017, as amended);
- Advance Authorization holders importing goods without payment of Customs duty (BCD) and IGST under Notification No. 79/2017-Customs (October 13, 2017, as amended);
- Deemed Exports under Notification No. 48/2017-Central Tax (October 18, 2017, as amended), exempting Customs duty and IGST for goods procured domestically;
- Merchant Exporters procuring goods at a concessional rate of 0.1% under Notification No. 40/2017-CT(R) and Notification No. 41/2017-IGST(R) (both dated October 23, 2017).
The intent behind this provision was to prevent exporters from claiming IGST refunds if the goods they exported had already benefited from these exemptions. However, the rule’s wording were unclear, leading to widespread confusion regarding its application. The situation became more complicated as exporters were required to track not only their own eligibility but also the exemption claims of their suppliers, creating unnecessary administrative burdens and legal uncertainty.
4.0 Amendments to Rule 96(10) – The Government’s Response to Exporter Challenges
In response to mounting concerns from the exporter community, the government made several amendments to Rule 96(10) over the years, attempting to address some of the challenges faced by exporters. However, these amendments resolved the problem of few, still many exporter’s problem remains unresolved. Below are key amendments to Rule 96(10):
1.Notification No. 39/2018-CT (Sept 4, 2018)– Refining the Scope
Amendment: The restriction was refined to apply only when the exporter (not the supplier) had availed exemptions under AA, EPCG, or EOU.
2. Notification No. 53/2018-CT (Oct 9, 2018)–96(10) not applicable on EPCG license.
Amendment: This notification introduced a two-phase approach to IGST refunds, with Phase I restricting refunds if the exporter had availed exemptions, while Phase II allowed refunds even for exporters who had benefited from EPCG exemptions.
3. Notification No. 16/2020-CT (Mar 23, 2020) – Payment of IGST at the time of Import
Amendment: The government clarified that exporters who availed BCD exemptions under AA, EPCG, or EOU schemes but paid IGST at the time of import would still be eligible to claim IGST refunds.
4. Notification No.14/2022 dated 5th July, 2022-Payment of erroneous refund
Amendment: This amendment inserted a new Rule 86(4B) which provides that where a registered person deposits the amount of erroneous refund sanctioned to him in contravention of 96(10) along with interest and penalty, wherever applicable, through Form GST DRC-03 by debiting the electronic cash ledger, on his own or on being pointed out, an amount equivalent to the amount of erroneous refund deposited by the registered person shall be re credited to the electronic credit ledger by the proper officer by an order made in Form GST PMT -03A.
5. Circular No. 233/27/2024 GST-Payment of IGST on Import of material consumed in relevant shipping bills
Clarification : This circular clarified that exporters who initially imported inputs without paying IGST and compensation cess under Notification no. 78/2017 customs and 79/2017 customs can still claim IGST refunds on their exports if they subsequently pay the IGST and compensation cess along with interest.
6.0 Judicial Interventions – High Court Rulings Favoring Exporters
6.1 Decision of Hon’ble High court of madras in the matter of M/S. Shobikaa Impex Private Limited vs Union Of India
It is submitted that hon’ble High court of madras in the matter of M/S. Shobikaa Impex Private Limited vs Union Of India on 1 July, 2024 vide their judgement dated held their view as under:
The Honorable High Court noted that the petitioner had wrongly claimed refund under Rule 96 (IGST route) of CGST Rules, 2017. However, the procedural irregularity committed by the petitioner should not come in the legitimate way of grant of export incentives as admittedly exports were made and the refund claims were itself based on the shipping bills.
Therefore, the Court held that the impugned order was to be set aside and the matter was to be remanded to pass fresh order by examining exports made by the petitioner for grant of refund under Rule 89(LUT route) of the CGST Rules, 2017.
6.2 Kerala High Court (Oct 2024)
Case Facts: The Kerala High Court examined the validity of Rule 96(10) as introduced in Notification No. 53/2018-CT.
Court’s Ruling: The Kerala High Court declared Rule 96(10) as ultra vires to Section 16 of the IGST Act, deeming it “manifestly arbitrary” and unenforceable. The court quashed all actions taken by the authorities based on this provision.
7.0 Deletion of Rule 96(10) with effect from October 8, 2024
Acknowledging the challenges faced by exporters and the judicial scrutiny of the provision, the government issued Notification No. 20/2024 on October 8, 2024, deleting sub-rule (10) of Rule 96. This deletion marked a significant step in addressing the concerns of exporters, acknowledging that the provision had caused undue hardship. However, the notification took effect only from the date of its issuance, leaving many cases prior to October 8, 2024, unresolved.
8.0 Prayer:
Despite several amendments and the eventual deletion of this rule in October 2024, many exporters are still suffering the consequences of this provision, especially as numerous cases remain unresolved due to the rule still being in effect up until that date.
Although, the deletion of Rule 96(10) in October 2024 has certainly brought some relief to exporters. However, this change does not fully address the ongoing legal and financial burdens faced by exporters. This liability pertains for the period for which the rule was still in force.
It is apparent that the revenue authorities have now realized the inadvertent insertion of Rule 96(10) and its negative impact on exporters. In this context, it is crucial to mention that the Honorable Madras High Court and the Honorable Kerala High Court (October 2024), have ruled in favor of exporters. The Kerala High Court specifically declared Rule 96(10) as ultra vires and unenforceable, recognizing its arbitrary nature and quashing the actions taken by authorities based on this provision. These rulings clearly highlight the significant concerns regarding the rule’s validity and the undue hardships it imposed on exporters.
In view of above, we request that the government extend this relief retrospectively to cover all cases arising from the period when Rule 96(10) was still enforced. This would ensure that exporters are not penalized for complying with a provision that is now deemed invalid, and it would provide much-needed relief to those who are still struggling with its consequences.
As per information available in the public domain there are large numbers of petitions filed in various high courts throughout the nation challenging the vires of this rule.
It is requested and expected from the revenue to accept the judgment of hon’ble Kerela High Court and not to file an appeal in hon’ble supreme court and to withdraw/delete Rule 96(10) since its inception to avoid unnecessary litigation in various high courts and various show cause notice pending at various appellate authorities.
We sincerely hope that the Department will consider our plea. Moreover, this would align with the government’s broader efforts to reduce litigation. We look forward to your positive consideration and prompt resolution of this matter.
Thank you for your attention.
Yours faithfully,
XYZ Exports
CA Pardeep Tayal
Ptcppt@gmail.com
+91 98960 92408
Pranav Bansal
Sunmargexim@gmail.com
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