CBIC Clarifies GST on Export of Services: Rupee Receipts, Set-Offs and Net Retention Now Count as Realisation

CBIC has issued Circular No. 263/09/2026-GST, dated 26 October 2026, settling a recurring dispute over when a service is a genuine "export of services" for GST. The core question is Section 2(6)(iv) of the IGST Act — the condition that payment be received in convertible foreign exchange or in Indian rupees where permitted by the RBI. Many refund claims were rejected because proceeds came in through rupee accounts, netting arrangements, or a broker's retained commission. The circular confirms these routes do satisfy the condition, provided the account and documentation are correct.

For service exporters — IT and consulting firms, stockbrokers serving overseas clients, reinsurance intermediaries, and anyone whose foreign client pays in rupees — this directly affects whether a supply qualifies as zero-rated and whether a GST refund survives scrutiny.

What Happened

Building on Circular 202/14/2023-GST, the new circular clarifies four points:

Rupee receipts. The realisation condition is met when payment for exported services comes in convertible foreign exchange or in a repatriable rupee account — such as a Special Non-Resident Rupee (SNRR) account, an INR Nostro account, or a similar account meant for repatriating foreign exchange.

Stockbrokers serving overseas clients. Brokers serving FPIs, NRIs and OCIs meet the condition when paid through SNRR or NRE accounts. Payments from an NRO account must be routed through an SNRR or NRE account to qualify, so brokers should check the source account of each receipt.

Set-offs (export receivables against import payables). Where export receivables are set off against import payables in accordance with RBI directions, the condition is treated as fulfilled. This is underpinned by the FEM (Export and Import of Goods and Services) Regulations, 2026, effective 1 October 2026.

Net retention (reinsurance brokers). A broker that retains its commission from premiums collected for foreign reinsurers, then remits the net premium, satisfies the condition for that retained commission.

Separately, the circular addresses Rule 96B for goods exporters: the realisation period is the one in RBI's FED Master Direction No. 16/2015-16 as amended, and no recovery is due where the AD bank has written off the realisation requirement, wholly or partly.

Why / Background

Exporters of services increasingly receive payment through rupee-settlement mechanisms as India promotes INR-based trade and as RBI widens SNRR account usage. Field formations, however, often read "convertible foreign exchange" narrowly and denied zero-rating or refunds where money arrived in rupees or was netted. The circular aligns the GST reading with RBI's foreign-exchange framework, reducing litigation and giving banks and exporters a clear documentary test.

Who's Affected

• Service exporters (IT, ITeS, consulting, professional services) paid in rupees from repatriable accounts.
• Stockbrokers serving FPIs, NRIs and OCIs.
• Reinsurance brokers working on a net-retention basis.
• Goods exporters, for Rule 96B realisation tracking and write-off relief.

What Exporters Should Do Now

• Identify the source account of every rupee receipt (SNRR, NRE, INR Nostro) and keep bank advices or FIRCs that evidence it; route NRO-sourced broker payments through SNRR/NRE.
• Document any netting of export receivables against import payables and obtain the AD bank's acceptance on record, consistent with RBI directions.
• Reinsurance brokers: keep statements showing gross premium, retained commission and net remittance.
• Goods exporters: track realisation against the RBI Master Direction period (and the new nine-month FEMA deadline from 1 Oct 2026) and retain any AD-bank write-off as evidence against a Rule 96B demand.
• Where a past refund was rejected on these grounds, review whether the circular supports a rectification or appeal, as it may apply to pending matters.

The Bigger Picture

This is part of a cluster of late-October moves — the export-services realisation clarification, the shift to a nine-month export-proceeds deadline, and the 1 November GST refund reforms — that together tighten the link between clean banking documentation and surviving GST and FEMA scrutiny. As INR-settled trade grows, the ability to prove realisation through a repatriable rupee account becomes a routine compliance skill, not an edge case.

Frequently Asked Questions

My overseas client pays me in rupees. Is my service still an export? Yes, if the payment lands in a repatriable rupee account such as SNRR, NRE or an INR Nostro account and you can document the source. A plain domestic rupee transfer or an NRO-sourced payment not routed through SNRR/NRE will not qualify.

Does a set-off against what I owe a foreign supplier count as receiving payment? Yes, where the set-off follows RBI directions and your AD bank accepts the netting. Keep that acceptance on record.

I'm a goods exporter — what changes for me? The key relief is on Rule 96B: no recovery of a refund is due where your AD bank has written off the realisation requirement. Track your realisation against the applicable RBI period.

Can this help a refund that was already rejected? It may support a rectification or appeal on pending matters where rejection was based on rupee receipts, netting, or retention. Take advice on your specific facts.

Conclusion

Circular 263/09/2026-GST removes a frequent reason for denying export-of-services status: it confirms that repatriable rupee receipts, RBI-permitted set-offs, and a broker's net retention all count as realisation. The benefit flows to exporters who can evidence the account and the arrangement cleanly.

This is a plain-English summary for service and goods exporters and their CHAs. Verify the exact wording against CBIC Circular No. 263/09/2026-GST on the official CBIC portal (cbic.gov.in) and consult your GST and FEMA advisors.