CBIC Clarifies Rupee Receipts and Set-Offs Count as Realisation for Export of Services

India's indirect-tax administration has settled a question that has tripped up thousands of service-export refund claims. In Circular No. 263/09/2026-GST, issued on 24 October 2026, the Central Board of Indirect Taxes and Customs (CBIC) clarifies when payment received in Indian rupees — rather than in convertible foreign exchange — still satisfies the "payment" condition that a transaction must meet to qualify as an export of services. In plain terms: if you provide services to an overseas client and are paid in rupees through specified repatriable channels, or if your receivable is netted against an import payable under RBI rules, your supply can still be zero-rated and your refund should not be denied on that ground alone.

This matters to a broad slice of India's services economy — IT and consulting firms, freight forwarders and shipping agents, brokers, and professional-service providers — who have faced refund rejections simply because the money arrived in rupees or was settled by set-off.

What Happened

Under Section 2(6) of the IGST Act, a supply counts as an export of services only if five conditions are met. The fourth, in Section 2(6)(iv), requires that payment be received by the supplier "in convertible foreign exchange or in Indian rupees wherever permitted by the Reserve Bank of India." Field officers had read "wherever permitted by RBI" narrowly, rejecting zero-rated treatment — and refunds — where rupees came in through accounts they were unsure about, or where no money moved at all because receivables were set off against payables.

Circular 263/09/2026-GST, which builds on the earlier Circular 202/14/2023-GST, treats the following as meeting the payment condition:

• Repatriable rupee accounts — payment through a Special Non-Resident Rupee (SNRR) account, an INR Nostro account, or a similar account maintained for repatriating foreign exchange.
• Stock brokers with overseas clients — receipts through SNRR or NRE accounts; where a client pays from an NRO account, the amount must be routed through an SNRR or NRE account to qualify.
• Set-off against import payables — where export receivables are netted against import payables in line with RBI directions issued under FEMA, the realisation condition is treated as fulfilled.
• Reinsurance brokers — the commission an Indian broker retains from premiums before remitting the net amount to a foreign reinsurer satisfies the condition.

The circular reportedly also addresses Rule 96B for goods exporters, confirming that the realisation period follows the RBI Master Direction and that an AD bank's write-off means no recovery is pursued.

Why This Matters Now

The clarification lands weeks after the FEMA (Export and Import of Goods and Services) Regulations, 2026 took effect on 1 October 2026, which reshaped how export proceeds are realised and set off. Commentary on the circular notes it does not say it applies only prospectively, which suggests it should also help resolve pending matters — including refund claims and appeals that were rejected on these very grounds.

For exporters, the practical upshot is that a legitimate rupee receipt through the right channel, or a documented netting arrangement, is no longer a reason to lose zero-rating. The burden shifts back to clean documentation rather than to the mere form of settlement.

Who Benefits

Service exporters paid in rupees through SNRR or INR-Nostro accounts; shipping lines, NVOCCs, freight forwarders and marine-service providers that net foreign receivables against overseas payables; stock brokers and reinsurance brokers with cross-border flows; and any exporter whose GST refund was earlier rejected because settlement was by set-off rather than inward remittance.

What Exporters Should Do Now

• Map how you actually get paid. Identify which overseas receipts arrive in rupees and through which account type (SNRR, INR Nostro, NRE, NRO).
• Fix NRO routing. Where an overseas client pays from an NRO account, route the amount through an SNRR or NRE account before treating it as export realisation.
• Paper your netting. For receivables set off against import payables, keep the written netting arrangement and your AD bank's acceptance of it on record.
• Re-examine rejected refunds. If a service-export refund was denied because payment was in rupees or by set-off, assess whether this circular supports a rectification or appeal.
• Hold your FIRC/bank advice. Keep bank advice or an FIRC that identifies the source account of every rupee payment claimed as export realisation.
• Reinsurance and broking firms: retain statements showing gross premium, retained commission and net remittance.

The Bigger Picture

India has pushed hard to internationalise the rupee and to simplify cross-border settlement, from SNRR accounts to rupee-invoicing arrangements. But tax administration had not fully caught up, and exporters were caught in the gap — compliant with RBI's framework yet denied GST benefits by customs-GST field formations. Circular 263/09/2026 is part of a wider set of CBIC circulars issued in late October 2026 to implement decisions of the 57th GST Council, and it aligns indirect-tax treatment with the FEMA framework. For services exporters, it removes a recurring friction point at precisely the time rupee settlement is growing.

Frequently Asked Questions

Does this mean any rupee payment now qualifies as export realisation? No. The receipt must come through a specified repatriable channel — such as an SNRR or INR-Nostro account — or be a documented set-off under RBI/FEMA directions. An ordinary domestic rupee payment does not qualify.

My refund was rejected last year because I was paid by netting. Can I reopen it? Possibly. The circular does not state that it is prospective only, and commentators suggest it should apply to pending matters. Review the specific rejection with your advisor to see whether rectification or appeal is open on the limitation timeline.

I'm a freight forwarder who nets payables and receivables with overseas partners. Am I covered? The circular treats set-off against import payables under RBI directions as satisfying the condition. Keep the netting agreement and your AD bank's acceptance documented.

What documents should I keep? Bank advice or FIRC identifying the source account of rupee payments, written netting arrangements accepted by the AD bank, and — for broking — statements showing gross, retained and net amounts.

Conclusion

Circular 263/09/2026-GST closes a long-standing gap between how the RBI permits exporters to be paid and how GST field formations assessed those payments. If you export services and receive rupees or settle by set-off, the path to zero-rating and refunds is clearer — provided your documentation is in order.

This article is for general guidance only and is not legal or tax advice. Verify the exact text, scope and effective date of Circular No. 263/09/2026-GST on the official CBIC portal (cbic.gov.in) and consult your tax advisor before acting.