Rule 96(10) Is Gone: CBIC Confirms IGST Refunds for Exporters Who Used Advance Authorisation, EOU or EPCG Imports

For years, one short sub-rule caused outsized pain for exporters. Rule 96(10) of the CGST Rules barred an exporter who had imported inputs duty-free — under Advance Authorisation, as an EOU, or under EPCG — from exporting goods on payment of IGST and claiming a refund of that IGST. Thousands of exporters who had taken the IGST-paid route received show-cause notices demanding they return the refund, often with interest and penalty. CBIC's Circular No. 264/10/2026-GST, dated 26 October 2026, closes this chapter. It clarifies the refund consequences now that Rule 96(10) has been omitted, confirming that exporters are not to be denied IGST refunds simply because their transactions fall in the period when the rule was on the books.

What Happened

Rule 96(10) was omitted from the CGST Rules, and the Supreme Court has since held that the omission — made without a saving clause — applies to all proceedings pending on the date of omission, not only to future shipments. CBIC had already indicated it would accept that position. Circular 264/10/2026-GST now formalises the refund treatment as part of the broader 57th GST Council implementation package, and reads alongside related clarifications on Rules 89(4A) and 89(4B).

In plain terms: the restriction that once blocked the IGST-paid refund route for duty-free-input exporters no longer applies, and demands built solely on Rule 96(10) for the pre-omission period should not be pursued.

A note of caution on dates: commentary has flagged differing views on the precise point from which the omission operates (the date the omission notification took effect versus a wider reading). Exporters with live disputes should confirm the exact dates and wording against the official circular and their own facts before relying on them.

Why / Background

GST law gives exporters two routes for zero-rated supplies: export without payment of tax under LUT/bond and claim a refund of accumulated input tax credit, or export on payment of IGST and claim a refund of the IGST paid. Rule 96(10) was designed to stop a perceived double benefit — getting duty-free inputs and an IGST cash refund — by forcing exporters who used schemes like Advance Authorisation or EOU onto the LUT route only. In practice the rule was complex, frequently litigated, and caught many exporters who had made genuine, good-faith IGST-paid exports. Its omission, and the Supreme Court's confirmation that the omission reaches pending cases, removes that trap.

Who Benefits

• Advance Authorisation holders who exported on payment of IGST and faced recovery of the refund.
• Export Oriented Units (EOUs) in the same position.
• EPCG authorisation holders who imported capital goods duty-free and used the IGST-paid export route.
• Any exporter with a pending notice, adjudication or appeal founded on Rule 96(10).

What Exporters and CHAs Should Do Now

• Map your exposure: list every IGST-paid export made while you held Advance Authorisation / EOU / EPCG benefits, and every notice or demand citing Rule 96(10).
• Flag pending proceedings to your consultant or counsel and seek their closure or favourable disposal in light of Circular 264/10/2026-GST and the Supreme Court ruling.
• Preserve documentation — shipping bills, authorisation details, IGST payment and refund records — to establish that refunds were correctly claimed.
• Do not assume automatic reversal of concluded cases: whether closed matters can be reopened turns on the court's language about pending proceedings, so take advice on your specific stage.
• Recheck future route choice: with Rule 96(10) gone, the IGST-paid refund route reopens for scheme users, but model the cash-flow and documentation trade-off against the LUT route for your business.

The Bigger Picture

Circular 264/10/2026-GST lands in the same late-October 2026 wave as CBIC's refund-automation rules and other clarifications giving effect to the 57th GST Council. Taken together, the measures tilt the GST refund system toward exporters: faster processing, fewer manual blocks, and the removal of a long-standing structural restriction. For exporters who had provisioned for Rule 96(10) demands, this is both a compliance relief and a potential balance-sheet positive.

Frequently Asked Questions

What did Rule 96(10) actually prohibit? It barred exporters who had availed specified duty-free import benefits (such as Advance Authorisation, EOU or EPCG) from exporting on payment of IGST and claiming a refund of that IGST; they were restricted to the LUT/refund-of-ITC route.

Does the omission help exporters with old, pending notices? The Supreme Court held the omission applies to proceedings pending on the date of omission, as there was no saving clause. Circular 264/10/2026-GST reflects this. Take advice on your specific case stage.

Can I now choose the IGST-paid export route again if I use Advance Authorisation? With Rule 96(10) omitted, the structural bar is removed. Confirm the current position with your consultant and weigh the working-capital implications of each route.

Is this the same as the refund-automation notification? No. The refund-automation changes (Notification 05/2026-Central Tax) speed up refund processing. Circular 264 addresses refund eligibility after the Rule 96(10) omission. They are complementary.

Conclusion

Rule 96(10) was one of the most litigated provisions in GST for exporters. Its omission, the Supreme Court's confirmation that the change reaches pending cases, and CBIC's Circular 264/10/2026-GST together remove a structural obstacle that cost many exporters time, cash and sleep. The practical task now is to clean up pending disputes and decide, case by case, how to use the reopened IGST-paid route.

This article summarises CBIC Circular No. 264/10/2026-GST dated 26 October 2026 and related judicial and CBIC material for general guidance. The precise scope, effective dates and treatment of individual cases should be confirmed against the official circular and professional advice. Source: Central Board of Indirect Taxes and Customs (cbic-gst.gov.in).