Rule 96B and write off of outstanding export dues

Hi Jayanta,

This is a nuanced issue involving Rule 96B of the CGST Rules, export dues write-offs, and RBI/FEMA regulations.

Background:

• Rule 96B deals with export of goods without payment of IGST or zero-rated supplies under LUT.

• When export dues are not recovered and are written off by the bank, GST authorities expect RBI approval or some formal documentation to justify the write-off and validate zero-rated export claims.

• FEMA and RBI rules give banks authority to write off bad debts, but GST is a separate statute and requires compliance under its own rules.

Key Points & Suggested Approach:

1. FEMA & RBI vs GST:

   • Under FEMA, banks have the authority to write off bad export dues after due procedure.

   • However, GST authorities require documentary proof of such write-off (including RBI approval or CA certificate) to accept zero-rated supply without IGST payment.

2. Rule 96B compliance:

   • GST department insists on RBI approval to confirm the genuineness of the write-off.

   • Banks handle RBI compliance internally — exporters usually receive only a certificate or letter from the bank confirming write-off.

3. Your Documentation:

   • If you have the bank's write-off certificate and a CA certificate confirming the non-recovery, submit these along with your refund claim.

   • Usually, this is acceptable if the bank certifies RBI compliance.

4. Preventing SCN:

   • Submit all bank documents, CA certificates, and correspondence with RBI or bank’s internal approvals as proof.

   • Maintain detailed records to show due diligence.

   • You may also obtain a legal opinion or representation confirming that bank’s write-off is compliant with RBI regulations and GST law.

5. Further Steps:

   • Communicate proactively with GST authorities providing all proof.

   • In case of an SCN, reply explaining the bank’s role, FEMA regulations, and attach documentary proof.

   • Consider approaching the GST appellate authorities or seeking advance ruling if necessary.

Summary:

• The write-off is valid under FEMA, but GST needs proof.

• The bank’s RBI approval is their internal process; you rely on their certificate.

• Submit bank and CA certificates to GST to avoid denial.

• Maintain clear documentary trail to defend your claim.