The Central Board of Indirect Taxes and Customs (CBIC) has issued Circular No. 263/09/2026-GST dated October 26, 2026, clarifying the treatment of payments received for exports of goods and services under the Goods and Services Tax (GST) framework.
The circular addresses several issues relating to the realisation of export proceeds, including payments received through Special Non-Resident Rupee (SNRR) accounts and INR NOSTRO accounts, adjustment of export receivables against import payables, commission payments to reinsurance brokers through net retention, and recovery of GST refunds where export proceeds are not realised within the prescribed period.
The clarification aims to ensure uniform implementation of GST provisions and provide greater certainty to exporters, stock brokers, reinsurance brokers and other businesses engaged in cross-border transactions.
1. INR Payments Through SNRR and NOSTRO Accounts Recognised for Export of Services
Under the Integrated Goods and Services Tax (IGST) Act, 2017, one of the conditions for treating a transaction as an export of services is that payment for the service must be received in convertible foreign exchange or in Indian rupees wherever permitted by the Reserve Bank of India (RBI).
CBIC has now clarified that payments received in repatriable INR accounts, including SNRR accounts and INR NOSTRO accounts, can satisfy the payment condition for export of services under Section 2(6)(iv) of the IGST Act, 2017.
The clarification is consistent with the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023, which permit export and import payments in Indian rupees or foreign currency, subject to the applicable regulatory framework.
The circular also refers to Circular No. 202/14/2023-GST dated October 27, 2023, which had addressed export proceeds received in Indian rupees through Special Rupee Vostro Accounts.
The latest clarification extends certainty to other permitted repatriable rupee accounts and similar accounts used for the repatriation of foreign exchange.
2. Special Clarification for Stock Brokers Serving Overseas Clients
CBIC has specifically addressed payments received by Indian stock brokers providing services to overseas clients, including Foreign Portfolio Investors (FPIs), Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs).
Where these brokers receive payment in Indian rupees through repatriable accounts such as SNRR or NRE accounts, the payment may be treated as satisfying the relevant condition under Section 2(6)(iv) of the IGST Act.
However, payments received through Non-Resident Ordinary (NRO) accounts require particular attention. As clarified in the circular, such payments should be routed through repatriable INR accounts, such as SNRR or NRE accounts, in accordance with RBI guidelines, to qualify under the relevant IGST provision.
This clarification is particularly relevant for stock brokers handling transactions for overseas investors and receiving brokerage or other service-related payments in Indian rupees.
3. Set-Off of Export Receivables Against Import Payables Permitted
Another important clarification concerns transactions in which export receivables are adjusted against import payables instead of being settled through separate inward and outward payments.
CBIC has recognised that set-off transactions are a valid method of settlement under the applicable foreign exchange regulations.
Accordingly, where export receivables are set off against import payables in accordance with RBI directions, the payment condition under Section 2(6)(iv) of the IGST Act, 2017, shall be considered fulfilled.
The circular notes that the Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026, came into effect on October 1, 2026. It explains that the earlier conditions governing certain set-off transactions will no longer apply under the new regulatory framework.
Businesses using netting or adjustment arrangements for cross-border transactions should nevertheless ensure that their settlements comply with the applicable RBI directions and maintain adequate supporting documentation.
4. Net Retention Mechanism for Reinsurance Brokers
CBIC has also clarified the GST treatment of export proceeds received by Indian reinsurance brokers through the net retention mechanism.
In this arrangement, an Indian reinsurance broker earns commission for providing broking services to foreign reinsurers. Instead of receiving the commission through a separate inward remittance, the broker retains the commission from the funds before the net premium is remitted outside India.
Under the applicable FEMA framework, the foreign reinsurer or broker is treated as having paid the commission by authorising the Indian broker to retain the amount from the funds available for settlement.
As the obligation to realise and repatriate the export proceeds is extinguished through this mechanism under FEMA regulations, CBIC has clarified that the arrangement may be treated as satisfying the payment condition under Section 2(6)(iv) of the IGST Act.
This provides greater clarity for reinsurance brokers whose commission income is settled through net retention rather than a separate foreign currency remittance.
5. GST Refund Recovery Where Export Proceeds for Goods Are Not Realised
The circular also clarifies the application of Rule 96B of the Central Goods and Services Tax (CGST) Rules, 2017, which deals with recovery of refunds in cases where export proceeds for goods are not realised within the prescribed period.
Under Rule 96B, where the sale proceeds of exported goods are not realised, wholly or partly, within the period prescribed under the Foreign Exchange Management Act, 1999, including any extension granted, the refund amount attributable to the unrealised proceeds may be recovered along with applicable interest.
The recovery is generally required to be made within 30 days after the expiry of the prescribed or extended period.
However, Rule 96B also provides an exception where the requirement to realise the export proceeds has been written off, wholly or partly, by the Reserve Bank of India on merits.
CBIC has now clarified that the applicable time limit for realisation of export proceeds will be the period prescribed under the RBI's FED Master Direction No. 16/2015-16 dated January 1, 2016, as amended from time to time. The circular refers to the version last amended on June 5, 2026.
Further, where the requirement to realise export proceeds has been written off, wholly or partly, by an Authorised Dealer (AD) Bank, recovery of the GST refund under Rule 96B shall not be made.
This clarification is important for exporters who have already claimed GST refunds but are facing delays or difficulties in receiving payments from overseas buyers.
6. Key Takeaways for Exporters and Businesses
The clarifications under Circular No. 263/09/2026-GST have practical implications for businesses involved in international trade and cross-border services.
- Service exporters: Payments received in permitted repatriable INR accounts, including SNRR and INR NOSTRO accounts, can satisfy the relevant export-of-services payment condition.
- Stock brokers: Brokerage payments from overseas clients may qualify when received through permitted repatriable INR accounts, subject to the stated conditions.
- Businesses using set-offs: Export receivables adjusted against import payables may satisfy the payment condition where the arrangement complies with RBI directions.
- Reinsurance brokers: Commission settled through the net retention mechanism may be treated as meeting the relevant payment requirement.
- Exporters of goods: GST refund recovery under Rule 96B must be assessed with reference to the realisation period prescribed by the RBI.
- Exporters with written-off receivables: Refund recovery will not be made where the realisation requirement has been written off, wholly or partly, by an Authorised Dealer Bank, as clarified by CBIC.
Businesses should review their payment arrangements, bank account classifications, foreign exchange documentation and export refund records to ensure that they meet the applicable GST and FEMA requirements.
Conclusion
CBIC's Circular No. 263/09/2026-GST dated October 26, 2026, provides important clarity on how export payments and settlement arrangements are treated under the GST framework.
By recognising specified repatriable INR payments, compliant set-off transactions and the net retention mechanism for reinsurance brokers, the circular addresses practical issues faced by businesses involved in cross-border services. It also clarifies the RBI-linked time limits for realisation of export proceeds and the circumstances in which GST refund recovery under Rule 96B will not be pursued.
Exporters and professionals should refer to the complete circular alongside the applicable provisions of the IGST Act, CGST Rules and FEMA regulations before determining the GST treatment of individual transactions.
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