GST Refund Restrictions: CBIC Clarifies Retrospective Omission of Rule 96(10)

The Central Board of Indirect Taxes and Customs (CBIC) has clarified that the omission of Rule 96(10) of the CGST Rules, 2017, will have retrospective effect from October 23, 2017. The clarification follows the Supreme Court's judgment in Goodluck India Limited v. Union of India, which held that the omission of the rule would apply to all proceedings pending on the date of its omission, in the absence of a saving or sunset clause.

Through Circular No. 264/10/2026-GST dated October 26, 2026, the CBIC has directed GST field formations to deal with pending proceedings relating to Rule 96(10) in accordance with the Supreme Court's ruling.

Why Was Rule 96(10) Introduced?

Rule 96(10) of the CGST Rules, 2017, was introduced with effect from October 23, 2017. Its primary objective was to prevent exporters from claiming double benefits.

Under the provision, exporters who had availed themselves of IGST exemption on procurement under specified notifications were restricted from claiming IGST refunds on the export of those goods.

However, the restriction created difficulties for exporters, particularly in cases involving concessional or exemption benefits on inputs.

Considering these difficulties, the GST Council, in its 54th meeting held on September 9, 2024, recommended removing the restriction.

Consequently, Rule 96(10) was omitted prospectively with effect from October 8, 2024, through Notification No. 20/2024-Central Tax dated October 8, 2024.

Supreme Court Ruling in Goodluck India Limited Case

The issue of whether the omission of Rule 96(10) could operate retrospectively came before the Supreme Court in M/s Goodluck India Limited & Anr. v. Union of India & Ors., Special Leave Petition (Civil) No. 24550 of 2025.

In its judgment dated August 6, 2026, the Supreme Court held that, in the absence of a saving clause or sunset clause accompanying the omission of Rule 96(10), the omission would apply to all proceedings pending as on the date of its omission.

The Court relied on the Constitution Bench judgment in Kolhapur Canesugar Works Ltd. v. Union of India [(2000) 2 SCC 536].

The legal principle considered by the Court was that Section 6 of the General Clauses Act, 1897, does not apply to the omission of a rule.

It further reiterated that pending proceedings following the omission of a rule can continue only where an express provision provides for their continuation or where a legal mechanism has been incorporated into the relevant statute or rules to preserve such proceedings.

CBIC Clarification: Retrospective Effect from October 23, 2017

Following the Supreme Court's decision, the CBIC has now provided an important clarification for GST officers and taxpayers.

Exercising its powers under Section 168(1) of the CGST Act, 2017, the Board has clarified the following:

1. Retrospective application: The omission of Rule 96(10) of the CGST Rules will be effective retrospectively from October 23, 2017, the date on which the rule was originally introduced.

2. Pending proceedings: GST field formations have been advised to deal with pending proceedings concerning Rule 96(10) in accordance with the Supreme Court's judgment in the Goodluck India Limited case.

3. Similar treatment for other provisions: The same treatment will apply, mutatis mutandis, to the omission of Rules 89(4A) and 89(4B) of the CGST Rules.

The clarification is intended to ensure uniform implementation of the law across GST field formations.

What Does This Mean for Exporters and GST Proceedings?

The CBIC clarification is significant for exporters who were affected by the restrictions under Rule 96(10).

With the omission now clarified as retrospectively effective from October 23, 2017, pending proceedings relating to the rule will have to be dealt with in accordance with the Supreme Court's interpretation.

The clarification also extends similar treatment to Rules 89(4A) and 89(4B), making it relevant to a wider set of GST refund-related proceedings.

For taxpayers and businesses involved in such matters, the development may have an important bearing on pending disputes and refund-related litigation.

However, the circular specifically directs field formations to follow the Supreme Court's judgment in pending proceedings. The actual impact will depend on the facts and procedural status of each case.

Official Circular Details

Conclusion

The CBIC's latest clarification settles an important question concerning the retrospective effect of omitting Rule 96(10) of the CGST Rules. Following the Supreme Court's ruling in the Goodluck India Limited case, the omission will be treated as effective from October 23, 2017, and pending proceedings must be handled accordingly. The clarification also extends similar treatment to Rules 89(4A) and 89(4B), providing important guidance for GST authorities and exporters dealing with related disputes.