The End of Rule 96(10)  - What Exporters Should Know

Recently, the Delhi High Court issued an important ruling that directly impacts exporters in India. The Court has ruled that there is no legal effect of Rule 96(10) of the CGST Rules after its omission on 8 October 2024. The reason behind this is that the Government revoked the rule, without adding any saving clause, which implies that the rule cannot be applied in any pending matters.

This is a great relief to the exporters whose IGST Refund was either blocked or challenged just due to Rule 96(10).

What Was Rule 96(10)?

Rule 96(10) limits the exporters to claim IGST Refund if they bought goods under some of the customs-duty-exempt schemes, like:

• Advance Authorisation
• EOU/STPI Units
• EPCG

Supplies in which the supplier applied IGST exemptions.

The purpose of the rule was to prevent misuse of the duty-free benefits. But in reality, it created serious problems for real exporters. Lots of them had their refunds delayed, show cause notices, and even adjudication because their suppliers were using exempt schemes.

Why Was Rule 96(10) Removed?

During its 54th meeting, the GST Council acknowledged that Rule 96(10) was causing undue complexities and complicating the refund process of exporters.

Consequently, the rule was removed by the Government on 8 October 2024.

Notably, no saving clause was in the notification, and it implies:

• The rule is no longer legal.
• It cannot be enforced on future refund cases.
• Once Rule 96(10) has been deleted, no authority can rely on the Rule. 

What Did the Delhi High Court Say?

The Court clearly held that:

An omitted rule is considered to have never existed, unless the government saves it.

The fact that Rule 96(10) has been eliminated with no saving clauses means that no further SCNs, inquiries, adjudications, restrictions, or denials of a refund based on this rule can be made.

Neither can new actions be issued by the departments under this rule.

In simple words:

• Rule 96(10) cannot be used to deny or question any IGST Refund.
• The other High Courts have also adopted the same stands, which adds strength to the clarity for exporters.

Impact on Exporters

Pending IGST Refund: IGST Refund that was withheld under Rule 96(10) should now be released, subject to other terms.

SCNs and Summons: Notices of show cause or summons which are issued under Rule 96(10) become invalid.

Appeals and Adjudications: This rule can no longer be used in cases that are either still in the appellate or adjudication stages.

Liquidity Relief: This enhances the cash flow since the exporters are able to claim the IGST Refund freely.

What Should Exporters Do Now?

• Check on any pending refund rejections or SCNs - they are now invalid.
• Send a letter to the jurisdictional officer to clear refunds that were stuck under Rule 96(10).
• Keep good documents - shipping bills, proofs of IGST payments, invoice information, LUT, etc.
• Reapply for refunds wherever they had blocked applications before.

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Conclusion

The abolition of Rule 96(10) is a significant move toward simplification of the export refund process and lessening unnecessary litigation. Exporters can now feel secure pursuing their outstanding IGST Refund since this rule is no longer effective after 8 October 2024, and therefore is not a basis for denying a claim.