Clarification on Redemption of Advance Authorisations Impacted by Rule 96(10) of CGST Rules

The Directorate General of Foreign Trade (DGFT), under the Ministry of Commerce & Industry, Government of India, has issued Policy Circular No. 07/2025-26 dated November 11, 2025, addressing concerns related to the redemption of Advance Authorisations (AAs) impacted by the erstwhile Rule 96(10) of the Central Goods and Services Tax (CGST) Rules, 2017. This circular provides much-needed clarity for exporters and trade members who faced challenges due to the earlier provisions of Rule 96(10) and its implications on imports made between October 13, 2017, and January 9, 2019.

Background

Rule 96(10) of the CGST Rules, prior to its amendment, restricted the refund of IGST paid on exports in cases where exporters or their suppliers availed specified duty exemptions under Customs Notification No. 79/2017-Customs. This created hurdles for exporters seeking redemption of their Advance Authorisations during the specified period.

To address these issues, the DGFT had earlier issued Notification No. 33/2015-2020 on October 13, 2017, modifying Para 4.14 of the Foreign Trade Policy (FTP) 2015-2020. This notification extended exemptions from payment of duties, including IGST and Compensation Cess, for physical exports under the AA Scheme, subject to a pre-import condition. However, the pre-import condition was later withdrawn through DGFT Notification No. 53/2015-2020 on January 10, 2019, following the issuance of Customs Notification No. 01/2019-Customs.

Supreme Court Judgment and Subsequent Actions

Union of India & ORS. vs Cosmo Films Limited

The Supreme Court of India set aside the Gujarat High Court’s judgment, which had declared the ‘pre-import condition’ in the Foreign Trade Policy (FTP) and customs notifications as arbitrary and unreasonable. The court upheld the validity of the ‘pre-import condition’ introduced by Notification No. 79/2017-Customs and Notification No. 33/2015-2020, stating that it was within legislative discretion and not arbitrary. It emphasized that tax exemptions and refunds are statutory privileges, not constitutional rights, and that economic policies can involve phased implementation and experimentation. The court also ruled that the removal of the ‘pre-import condition’ through a later notification could not be applied retrospectively. While allowing the Revenue’s appeals, the court directed the respondents (exporters) to claim refunds or input tax credit for duties paid during the interim period, subject to verification by the jurisdictional commissioner.

The Hon’ble Supreme Court, in its judgment dated April 28, 2023, upheld the Revenue’s appeal and directed that affected parties be allowed to claim refunds or input tax credit (ITC) wherever applicable. In response, the Customs Authorities issued Circular No. 16/2023-Customs on June 7, 2023, and the DGFT followed suit with Trade Notices No. 07/2023-24 and No. 27/2023, issued on June 8, 2023, and September 25, 2023, respectively.

Key Clarifications in Policy Circular No. 07/2025-26

To further streamline the process and address exporters’ concerns, the DGFT has clarified the following points regarding the issuance of Export Obligation Discharge Certificates (EODC):

Payment of IGST in Cash: Exporters who paid IGST in cash at the time of clearing import consignments under the AA Scheme during the specified period will not face any hindrance in obtaining their EODC, provided all other requirements are met.
Non-Availing of Duty Exemptions: Exporters who did not avail exemptions from IGST, Compensation Cess, or other levies (except Basic Customs Duty) are eligible for EODC issuance.
Compliance with Pre-Import Conditions: Exporters who adhered to the prescribed pre-import and other procedural requirements under the AA Scheme will not face delays in EODC issuance.

Conclusion

This clarification by the DGFT is a welcome move for exporters who were impacted by the earlier provisions of Rule 96(10) of the CGST Rules. By addressing the concerns and providing clear guidelines, the government has ensured smoother processes for the redemption of Advance Authorisations. Exporters are encouraged to review the circular and ensure compliance with the outlined conditions to facilitate the timely issuance of their EODCs.

In case you face any issues related to Indirect Tax-Customs, GST, Foreign Trade Policy (FTP), Arbitration matters and Central Licensing and related advisory matters in India then please feel free to get in touch with SJ EXIM Services.

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Source: DGFT, Supreme Court

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