Payment Receipt for Services Export is Enough for GST Benefits
The Central Board of Indirect Taxes &
Customs (CBIC) has issued Circular No. 263/09/2026-GST dated October 26,
2026. This circular harmonises GST refund eligibility rules with the Reserve
Bank of India's (RBI) foreign exchange management protocols. It provides major
relief to service exporters, stockbrokers, and reinsurance agents by broadening
the types of account settlements that qualify for tax benefits.
Key Highlights &
Clarifications
·
Validity of Special Rupee Accounts:
Exporters receiving payments in Indian Rupees (INR) via Special Non-Resident
Rupee (SNRR) accounts or INR Nostro accounts are now officially recognized
as meeting the export compliance conditions under Section 2(61)(iv) of the IGST
Act.
·
Relief for Stockbrokers:
Stockbrokers providing services to foreign clients (FPIs, NRIs, and OCIs) and
receiving fees through repatriable INR accounts like SNRR or NRE accounts
satisfy export definitions. However, payments received via non-repatriable NRO
accounts must be explicitly routed through SNRR or NRE channels to be valid for
refunds.
·
Permitting Import-Export Set-Offs:
Financial adjustments where export receivables are set off against import
payables are accepted as valid modes of settlement. Following the
enforcement of the Foreign Exchange
Management (Export and Import of Goods and Services) Regulations, 2026
on October 1, 2026, these set-offs are fully eligible for GST benefits as long
as they follow general RBI directions.
·
Net Retention for Reinsurance Brokers: In the
reinsurance industry, where Indian brokers deduct their commission directly
from the premium before remitting the net amount to foreign reinsurers, the
transaction is recognized as a valid service export. The net retention
mechanism fully satisfies zero-rated refund parameters.
·
Relaxed Rule 96B Recovery Guidelines: For the
export of physical goods, standard GST refund rules require the recovery of
disbursed tax refunds if export proceeds are not realized within the timelines
mandated by FEMA. The CBIC clarified that no tax refund recovery will be
initiated if the non-realization of proceeds has been officially written
off by the Authorized Dealer (AD) Bank or the RBI on merits.
[GST Circular No. 263/09/2026-GST dated
October 26, 2026]
References have been received from the field
formations seeking clarification on various issues relating to GST refunds. In
order to clarify these issues and to ensure uniformity in the implementation of
the provisions of law in this regard across the field formations, the Board, in
exercise of its powers conferred by section 168 (1) of the Central Goods and
Services Tax Act, 2017 (hereinafter referred to as “CGST Act”), hereby
clarifies the issues detailed hereunder:
2.
Receipt
of foreign remittance in respect of export of services in Nostro and Special Non-Resident
Rupee (SNRR) accounts: Various
requests have also been received for clarification regarding admissibility of
export remittances received in repatriable rupee (INR) accounts such as Special
Non-Resident Rupee (SNRR) Account or Nostro account and treatment of set-off of
export receivables against import payables, wherever permitted by the Reserve
Bank of India (RBI) for the purposes of consideration of supply of services as
per the provisions of condition (iv) of clause (6) of section 2 of the
Integrated Goods & Services Tax Act, 2017 (herein after referred to as the
‘IGST Act”).
2.1 In this regard, reference is drawn to circular
No. 202/14/2023-GST dated 27.10.2023, wherein it was clarified that when the
Indian exporters, undertaking export of services, are paid the export proceeds
in INR from the Special Rupee Vostro Accounts of correspondent bank(s) of the
partner trading country, opened by Authorised Dealer
(AD) banks, the same shall be considered to be fulfilling the conditions of
sub-clause (iv) of clause (6) of section 2 of IGST Act, 2017, subject to the
conditions/ restrictions mentioned in Foreign Trade Policy, 2023 and extant RBI
Circulars and without prejudice to the permissions/ approvals, if any, required
under any other law.
2.2 As per the provisions of Foreign Exchange
Management (Manner of Receipt and Payment) Regulations, 2023 (FEMA 14R/2023),
receipt/payment for export to countries other than Nepal, Bhutan and members of
Asian Clearing Union(ACU), may be done in Indian Rupees (INR) or in any foreign
currency. Such payment in INR may be facilitated either through INR Nostro
(Rupee Vostro) of correspondent banks or repatriable INR accounts such as
Special Rupee Vostro Account (SRVA), Special Non-Resident Rupee (SNRR) etc..
Since, payments in INR are a valid mode of settlement as per FEMA regulations
and Rupee Vostro and SNRR are permissible accounts for receipt of export
proceeds.
2.3. Therefore, it is hereby clarified that
wherever the payment for export of service made by the Indian exporters is
received in convertible foreign exchange or in repatriable rupee (INR)
accounts, such as SNRR Account or INR Nostro account, or any other similar
account for repatriation of foreign exchange, the same shall be considered to
be fulfilling the conditions of sub-clause (iv) of clause (6) of section 2 of
IGST Act, 2017. Further, stock brokers provide services to their overseas
clients (FPIs, NRIs and OCIs) and get paid for the services in INR. It is
clarified that payment to brokers through repatriable INR accounts (SNRR, NRE)
may be considered to be fulfilling the conditions of sub-clause (iv) of clause
(6) of section 2 of IGST Act, 2017. In case of payments through NRO accounts,
as per RBI guidelines, the same should be routed through repatriable INR
accounts (SNRR, NRE) for it to be considered to satisfy the conditions
stipulated under sub-clause (iv) of clause (6) of section 2 of the IGST Act,
2017.
2.4 It may also be noted that set-off
transactions are a valid method of settlement under FEMA regulations. In terms
of extant guidelines of RBI, set-off are allowed with certain conditions. Such
set-off are allowed for goods against goods and services against services.
However, with the coming into effect of the new guidelines viz. Foreign
Exchange Management (Export and Import of Goods and Services) Regulations,
2026, from October 01, 2026, these conditions would not be applicable for such
transactions. Thus, as set-offs are valid mode of settlement as per FEMA
regulations, it is further clarified that wherever export receivables are
set-off against import payables, then as long as such set-off is in accordance
with the directions issued by the RBI, the said condition of sub-clause (iv) of
clause (6) of section 2 of IGST Act, shall be considered to be fulfilled.
2.5. Further, in respect of receipt of
remittance by reinsurance brokers through the net retention mechanism, it may
be noted that the commission charged by an Indian reinsurance broker for
providing broking services to the foreign reinsurers is settled by net
settlement rather than by a separate inward remittance in foreign exchange. In
this scenario, as per FEMA regulations, the foreign reinsurer/broker is treated
as having paid the commission/brokerage by authorizing the Indian broker to
retain it out of funds prior to remittance of the net premium outside India.
Under FEMA regulations, the obligation of the service exporter to realise and repatriate export proceeds is extinguished
through this net retention mechanism. Thus, it may be treated as having
satisfied sub-clause (iv) of clause (6) of section 2 of the IGST Act.
3.
Realisation of
export proceeds in case of export of goods: Attention is invited to Rule 96B of the CGST Rules, which
provides that where sale proceeds of export goods are not realized, wholly or
partly, within the period prescribed under the Foreign Exchange Management Act (FEMA),
1999, including any extension granted thereunder, the refund amount paid shall
be liable to be deposited/ recovered, to the extent of such non-realization,
along with applicable interest, within thirty days from the expiry of the said
period or extended period, if any. Rule 96B further provides that no such
recovery shall be effected where the requirement of
realization has been written off, either wholly or partly, by the Reserve Bank
of India on merits.
3.1. It is clarified that as the time limit for
realization of export proceeds in India and the amount to be realized are
governed under the provisions of FEMA, 1999, regarding which provisions are formulated
and implemented by the RBI, therefore, the time limit for realization of export
proceeds for export of goods under the IGST Act, 2017, shall be such period, or
such extended period, which has been prescribed in FED Master Direction No.
16/2015-16 dated 01.01.2016 (last amended on 05.06.2026) issued by the RBI and
as amended from time-to-time. It is also clarified that wherever the
requirement of realization has been written off, either wholly or partly, by
the AD Bank, recovery of refund amount under rule 96B shall not be done.
4.
It
is requested that suitable trade notices may be issued to publicize the
contents of this circular. Difficulty, if any, in the implementation of the
above circular may please be brought to the notice of the Board.