Supreme Court: CGST Rule 96(10) Retrospective Effect Confirmed

• The Supreme Court, in Goodluck India Ltd. v. Union of India on August 6, 2026, ruled that the omission of Rule 96(10) of the CGST Rules, 2017, applies to all pending proceedings.
• This decision invalidates legacy demands, refund rejections, and recovery notices based on the erstwhile Rule 96(10).
• Rule 96(10) had previously restricted the IGST refund route for exporters utilizing specific concessional or exemption schemes.
• The government had initially intended the rule's omission in October 2024 to be prospective, leading to widespread disputes.
• The Supreme Court's judgment resolves conflicting High Court decisions and provides clarity on the `retrospective effect` of the rule's removal.

The Supreme Court's definitive ruling on August 6, 2026, in the case of Goodluck India Ltd. v. Union of India, unequivocally established that the omission of Rule 96(10) of the CGST Rules, 2017, applies retrospectively to all ongoing proceedings.

The Supreme Court's definitive ruling on August 6, 2026, in the case of Goodluck India Ltd. v. Union of India, unequivocally established that the omission of Rule 96(10) of the CGST Rules, 2017, applies retrospectively to all ongoing proceedings. This landmark decision effectively invalidates a multitude of legacy demands, refund rejections, and recovery notices that had been issued to exporters based on the now-defunct rule. The ruling brings a conclusive end to a protracted debate over the `retrospective effect` of the rule's removal, providing clarity for `India export refund pending proceedings`.

Prior to this judgment, the omission of `CGST Rules 2017 Rule 96(10)` in October 2024 had left thousands of exporters in limbo. While the government had intended the omission to be prospective, tax authorities continued to pursue demands for the period before the rule's removal. The Supreme Court's intervention resolves this critical ambiguity, confirming that any disputes or demands predicated on the erstwhile `Rule 96(10)` must now be dismissed.

At the heart of this legal contention was `Rule 96(10)` of the CGST Rules, 2017, a provision that had significantly complicated `GST export incentives litigation`. Under `Section 16, Integrated Goods and Services Tax Act, 2017`, exporters are afforded two primary avenues for relief: either exporting under a Letter of Undertaking (LUT) or bond to claim a refund of unutilised input tax credit (the Rule 89 route), or exporting upon payment of Integrated Goods and Services Tax (IGST) and subsequently claiming a refund of the tax paid (the Rule 96 route).

Rule 96(10) was specifically designed to restrict the more expedient Rule 96 route for a broad category of exporters. This included Export Oriented Units (EOUs) importing without Basic Customs Duty (BCD) and IGST, Advance Authorisation holders benefiting from similar exemptions, those involved in deemed export procurements, and merchant exporters purchasing goods at a concessional 0.1 percent rate. The rule, rather than achieving its intended purpose, generated considerable litigation, leading to issues like mismatches, recovery demands with interest, and ongoing disputes regarding the payment of BCD.

The government, acting on the recommendations from the 54th GST Council meeting, formally omitted `Rule 96(10)` through Notification No. 20/2024-CT, effective October 8, 2024. Despite the acknowledgement that the rule was causing "unnecessary complications without any intended benefit," the recommendation specified a prospective effect for its omission. This single word, "prospective," became the focal point of a widespread legal battle.

Tax authorities maintained that pre-October 8, 2024, demands remained valid, while assessees argued that an omission without an explicit saving clause effectively removed the provision from the statute book for all pending matters. This divergence led to conflicting judgments across various High Courts. Initially, the Gujarat High Court upheld Rule 96(10), but subsequently, the Kerala and Calcutta High Courts declared the rule ultra vires `Section 16, IGST Act` and manifestly arbitrary, quashing related demands. Following the rule's omission, High Courts in Gujarat, Bombay, and Andhra Pradesh further ruled that the omission applied to all pending proceedings, setting aside departmental demands, ultimately necessitating the Supreme Court's definitive pronouncement in `Goodluck India Ltd v Union of India`.

Lawyers and compliance officers should immediately review all pending export refund disputes, recovery demands, and tax disputes based on the erstwhile Rule 96(10) of the CGST Rules, 2017. The Supreme Court's decision confirms that the omission of this rule applies to all such pending proceedings, rendering legacy demands and disputes invalid, thus providing a basis for challenging or resolving these matters in favor of the assessee.

Source: Original reporting via legal analysis.