A GST notice alleging that export proceeds were not realised within the prescribed period invokes Section 16(3) of the IGST Act and Rule 96B of the CGST Rules. The consequence can be reversal of the refund already paid, recovery of the unutilised ITC or IGST refund, and a demand on the export value. The taxpayer’s defence turns on the realisation timeline, the RBI/FEMA permission, and the documentation of the foreign exchange receipt.
The Statutory Timeline
Section 16(3) of the IGST Act requires that the payment for the zero-rated supply be received in convertible foreign exchange or in permitted Indian rupees within the period allowed under the Foreign Exchange Management Act, 1999, or such further period as the Reserve Bank of India may permit. Rule 96B operationalises the recovery where the proceeds are not realised within the FEMA period, including any extension. The exporter must monitor the realisation timeline for each export invoice.
The Realisation Evidence
The exporter should maintain the foreign inward remittance advice, the FIRC or bank certificate, the invoice-wise mapping of the receipt to the export invoice, and the RBI or AD bank approval for any extension or write-off. Where the payment is received in permitted Indian rupees, the exporter should document the RBI permission and the linkage to the export. Where there is a set-off or netting arrangement, the exporter should document the contractual basis and the bank’s confirmation.
The Rule 96B Recovery and the Three-Month Cure
Rule 96B provides that where the refund has been paid but the proceeds are not realised, the exporter must deposit the refund with interest within 30 days of the expiry of the realisation period. Where the proceeds are realised subsequently, the exporter can produce evidence within three months from the date of realisation, and the recovery can be reversed. The exporter should therefore maintain a realisation tracker and should respond to the notice with the evidence of realisation or the RBI permission.
The Write-Off Route
Where the RBI writes off the requirement of realisation on merits, the exporter can rely on the write-off to resist the recovery. The write-off should be documented through the AD bank and the RBI framework. A write-off that is not supported by the prescribed process may not be accepted.
What the Exporter Should Control
The delayed-proceeds outcome depends on three variables: whether the realisation occurred within the FEMA period or an approved extension; whether the exporter has the bank advice, FIRC and invoice mapping; and whether any write-off or extension is documented under the RBI framework. The exporter that controls these variables can resist a Rule 96B recovery or reverse it upon realisation.
Call to Action: We advise exporters on Rule 96B notices, Section 16(3) realisation and the documentation that protects zero-rated treatment. For an export-compliance review, contact office@anujdesaiassociates.com, Ph No. 9619456656, Website https://anujdesaiassociates.com, LinkedIn linkedin.com/in/ca-anuj-desai-122547230.