Erased, Not Paused: Goodluck India, Circular 264 and the Exporter’s Way Back to IGST Refunds

Few provisions in the GST rules have produced as much litigation for so little revenue purpose as sub-rule (10) of rule 96. For seven years it shut a class of exporters out of the faster route to a refund of integrated tax, generated recovery notices running back to 2017, and split the High Courts. On 6 August 2026, in Goodluck India Ltd. v. Union of India, the Supreme Court held that its omission applies to every proceeding pending on the date it was omitted.¹ On 26 October 2026, CBIC issued Circular No. 264/10/2026-GST accepting the judgment and stating that the omission “will be effective retrospectively from 23.10.2017”.²

This TLC Insight examines what the Court actually decided, how far the circular goes beyond it, and what an exporter in each stage of a dispute should now do.

01A restriction on a statutory choice

Section 16 of the IGST Act gives an exporter a choice. It may export under a bond or letter of undertaking and claim refund of unutilised input tax credit under rule 89, or export on payment of integrated tax and have that tax refunded under rule 96.³ The second route is generally faster, because for goods the shipping bill itself is treated as the refund application.

Rule 96(10), as finally substituted with effect from 23 October 2017, denied the second route to an exporter whose supplier had availed specified concessional notifications, or who had itself imported inputs under specified customs exemptions such as advance authorisation or export-oriented unit benefits.⁴⁵ CBIC’s stated purpose was to prevent a “double benefit”: an exporter who obtained inputs free of integrated tax should not also receive a cash refund of the tax paid on exports.⁶ The difficulty was that the rule caught exporters who had derived no double benefit at all, and the department used it to recover refunds already sanctioned, with interest and penalty, for periods reaching back to the first months of GST.

02The omission and the quarrel over “prospective”

At its 54th meeting on 9 September 2024, the GST Council recorded the Law Committee’s view that rule 96(10) was “leading to unnecessary complications without any intended benefit being served” and recommended that rule 96(10), rule 89(4A) and rule 89(4B) be omitted “with prospective effect”.⁷ Notification No. 20/2024–Central Tax omitted all three with effect from 8 October 2024.⁸ The notification itself said nothing about pending proceedings.

The department read the Council’s words into the notification and continued to pursue demands for the pre-omission period. Exporters argued that a rule omitted without a saving clause cannot sustain any proceeding still open. The High Courts divided on the route but increasingly agreed on the result. The Kerala High Court in Sance Laboratories declared the rule ultra vires section 16 of the IGST Act and manifestly arbitrary.⁹ The Gujarat, Bombay and Calcutta High Courts, among others, held that the omission governs pending proceedings.¹⁰

03What the Supreme Court decided

The Court framed one question: whether the omission of rule 96(10) with effect from 8 October 2024 enures to the benefit of the exporter in proceedings then pending, so that the refund claim is decided without the restriction.¹¹ It answered yes, for three reasons.

First, the omission was unconditional. The Court applied the Constitution Bench decision in Kolhapur Canesugar Works, which holds that section 6 of the General Clauses Act, 1897 saves pending proceedings only where a Central Act or regulation is repealed, and does not apply to the omission of a rule.¹²¹³ A proceeding under an omitted rule can continue only if the amending instrument saves it, or if the statute creates a fiction that keeps it alive. Rule 96(10) was omitted with neither. The Additional Solicitor General fairly accepted that no saving clause or sunset clause had been enacted.

Second, the Council’s word “prospective” did not travel into the law. The Court described the recommendation as advisory, not binding on the rule-making authority, and noted that the Government’s own counsel accepted as much.¹⁴

Third, the purpose of the omission pointed the same way. The rule was omitted to end unnecessary complications “once and for all”. That purpose, the Court held, could not be served by keeping those complications alive in pending matters.¹⁵

Two features of the order are easy to miss. The exporters’ own petitions challenging the validity of rule 96(10) were dismissed as infructuous.¹⁶ The Supreme Court has therefore not decided whether the rule was valid during its life; that question remains where the High Courts left it. And the Court directed every High Court registry to list pending rule 96(10) matters before the roster bench expeditiously, so that the litigation reaches closure.¹⁷

An omission without a saving clause does not pause a rule. It removes it, and the pending proceeding goes with it.

04Circular 264: a judgment accepted, then extended

CBIC moved in two steps. By an Office Memorandum dated 24 August 2026, the GST Policy Wing accepted the judgment and advised that the restriction could not be applied to pending proceedings.¹⁸ The memorandum makes a candid point. After Kolhapur Canesugar, Parliament inserted general saving provisions into the Central Excise Act, 1944 (section 38A) and the Customs Act, 1962 (section 159A) by the Finance Act, 2001, so that amending or omitting a rule would not extinguish existing rights and pending cases. GST law has no equivalent. In the Board’s own words, without such a clause “omission of a rule in essence takes retrospective effect”.¹⁹

Circular No. 264/10/2026-GST then gave this a formal footing under section 168(1) of the CGST Act. It clarifies that the omission of rule 96(10) “will be effective retrospectively from 23.10.2017”, directs field formations to deal with pending proceedings in accordance with the judgment, and applies the same treatment, mutatis mutandis, to the omission of rules 89(4A) and 89(4B).²⁰²¹

The circular is wider than the judgment in two respects, and both matter.

Retrospective from 2017, not merely pending on 8 October 2024. The Court spoke of proceedings pending on the date of omission. The circular speaks of retrospective effect from the date the rule was introduced. On the ordinary understanding of the omission principle, matters that had already concluded are not reopened; the Court’s own formulation is consistent with that. The circular’s language is therefore best read as the Board’s explanation of why pending matters must fall, rather than as an independent grant of relief in closed cases. It does, however, bind the officers who issued it.

Rules 89(4A) and 89(4B). The Court was not asked about these sub-rules. They were omitted by the same notification, without a saving clause, and the same reasoning applies to them. The Board has chosen to extend the treatment administratively. Exporters should note that these sub-rules did not operate in one direction only: they provided separate refund mechanisms for supplies made using concessional inputs, and the related formula in rule 89(4) excluded the credit claimed under them. Whether the omission helps or hurts a particular pending claim depends on its facts.

What gives the circular its force is its status. A circular under section 168(1) binds the officers of the department, though not the taxpayer or the courts. The Constitution Bench in Ratan Melting held that circulars bind the authorities under the statute but cannot prevail over a declaration of law by the Supreme Court or a High Court.²² Circular 264 sits comfortably within that rule, because it follows the declaration of law rather than departing from it. For a pending matter, therefore, a departmental officer who continues to rely on rule 96(10), or who argues that the omission was prospective only, now acts contrary to both the Supreme Court and the Board.

05Where a Kolkata exporter stands

The Calcutta High Court has already applied Goodluck India. In KSE Electricals Pvt. Ltd., a show cause notice dated 25 July 2024 issued under section 74 for July 2017 to March 2022, founded on rule 96(10), was set aside together with the consequential orders. The Court took judicial notice of the judgment and of CBIC’s Office Memorandum.²³ The Rajasthan High Court, disposing of three writ petitions in Sutlej Textiles, permitted the exporter to file fresh refund applications and directed that they be decided within twelve weeks without prejudice from the earlier orders.²⁴

Together these decisions show the two shapes that relief takes: a demand that falls, and a refund that must be reconsidered. The table below sets out, in TLC’s assessment, how the position works out at each stage.

Refund rejected on rule 96(10); appeal pending or still within time Appellate authority, GSTAT or High Court must apply Goodluck India File or press the appeal; place the judgment, the circular and the Office Memorandum on record

Show cause notice under section 73 or 74 to recover refunds already paid Proceeding cannot continue on the omitted rule Seek withdrawal or dropping; KSE Electricals is the jurisdictional precedent in Calcutta

Demand confirmed; appeal or writ pending Demand falls; pre-deposit refundable with interest under section 115 Seek early listing in terms of para 9 of the judgment

Rule 89(4A) or 89(4B) claims or disputes Same treatment, mutatis mutandis, under para 6 of the circular Test whether the omitted sub-rule restricted or enabled the claim before relying on it

Order final, or amount paid and not contested, before 8 October 2024 Not a “pending” proceeding on the judgment’s terms; the circular’s wording is arguable support Examine limitation under section 54 and the route available before acting; take a matter-specific opinion -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

06The hard cases: money already paid

The difficult question is the exporter who paid. Many exporters, faced with audit objections or recovery notices, repaid refunds through Form DRC-03 rather than litigate. Others let an adverse order become final. Neither is a pending proceeding in the sense the Court used.

Three points shape the answer. First, a refund of pre-deposit made to file an appeal is governed by section 115 of the CGST Act, and carries interest from the date of payment at the rate notified under section 56.²⁵ That applies only where an appeal was actually filed. Second, any fresh claim to recover tax or other amounts paid falls under section 54, which requires an application within two years of the relevant date.²⁶ The circular does not, and could not, extend that period. Third, the Supreme Court in Mafatlal Industries held that refunds outside the narrow case of an unconstitutional levy must be claimed under the statute and within its time limits.²⁷ Because the Supreme Court has not decided the validity of rule 96(10), the unconstitutional-levy exception cannot be assumed.

That leaves room for argument, not certainty. A payment made under protest within a live proceeding, a payment followed by a writ still pending, and a payment where the two-year window has not closed are each worth testing. A payment made voluntarily years ago, with no proceeding and no claim, is unlikely to be recovered merely because the circular uses the word “retrospectively”. Exporters within the jurisdiction of the Kerala High Court may wish to examine the effect of Sance Laboratories on their own facts.²⁸

07A gap in the GST law worth closing

The wider lesson is structural. Central Excise and Customs have carried general saving provisions since 2001; the CGST Act does not. As the Board itself has recognised, every rule omitted without a saving clause now carries the Goodluck India consequence for pending matters.²⁹ That cuts both ways. It protects taxpayers when a burdensome rule is withdrawn. It also means that any future omission of a rule may be accompanied by an express saving clause, which taxpayers will then need to read closely. Practitioners should check every future amendment notification for that language, and should not assume that a rule omitted tomorrow will be treated as this one has been.

08The chapter that should now close

Goodluck India is a short order with a long reach. It rests on a principle settled for a quarter of a century, applies it to a rule that the GST Council’s own Law Committee had described as producing complications without benefit, and leaves the department with nothing to pursue in pending matters. Circular 264 completes the work administratively. What remains is execution: listing old cases, releasing withheld refunds and returning pre-deposits. Exporters who act now, with their papers in order, should see this dispute end where it began, with a refund of the tax they paid on their exports.

This insight reflects the law as at 30 October 2026.

About the authorSumit KumarFounder, The Lord’s Consultancy · Corporate, Taxation & Regulatory Lawyer

Advises on GST, customs, direct tax and corporate law, and appears before Appellate Tribunals, the High Courts and the Supreme Court.