GST Circular No 263/09/2026

The Central Board of Indirect Taxes and Customs (CBIC) has issued an important Circular clarifying the acceptable modes of receiving export payments for goods and services, including payments through INR accounts, adjustment of export receivables against import payables, and realisation of export proceeds for GST refund purposes. The Circular has been issued under Section 168(1) of the CGST Act, 2017, to ensure uniform implementation of GST provisions.

1. Receipt of Export Payments in INR Through Nostro and SNRR Accounts

Under Section 2(6)(iv) of the IGST Act, 2017, one of the conditions for qualifying as an export of services is that payment must be received in convertible foreign exchange or in Indian Rupees wherever permitted by the RBI.

CBIC has clarified the following:

Earlier Clarification – Special Rupee Vostro Accounts

As per Circular No. 202/14/2023-GST dated 27.10.2023:

Export payments received in INR from Special Rupee Vostro Accounts of correspondent banks of partner trading countries, opened by Authorised Dealer (AD) banks, satisfy the payment condition for export of services.
This is subject to the conditions and restrictions under Foreign Trade Policy, 2023, applicable RBI Circulars and any other approvals or permissions required under law.

Payments Through Repatriable INR Accounts

Under the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023 (FEMA 14R/2023):

Payments for exports to countries other than Nepal, Bhutan and members of the Asian Clearing Union (ACU) may be received in INR or foreign currency
Payments in INR may be facilitated through INR Nostro (Rupee Vostro) accounts of correspondent banks or repatriable INR accounts, including Special Rupee Vostro Accounts (SRVA) and Special Non-Resident Rupee (SNRR) Accounts.

Accordingly, CBIC has clarified that payments for export of services received through the following modes satisfy Section 2(6)(iv) of the IGST Act:

Convertible foreign exchange.
Repatriable INR accounts such as SNRR Accounts.
INR Nostro Accounts.
Other similar accounts permitting repatriation of foreign exchange.

2. Export Payments Received by Stock Brokers from Overseas Clients

CBIC has specifically clarified the treatment of payments received by Indian stock brokers providing services to overseas clients, such as:

Foreign Portfolio Investors (FPIs).
Non-Resident Indians (NRIs).
Overseas Citizens of India (OCIs).

A. Payments Through SNRR and NRE Accounts

Payments received by stock brokers through repatriable INR accounts such as SNRR and Non-Resident External (NRE) Accounts may be considered to satisfy the payment condition under Section 2(6)(iv) of the IGST Act.

B. Payments Through NRO Accounts

Where payments are made through Non-Resident Ordinary (NRO) Accounts:

Such payments must be routed through repatriable INR accounts, such as SNRR or NRE Accounts, in accordance with RBI guidelines.
This is necessary for satisfying the payment condition under Section 2(6)(iv).

3. Set-Off of Export Receivables Against Import Payables

CBIC has clarified that adjustment of export receivables against import payables is also a valid mode of settlement, subject to RBI directions.

Earlier FEMA Provisions:

Under the earlier RBI guidelines:

Set-off transactions were permitted subject to prescribed conditions.
Such adjustments were allowed for goods against goods and services against services.

New FEMA Regulations Effective from 1 October 2026

With the introduction of the Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026, effective from 01.10.2026:

The earlier conditions governing such set-off transactions cease to apply as stated in the Circular.
Set-off transactions remain a valid method of settlement under FEMA regulations

GST Clarification

Where export receivables are adjusted against import payables:

Such settlement will be accepted for satisfying the payment condition under Section 2(6)(iv) of the IGST Act.
The set-off must comply with the applicable directions issued by the RBI.

4. Export Payments Received by Reinsurance Brokers Through Net Retention

CBIC has also clarified the treatment of commission received by Indian reinsurance brokers for services provided to foreign reinsurers.

How the Net Retention Mechanism Works

Indian reinsurance brokers provide broking services to foreign reinsurers.
Instead of receiving their commission separately through inward foreign remittance, they retain the commission from the funds before remitting the net premium outside India.
Under FEMA regulations, the foreign reinsurer or broker is treated as having paid the commission by authorising the Indian broker to retain the amount.
The obligation to realise and repatriate export proceeds is extinguished through this net retention mechanism

GST Clarification

CBIC has clarified that the net retention mechanism may be treated as satisfying the payment condition under Section 2(6)(iv) of the IGST Act.

5. Realisation of Export Proceeds for Export of Goods – Rule 96B

CBIC has clarified the applicable time limit for realisation of export proceeds and its impact on GST refunds.

Requirement Under Rule 96B of the CGST Rules

Where export proceeds for goods are not realised, either wholly or partly, within the period prescribed under FEMA, 1999, including any permitted extension:

The GST refund already received becomes liable to be deposited or recovered to the extent of non-realisation.
Applicable interest is also payable.
The amount must be deposited within 30 days from the expiry of the prescribed or extended period.

Rule 96B also provides that recovery shall not be effected where the RBI has written off the requirement of realisation, wholly or partly, on merits.

Applicable Time Limit for Realisation

CBIC has clarified that:

The applicable time limit and amount required to be realised are governed by FEMA, 1999, and RBI regulations.
For export of goods, the applicable period or extended period shall be the period prescribed under RBI FED Master Direction No. 16/2015-16 dated 01.01.2016, last amended on 05.06.2026, as amended from time to time.

Relief Where Export Proceeds Are Written Off by AD Bank

CBIC has further clarified that:

Where the requirement of realisation of export proceeds is written off, wholly or partly, by the Authorised Dealer (AD) Bank, GST refund recovery under Rule 96B shall not be made.

Circular-No-263-09-2026