Government Must Refund GST Collections Under Scrapped Rule, Say Experts

The Central Board of Indirect Taxes and Customs (CBIC) has come under scrutiny following its decision to retrospectively omit CGST Rule 96(10), which had been used to recover funds from exporters. The move raises critical questions about the legitimacy of collections made under the provision before its removal, with stakeholders questioning why exporters should bear the financial burden of the government's regulatory oversight.

Under the disputed rule, tax authorities had recovered substantial amounts from exporters, along with associated interest charges. The retrospective nature of the CBIC's action—essentially invalidating a previously applicable regulation—has led industry representatives to argue that all sums collected under the provision should be returned with appropriate interest to affected businesses.

The situation highlights ongoing tensions between tax administration and the export sector, which has long complained of regulatory uncertainty and retroactive policy changes. Trade bodies have called for clarity on the government's intention regarding the collected amounts and a timeline for returns, emphasizing that such reversals undermine business confidence in tax compliance frameworks.

As of now, the CBIC has not issued official guidance on refunding the recovered amounts. Exporters and their representatives are awaiting formal notification detailing the mechanism and timeline for returning collected funds and interest, which could significantly impact working capital for numerous businesses in the export-dependent sectors.