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DGFT resolves long-standing concern related to redemption of AAs affected by old CGST Rule
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Shardul Nautiyal, Mumbai
November 19 , 2025
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In a significant relief for pharmaceutical exporters, the Directorate General of Foreign Trade (DGFT) has issued a clarification resolving a long-standing concern related to the redemption of Advance Authorisations (AAs) impacted by the erstwhile Rule 96(10) of the CGST Rules-2017. This issue had persisted for years, creating compliance hurdles and delaying export obligation closures for several companies in the pharma sector, which heavily relies on duty-free imports of raw materials.
Since October 2017, many pharma exporters who imported critical inputs under the AA Scheme found themselves unable to obtain redemption or Export Obligation Discharge Certificates (EODCs). The bottleneck stemmed from the earlier version of Rule 96(10) of the CGST Rules, which restricted IGST refund eligibility for exporters (or their suppliers) who had availed specified duty exemptions.
This rule created ambiguity and led to conflicting interpretations by Customs and GST authorities, especially for imports made between October 13, 2017, and January 09, 2019, a period when IGST exemption for AA imports existed but was subject to a pre-import condition; and exporters were unsure whether past duty exemptions affected their IGST refunds or AA redemption.
Pharma exporters, whose supply chains depend on time-sensitive import consignments of active pharmaceutical ingredients (APIs) and excipients, were among the most affected. Many faced delays in closing AA cases, increased financial exposure, and prolonged compliance uncertainty.
The DGFT has now settles the issue by clearly outlining when EODC should not be withheld. The clarification circular aligns with Supreme Court (SC) judgment dated April 28, 2023, Customs Circular No. 16/2023 dated June 07, 2023, and earlier DGFT Trade Notices issued on June 08, 2023 and September 25, 2023.
The DGFT stated that EODC must be granted, provided all other export obligation conditions are fulfilled, in the following cases like IGST paid in cash: If the exporter paid IGST in cash at the time of import under the AA Scheme during the affected period, if the exporter did not avail benefits of IGST or Compensation Cess exemption (except Basic Customs Duty relief) and if the importer met the pre-import requirement and other scheme procedures applicable at the time.
The clarification directly addresses the primary concern of pharma exporters around uncertainty over EODC issuance for AAs due to technical interpretations of historical GST rules.
With this policy circular clarification, hundreds of stuck AA cases can now move toward closure. Exporters can regularise compliance without fear of retrospective penalties. Working capital previously locked in litigation or administrative delays will be freed. Supply chains depending on timely duty-free imports will operate with renewed confidence.
The DGFT’s directive represents a major step toward simplifying pharma export compliance by removing ambiguity around Rule 96(10) and harmonising positions across DGFT, customs, and the GST framework.
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