Indian Exporters RELIEF Scheme due to IRAN WAR and GEOPOLITICAL challenges Realisation Nexus: A Legal Analysis of ECGC Claims & the GST REFUNDS

TO SET THE CONTEXT

1.What are ECGC Claims?

ECGC claims refer to the amounts payable by the Export Credit Guarantee Corporation of India (ECGC) to exporters when they suffer a loss due to non-payment or default by overseas buyers, or due to political risks in the importing country. In short, ECGC claims are insurance payouts to exporters for losses arising from buyer default or political risks in international trade.

2.Purpose of ECGC Claims

• Protect exporters against export credit risk
• Encourage exports by reducing uncertainty in international trade
• Provide financial security in case of default or disruption

3.Recent developments: What is actually happening on the ground?

• War-related disruptions in West Asia (including Iran region) have:
  • Increased freight costs
  • Increased insurance / war-risk premiums
  • Caused shipment delays, rerouting, and contract uncertainty
• Government response:
  • ₹497 crore RELIEF scheme launched
  • ECGC made nodal agency for claim verification and settlement
• Exporters are now facing:
  • Payment delays / contract cancellations
  • Higher probability of defaults
  • Logistics disruptions affecting delivery timelines

These are classic triggers for ECGC claims (political + commercial risk).

4.The Problem No One Is Talking About – The Critical ECGC-GST Intersection

If an exporter’s buyer in a West Asia country or any other part of the world fails to pay due to war/political disruption, and the exporter receives settlement from ECGC instead. Does that satisfy the “realisation of sale proceeds” condition under GST law?

I. The Geopolitical Context: What the RELIEF Scheme Actually Is

The Government of India on March 19, 2026 unveiled the RELIEF (Resilience & Logistics Intervention for Export Facilitation) Scheme with a financial outlay of ₹497 crore under the Export Promotion Mission (EPM), aimed at addressing “extraordinary freight escalation, heightened insurance premia and war-related export risks” faced by Indian exporters due to the West Asia conflict.

The crisis has been triggered by escalating security concerns around the Strait of Hormuz, forcing vessel diversions, longer sailing routes, congestion at transshipment hubs, and emergency conflict-linked surcharges. Commerce Secretary confirmed that “exporters to the Middle East are facing challenges” and “exports haven’t reached destinations, future exports getting impacted,” with a “sense of worry” among exporters exposed to the region.

The scheme is structured into three components:

Component I (₹56 crore): For exporters already insured by ECGC with shipments between February 14 and March 15, 2026 – government tops up war and political risk losses beyond ordinary ECGC cover, keeping premiums at pre-disruption levels.

Component II (₹159 crore): For upcoming exports from March 16 to June 15, 2026 – enhanced coverage up to 95% for fresh shipments to UAE, Saudi Arabia, Kuwait, Qatar, Oman, Bahrain, Iraq, Iran, Israel, and Yemen.

Component III (₹282 crore): For non-ECGC-insured MSME exporters – reimbursement of up to 50% of additional freight and insurance costs for shipments to the same countries. ECGC Ltd. will maintain a dashboard-based monitoring system to enable real-time tracking of claims and fund utilisation.

II. The GST Question: Realisation of Export Proceeds as a Condition for Refund

This is where the geopolitical risk directly intersects with GST law. The question is stark:

If an exporter’s buyer in a West Asia country fails to pay due to war/political disruption, and the exporter receives settlement from ECGC instead – does that satisfy the “realisation of sale proceeds” condition under GST law?

The answer requires dissecting the legal architecture at three levels: the IGST Act, the CGST Rules, and the FEMA/RBI framework.

III. The GST Statutory Framework: Realisation Condition

A. Section 16(3) of the IGST Act, 2017 – The Parent Provision

As per proviso to Section 16(3) of the IGST Act:

“Provided that the registered person making zero rated supply of goods shall, in case of nonrealisation of sale proceeds, be liable to deposit the refund so received under this sub-section along with the applicable interest under section 50 of the Central Goods and Services Tax Act within thirty days after the expiry of the time limit prescribed under the Foreign Exchange Management Act, 1999 (42 of 1999.) for receipt of foreign exchange remittances, in such manner as may be prescribed.”

Consequently, with effect from 1st October 2023, as notified through Notification No. 27/2023-Central Tax, realisation of export proceeds in case of export of goods has become a statutory necessity for exporter to retain the refund of utilised ITC or refund of IGST paid upon export.

This is a critical inflection point when non-realisation within the FEMA-prescribed period triggers mandatory refund reversal. There is no longer any credible ultra-vires argument against this condition.

B. Rule 96B of the CGST Rules, 2017 – The Recovery Mechanism

Rule 96B(1) mandates: where any refund of unutilised ITC on account of export of goods or of IGST paid on export of goods has been paid to an applicant but the sale proceeds in respect of such exported goods have not been realised, in full or in part, in India within the period allowed under FEMA, 1999, including any extension of such period, the exporter shall deposit the refund amount (to the extent of non-realisation) along with applicable interest within thirty days of the expiry of the said period, failing which the amount shall be recovered under Section 73, 74, or 74A of the Act (as applicable for recovery of erroneous refund).

Provided, where RBI writes off the requirement of realisation of sale proceeds on merits, the refund paid to the applicant shall not be recovered.

Rule 96B(2) provides a restoration mechanism: where sale proceeds are subsequently realised after recovery under sub-rule (1), and the exporter produces evidence of such realisation within three months from the date of realisation, the recovered amount shall be refunded by the proper officer – provided the proceeds have been realised within the extended period as permitted by RBI.

The GST architecture is therefore:

Event	Timeline	GST Consequence
Export made	Day 0	Zero-rated, refund claimed
FEMA realisation deadline	15 months from date of export (currently)	Must realise by this date
Non-realisation	Post 15 months	Deposit refund + interest within 30 days
Failure to deposit	Day 31 onwards	Recovery under S.73/74/74A
Subsequent realisation	Within 3 months of actual receipt	Apply for re-credit

D. An interesting comparison : Rule 96A vs 96B

Rule 96A (governing export under LUT/Bond) uses the expression “foreign exchange” or “Indian Rupees wherever permitted by RBI” as the mode of realisation, thereby explicitly acknowledging INR receipt as a valid realisation mode where RBI so permits.

Rule 96B (the recovery provision), however, uses the broader expression “sale proceeds“, without the explicit qualifier of foreign exchange or INR. The provision simply mandates receipt of sale proceeds within the period allowed under FEMA.

This distinction is legally significant. Rule 96B’s use of “sale proceeds” is wider and more neutral in its language on currency modality – the emphasis is on the receipt of proceeds, not necessarily on the currency of receipt, subject to what FEMA permits. This opens a textual argument that INR receipt through RBI-permitted mechanisms (such as the Special Rupee Vostro Account mechanism discussed below) could constitute valid “sale proceeds” realisation under Rule 96B. This is a position strengthened by the RBI’s own liberalisation framework.

IV. Comparison with other Export Incentives
A.Drawback Rules

Rule 18(5) of Customs & Central Excise Duties Drawback Rules, 2017 stipulates that drawback shall NOT be recovered where non-realization has been compensated by ECGC and RBI has written off the requirement of realization on merits, supported by a certificate from the concerned Foreign Mission of India. While the aforementioned proviso to Rule 96B(1) above covers the scenario of RBI write off, an explicit mentioning about ECGC compensation is unfound in the GST rules unlike drawback rules.

B.Foreign Trade Policy – FTP, 2023

2.54 Non-Realisation of Export Proceeds

(a) If an exporter fails to realize export proceeds within time specified by RBI, he shall, without prejudice to any liability or penalty under any law in force, be liable to return all benefits / incentives availed against such exports and action in accordance with provisions of FT (D&R) Act, Rules and Orders made thereunder and the FTP.

(b) In case an Exporter is unable to realize the export proceeds for reasons beyond his control (force-majeure), he may approach RBI for writing off the unrealized amount as laid down in Para 2.72 of Handbook of Procedures. (c) The payment realized through insurance cover, would be eligible for benefits under FTP as per Procedures laid down in Para 2.71 of Handbook of Procedures.

C.Handbook of Procedures (HBP)

Para 2.71 which specifically determines the “Admissibility of benefits on payment through insurance cover” states in that “(I) Payment through ECGC cover would count for benefits under FTP” The said para also deals about the case of insurance claims other than ECGC.

Further Para 2.72 of HBP also states that: RBI write-off on export proceeds realization Realization of export proceeds shall not be insisted under FTP, if the RBI or any “Authorised Bank” (authorised by RBI for this purpose) writes off the requirement of realization of export proceeds on merits and the exporter produces a certificate from the concerned Foreign Mission of India about the fact of non-recovery of export proceeds from the buyer. However, this would not be applicable in self – write off cases.

D.Inference:

Thus, a comprehensive reading makes it amply clear that Export incentives are undisturbed due to Compensation of short realisation of sale proceeds from ECGC. However, the same is subject to RBI Write off approval and certification from concerned Foreign Mission. This position for Drawback/RoDTEP/ RoSCTL is also clarified recently through Para 3 of CBIC Circular No. 20/2026-Customs dated 10^th April 2026.

V. The FEMA/RBI Framework: What is the “Period Allowed”?

The Governing Regulation (Currently Applicable)

RBI, vide Notification No. FEMA 23(R)/(7)/2025-RB dated November 13, 2025, amended the Foreign Exchange Management (Export of Goods & Services) Regulations, 2015 under Sections 7, 8 and 47(2) of FEMA. Regulation 9 now stands revised from nine months to fifteen months for realisation and repatriation of export proceeds.

This revised 15-month period applies to all exporter categories – including units in SEZs, Status Holder exporters, EOUs, EHTPs, STPs, and BTPs – ensuring uniformity across all export categories.

The 2026 Regulatory Overhaul – Forward-Looking Framework

The RBI notified the Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026 on January 13, 2026 (Notification FEMA 23(R)/2026-RB), followed by the Directions on Export and Import on January 16, 2026. The 2026 Update comes into force on October 1, 2026, and upon implementation, the 2015 Regulations, both Master Directions, and existing circulars stand superseded. Nevertheless, the 15-month realisation timeline has been retained in the New Regulations.

Additionally, the 2026 Regulations provide that an additional three months is available for exports invoiced or settled in Indian Rupees – making the effective realisation window 18 months for INR-denominated exports. The new framework also includes set-off between parties as a valid realisation method, aligned with jurisprudence under Income Tax and Indirect Taxes.

Important note: Until October 1, 2026, the existing 2015 Regulations as amended by FEMA 23(R)/(7)/2025-RB continue to govern. The 2026 framework is notified but not yet operative. AD Banks will have the authority to grant extensions beyond the 15-month period, subject to their internal policies. If export proceeds remain unrealised for more than 1 year past the due date, the RBI restricts future shipments to advance payments or irrevocable letters of credit only.

VI. The Critical ECGC-GST Intersection: The Problem No One Is Talking About

This is the core legal issue that every exporter covered under the RELIEF scheme must understand.

The RBI’s Own Position: ECGC Claims ≠ Export Realisation in Foreign Exchange

The RBI’s Master Direction – Export of Goods and Services – explicitly states the following:

“C.24 Write off in cases of payment of claims by ECGC and private insurance companies regulated by Insurance Regulatory and Development Authority (IRDA)

(i) AD Category – I banks shall, on an application received from the exporter supported by documentary evidence from the ECGC and private insurance companies regulated by IRDA confirming that the claim in respect of the outstanding bills has been settled by them, write off the relative export bills in EDPMS.

(ii) Such write-off will not be restricted to the limit of 10 per cent indicated above.

(iii) Surrender of incentives, if any, in such cases will be as provided in the Foreign Trade Policy.

(iv) The claims settled in rupees by ECGC and private insurance companies regulated by IRDA should not be construed as export realization in foreign exchange.”

The ECGC Write-Off Process and Its GST Implication

When ECGC settles a claim, banks can write off the unrealised export receivables under FEMA without any limit. Eg. if ECGC settles 70% of the export bill value, then 30% shall be written off by the exporter. Exporters can avail export incentives for claims settled by insurance companies.

AD Category-I banks can write off export bills without any limit in case of payment of claims by ECGC and private insurance companies regulated by IRDA. But the claims settled in rupees by insurance companies should not be construed as export realisation in foreign exchange.

The GST Consequence of ECGC Write-Off

Under Rule 96B, the question is whether an ECGC settlement followed by an AD bank write-off constitutes “realisation within the period allowed under FEMA.” The answer, while partially protective, is nuanced:

Positive protection: Under Rule 96B(1), where export proceeds are not realised within the FEMA period but the RBI writes off the requirement of realisation on merits, the refund paid to the applicant shall not be recovered. Write-offs approved by AD Category-I banks under RBI’s delegated authority constitute a valid write-off under this rule. This means exporters are protected from refund recovery if their export bills are formally written off by their AD bank following proper evaluation and in line with RBI’s directions.

Critical caveat: The protection only flows from a formal AD bank write-off. Thus, it does NOT arise automatically from ECGC claim settlement. There are therefore two distinct scenarios:

VII. Scenario Analysis for West Asia-Affected Exporters

Scenario 1: Exporter covered under ECGC, ECGC pays the claim

• ECGC pays in Indian Rupees
• Under RBI law, this is NOT treated as export realisation in foreign exchange
• The FEMA clock continues to run on the unrealised foreign exchange proceeds
• The exporter must separately seek AD bank write-off of the unrealised export bill
• GST implication: Unless the AD bank formally writes off the bill before the 15-month FEMA deadline (or an extended period is granted), Rule 96B recovery is triggered and refund must be deposited with interest within 30 days of deadline expiry
• On such deposit, the export incentive (drawback, RoDTEP) is protected per FTP provisions if the write-off route is taken

Scenario 2: Exporter receives partial payment from buyer + partial ECGC settlement

• The FEMA realisation clock is satisfied only to the extent of actual foreign exchange received from the buyer
• The ECGC-settled portion, received in INR, does not count toward FEMA realisation
• Rule 96B recovery applies proportionately to the non-realised forex portion
• The exporter must deposit the refund proportionate to the unrealised amount within 30 days of FEMA deadline

Scenario 3: No payment received, buyer country blocked (Iran, Yemen, etc.)

• Complete non-realisation scenario
• FEMA has a specific carve-out: exporters cannot write off proceeds in cases where the overseas buyer has already deposited the export proceeds in local currency but the amount is not allowed to be repatriated by that country’s central banking authorities (externalization problem countries).
• This creates a particularly difficult situation for Iran-linked exports where even ECGC settlement may not fully resolve the FEMA and GST compliance position
• Such cases may require specific RBI Regional Office approval for write-off

Scenario 4: ECGC settlement + subsequent recovery from buyer

In cases where ECGC initially settles the claims of exporters and export proceeds are subsequently received from the buyer/buyer’s country, the share of exporters in the amount so received is disbursed through the AD bank which handled the shipping documents, after receipt of a certificate issued by ECGC. The certificate shall indicate the GR/PP form number, name of exporter, AD details, date of negotiation, bill number, invoice value, and amount actually received.

In this scenario, if subsequent recovery occurs within RBI’s extended period, Rule 96B(2) re-credit becomes available, and the GST refund can be re-availed.

VIII. The INR Realisation Question

This section addresses what is perhaps the most practically significant question for West Asia exporters – particularly those trading with Iran, UAE, and other countries under India’s evolving rupee trade framework.

One important aspect of the RELIEF scheme is that many of the affected countries (particularly Iran) have been settling trade in INR under RBI’s special arrangements. This raises a separate question: does INR settlement count as “realisation” for GST purposes?

Under Rule 96B, the provision specifies that sale proceeds should be received within the period allowed under FEMA, 1999, but the manner of receipt is not specified in Rule 96B itself. The proviso to Section 16(3) uses the phrase “foreign exchange remittances”, which suggests forex realisation. However, a broader reading may accommodate INR realisation where RBI has specifically permitted INR settlement.

The RBI Framework: INR Settlement as a Permitted Mode

The foundation of INR-based export realisation rests on RBI A.P. (DIR Series) Circular No. 10 dated 11th July 2022 read with Regulation 7(1) of the Foreign Exchange Management (Deposit) Regulations, 2016. The RBI, through this circular, put in place an additional arrangement for invoicing, payment, and settlement of exports and imports in INR. For settlement of trade transactions with any country, AD banks in India may open Special Rupee Vostro Accounts (SRVAs) of correspondent banks of the partner trading country. Indian exporters undertaking exports of goods and services through this mechanism shall be paid the export proceeds in INR from the balances in the designated Special Vostro Account of the correspondent bank of the partner country.

This framework is operative for both goods and services and was further reinforced by FTP 2023, Para 2.52(d), which explicitly permits invoicing, payment, and settlement of exports and imports in INR subject to compliance with RBI’s circular of 11th July 2022.

CBIC Circular 202/14/2023-GST dated 27th October 2023 – The GST Clarification

CBIC Circular No. 202/14/2023-GST, issued pursuant to the recommendations of the 52nd GST Council Meeting, brought this settled RBI position formally into the GST framework. The CBIC clarified that when Indian exporters are paid the export proceeds in INR from the Special Rupee Vostro Accounts of correspondent banks of the partner trading country, opened by AD banks, the same shall be considered to fulfil the conditions of sub-clause (iv) of clause (6) of Section 2 of the IGST Act, 2017, subject to the conditions/restrictions mentioned in FTP 2023 and extant RBI Circulars.

While this circular specifically addresses the export of services definition under Section 2(6)(iv) of the IGST Act, it is clarificatory in nature and the substantive permission flows from the RBI’s own framework, which applies equally to goods and services. The GST law position must be read in harmony with the RBI’s liberalisation policy: INR receipt through the SRVA mechanism, being RBI-permitted, constitutes valid realisation of export proceeds for GST purposes, both for goods and services.

This position is also consistent with the language of Rule 96B, which requires realisation of “sale proceeds” within the FEMA-allowed period, without mandating a specific currency, thereby accommodating INR receipt through RBI-permitted routes as valid realisation.

The Iran-Specific Dimension: A Separate and Older Bilateral Channel

The specific question of whether INR-settled proceeds under RBI’s special bilateral arrangements (e.g., India-Iran rupee trade framework) qualify as “realisation” for Rule 96B purposes is a genuinely unsettled area where no CBIC circular or judicial ruling has yet provided authoritative guidance as of the date of this analysis.

Here is where the Iran situation becomes legally distinct and more complex. Iran is not among the 22 countries included in the 2022 SRVA framework. The reason is structural: Iran has accumulated significant INR surpluses in its accounts with UCO Bank over the years, and the mutual balance has made it easy for RBI to keep Iran outside the ambit of the formal SRVA facility.

The India-Iran INR trade mechanism is far older, predating the 2022 framework by a decade. In 2012, after the US imposed sanctions on Iran, UCO Bank started a rupee trade mechanism through which 45% of oil imports of Indian oil companies were settled in rupee denomination. Under the mechanism, Iranian banks opened Indian Rupee accounts with UCO Bank. Payments towards imports of crude oil were paid by Indian oil companies to these accounts, and payments towards exports of goods from India to Iran were paid from these accounts.

Under this mechanism, Indian importers deposited payments in rupee in the Vostro account of Iranian banks maintained with UCO Bank for imports including crude oil. The account was also used to make payments to Indian exporters for sending goods to Iran and the payments were settled on a daily basis.

The critical GST and FEMA implications for Iran-specific exporters are therefore:

First, the Iran INR mechanism operates through a pre-existing bilateral arrangement with UCO Bank and not through the standard 2022 SRVA framework. The regulatory basis is distinct and the formal linkage to RBI Circular No. 10 of July 2022 does not automatically apply.

Second, Iran presents an externalization problem: even where Iranian banks hold rupee balances with UCO Bank sufficient to pay Indian exporters, the broader context of US sanctions means that the payment infrastructure itself is fragile and subject to disruption when geopolitical tensions escalate, as they have now with the US-Iran-Israel conflict.

Third, from a FEMA write-off standpoint, where an Iranian buyer has deposited proceeds in local currency (Rial or through the UCO Bank rupee mechanism) but the funds cannot be repatriated due to sanctions or banking channel disruptions, the exporter faces the externalization bar. Exporters cannot self-write off, requires RBI Regional Office approval, and the GST refund recovery threat remains live.

Exporters with Iran exposure must therefore treat their position as a special category requiring dedicated regulatory engagement with both their AD bank and, wherever necessary, directly with RBI’s Foreign Exchange Department, rather than assuming the standard SRVA realisation route applies to them.

Bottomline: INR receipt for export is permissible as per the RBI liberalisation policy, but export to those countries like Iran which are not in the 22 countries enlisted, should remain more cautious in the specific procedural compliances.

IX. Practical Precautions: What Exporters Must Do Now

Given the above legal landscape, exporters covered by the RELIEF scheme should take the following steps in a time-bound manner:

1. Map Your Export Bill Dates to the FEMA Clock

Identify all export shipments to West Asia (UAE, Saudi Arabia, Qatar, Oman, Kuwait, Bahrain, Iraq, Iran, Israel, Yemen) from January 2025 onwards. These are the shipments currently within the live 15-month FEMA realisation window as of April 2026. For each shipping bill, calculate the precise FEMA deadline and the 30-day GST deposit window under Rule 96B. Map this proactively and Do not wait for a GST notice.

2. Initiate Formal AD Bank Communication – Do Not Rely on ECGC Settlement Alone

The moment you receive ECGC claim settlement, formally approach your AD Category-I bank with:

• ECGC settlement certificate (which indicates GR/PP form, invoice value, amount received)
• Supporting evidence of the geopolitical event causing non-realisation
• Application for formal write-off under FEMA of the unrealised export bill This write-off, once granted by the AD bank, protects you under Rule 96B(1) from GST refund recovery.

3. Proactively Apply for RBI/AD Bank Time Extension Before Deadline

If there is any prospect of eventual recovery (e.g., buyer is not insolvent but payment is delayed due to war disruption), do not rush to write-off. Instead:

• Seek an extension of the realisation period from your AD bank citing war disruption
• Maintain documentary evidence of all buyer communications, payment attempts, and ECGC correspondence
• This preserves the Rule 96B(2) pathway for re-credit if proceeds are subsequently received

4. Procedures separately for Drawback/RoDTEP/ RoSCTL

Compensation of short realisation of sale proceeds from ECGC, RBI Write off and certification from concerned Foreign Mission are one set of procedural compliance to be completed. However, the due discharge and satisfaction of this requirement could be required to be separately established procedurally to safeguard GST refund under Rule 96B, apart from protection of export incentive schemes like Duty Drawback / RoDTEP / RoSCTL.

Note: This position for Drawback/RoDTEP/ RoSCTL is also clarified through Para 3 of CBIC Circular No. 20/2026-Customs dated 10^th April 2026.

5. Maintain a Parallel EDPMS Compliance Trail

Banks are required to report the write-off of unrealised export proceeds (self-write-off or otherwise) through EDPMS to RBI. Ensure your AD bank updates EDPMS correctly and promptly, since a mismatch between EDPMS status and GST refund records is a common trigger for scrutiny.

6. Do Not Treat ECGC Settlement as a Substitute for e-BRC

The e-BRC (Electronic Bank Realisation Certificate) remains the primary documentary evidence of export realisation for GST refund purposes. ECGC settlement in INR will not generate an e-BRC in the conventional sense. Maintain a clean paper trail distinguishing between the two.

7. Watch the FEMA 2026 Transition

The 2026 Regulations come into force on October 1, 2026 and will supersede existing circulars. If your extended realisation period runs into post-October 2026, be aware that the legal framework governing your compliance will shift. The 2026 framework authorises AD Banks to grant extensions for both export and import timelines without requiring RBI approval – a significant liberalisation that can benefit exporters in distress scenarios.Given the above legal landscape, exporters covered by the RELIEF scheme should take the following steps in a time-bound manner:

X.The open Legal Questions and Risk Positions

Issue	Current Legal Position	Risk Level
ECGC INR claim as GST realisation	NOT treated as realisation per RBI/FEMA	HIGH RISK if no AD write-off obtained
AD bank write-off protection under Rule 96B	Protects from refund recovery	Moderate — requires formal process
INR through SRVA (2022 framework countries)	Valid realisation — RBI permitted, FTP 2023 confirmed	NO RISK where SRVA is operational
INR through Iran bilateral UCO Bank channel	Separate pre-2022 arrangement; externalization complications	HIGH RISK — requires dedicated RBI engagement
Post-ECGC settlement recovery from buyer	Triggers Rule 96B(2) re-credit pathway	Favourable if documented within 3 months
Self-write-off without AD bank approval	NOT protected under Rule 96B	VERY HIGH RISK
Externalization problem countries	Cannot write off; RBI Regional Office approval needed	VERY HIGH RISK
Set-off as realisation (post Oct 2026)	Expressly recognised in 2026 Regulations	Favourable under incoming framework

XI. Conclusion

The RELIEF scheme addresses the commercial and logistical disruption caused by the West Asia conflict admirably. But it creates, simultaneously, a GST Refund challenge for exporters who assume that ECGC claim settlement ends their regulatory obligations.

The legal position is unambiguous on one point: ECGC claim receipt in INR is NOT export realisation in foreign exchange for FEMA or GST purposes. The 15-month FEMA clock continues to run regardless of ECGC settlement, and Rule 96B recovery is triggered the moment that clock expires without forex realisation or a formal AD bank write-off on record.

Exporters, particularly MSMEs who may not have the compliance bandwidth to track this intersection and hence need immediate proactive advisory on the following hierarchy of actions:

1. Obtain formal AD bank write-off where recovery from buyer is impossible → protects existing GST refund under Rule 96B(1)
2. Seek AD bank time extension where recovery may come later → preserves Rule 96B(2) re-credit path
3. Do not conflate ECGC settlement with realisation – these are two legally distinct events under Indian law
4. Track FEMA deadlines independently of the RELIEF scheme timelines – the RELIEF scheme runs to June 2026; the FEMA clock may run to 15 months post-export, which for some shipments means realisation deadlines extending into early 2027

The interplay of the RELIEF scheme, ECGC insurance mechanics, FEMA realisation rules, and Rule 96B of the CGST Rules creates a multi-layered compliance obligation that no exporter can afford to navigate without precision. A geopolitical disruption should not become a GST default, that could cost a litigation with penal consequences in the future.

Key Citations: Section 16(3) IGST Act, 2017 (as notified by Notification No. 27/2023-Central Tax, effective 01.10.2023) | Rule 96B, CGST Rules, 2017 (inserted vide Notification No. 16/2020-CT dated 23.03.2020; amended w.e.f. 01.11.2024) | Rule 96A, CGST Rules, 2017 | FEMA 23(R)/(7)/2025-RB dated 13.11.2025 (Regulation 9 – 15-month realisation period) | FEMA 23(R)/2026-RB dated 13.01.2026 (New Regulations, operative from 01.10.2026) | RBI A.P. (DIR Series) Circular No. 10 dated 11.07.2022 (Special Rupee Vostro Account framework) | FTP 2023, Para 2.52(d) | CBIC Circular No. 202/14/2023-GST dated 27.10.2023 | RELIEF Scheme under Export Promotion Mission, Ministry of Commerce, March 19, 2026 | CBIC Circular No. 20/2026-Customs dated 10th April 2026.

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