Export proceeds not realised: recovery of the refund already granted
A refund granted on an export is conditional. If the money never arrives, the department comes back.
Where a refund of unutilised input tax credit has been granted on a zero rated supply of goods and the sale proceeds are not realised within the period allowed under the Foreign Exchange Management Act, including any extension granted by the Reserve Bank of India, Section 16(4) of the IGST Act and Rule 96B require the amount so refunded to be deposited, with interest, within thirty days of the expiry of that period. The amount is restored as credit if the proceeds are realised subsequently, subject to the conditions prescribed.
The mechanism
The refund is conditional on realisation of the export proceeds within the period allowed under the foreign exchange law, including any extension granted by the authorised dealer or the Reserve Bank of India.
On failure, the refunded amount must be deposited with interest within thirty days of the expiry of the period. Failure to deposit results in recovery under Section 73 or 74.
Where the proceeds are realised later, the amount is restored, subject to the prescribed conditions and evidence.
Where the Reserve Bank of India has written off the receivable in accordance with its guidelines, the requirement to deposit does not arise in the circumstances specified.
The control this requires
A shipping bill wise realisation tracker, linked to the refund claim, with the due date for realisation and the extension status.
A quarterly reconciliation with the authorised dealer's records, because the bank's position is the evidence.
Escalation on any receivable approaching the outer date, with an extension application to the authorised dealer where warranted.
For written off receivables, the documentation supporting the write off in accordance with the applicable guidelines, kept with the refund file.
Where disputes arise
The department computes the period without accounting for an extension granted by the authorised dealer. Produce the extension.
The refund is sought to be recovered on a partial non realisation, whereas the deposit obligation is proportionate to the unrealised amount.
The write off is not accepted although it was made in accordance with the guidelines. This is a documentary argument and the bank's confirmation is the key.
Interest is computed from the date of the refund rather than from the expiry of the realisation period. Check the computation.
What to do on Monday
Maintain a shipping bill wise realisation tracker linked to each refund claim.
Reconcile quarterly with the authorised dealer and keep the confirmations.
Apply for extensions before the outer date rather than after a notice.
Keep write off documentation with the refund file, indexed to shipping bills.
This page states the general position. A reader with a specific question on their own facts may write to the GST practice at AMLEGALS.
Write to the GST practiceQuestions we are asked on this
Does this apply to export of services?
The rule is framed with reference to goods. For services, realisation in convertible foreign exchange is a condition of the export itself, which is a different analysis.
What if we obtain an extension from our bank?
The period includes an extension granted under the foreign exchange law. Produce the extension when the department computes the date.
Is the deposit proportionate?
It relates to the unrealised proceeds. A partial realisation should produce a proportionate deposit, and a demand for the whole refund should be resisted.
Can the amount be restored?
Yes, on later realisation, subject to the conditions and evidence prescribed.
What if the receivable is written off?
Where the write off is in accordance with the applicable guidelines, the specified relief applies. Keep the bank documentation.
In this cluster
- GST refunds: every category, every form, every deadline
- Export refunds: the LUT route versus the IGST route
- VKC Footsteps: why input service tax stays stuck in an inverted duty structure
- Provisional refund of ninety percent: the mechanism and how to keep it
- Replying to RFD-08: the refund rejection notice
- Deficiency memos in RFD-03 and the limitation reset problem
- Interest on delayed refunds under Section 56
- Unjust enrichment in GST refunds: when it applies, and when it does not
- Section 77: refund where tax was paid under the wrong head
- SEZ supplies and refund: endorsement, authorised operations and the disputes
GST Insights is published by AMLEGALS for general information. Law stated as on 3 September 2026. Not advice on any particular set of facts; not an advertisement or a solicitation under Rule 36 of the Bar Council of India Rules. Readers with a question on their own facts may write to the GST practice of their own accord.