Using RBI’s Extended 15‑Month Payment Realization Rule to Save Your GST Refunds & LUT Exports

1. Background: RBI Change + GST Trap

RBI has amended the Foreign Exchange Management (Export of Goods and Services) Regulations, 2015 to extend the export realisation period from 9 months to 15 months for goods, software and services. This one change directly reshapes when GST refunds on exports become vulnerable to reversal under Section 16(3) of the IGST Act and Rule 96B of the CGST Rules.​

Under the post‑1 October 2023 regime, realisation of export proceeds within FEMA timelines is now a statutory condition to retain GST refunds on export of goods, whether you export with payment of IGST or under LUT with refund of unutilised ITC. If proceeds remain unrealised beyond the permitted FEMA period (including extensions), the exporter must pay back the refund with interest, or face recovery under Sections 73/74 as “erroneous refund”.​

2. RBI’s 15‑Month Extension: What Exactly Has Changed

2.1 Core FEMA Relaxation

• The RBI notification (F.No. FEMA 23(R)/(7)/2025‑RB dated 13‑11‑2025) extends the time limit to realise and repatriate full export value from 9 months to 15 months from the date of export.​
• The change covers exports of goods, software and services and aims to ease cash‑flow pressures and align timelines with practical export and payment cycles.​
• The same amendment also allows exporters up to 3 years to utilise or refund advance receipts for exports against advance payments, as against the earlier one‑year limit which often required RBI approval.​
• The revised 15‑month period is uniformly applicable to SEZ units, EOUs, status holders and units in EHTP/STP/BTP, bringing a single harmonised realisation time across categories.​

2.2 Role of AD Banks and Post‑Facto Extensions

• Authorised Dealer Category‑I banks can grant additional time for realisation in genuine cases, subject to RBI’s delegated powers and internal credit/ risk norms.​
• Beyond the AD bank’s limit, exporters can approach RBI for post‑facto extension or write‑off in cases like buyer insolvency, trade disputes, sanctions, force majeure, etc., and such approvals effectively extend the FEMA timeline for that export.​

3. GST Law Hooks: Section 16(3), Rule 96B and FEMA

3.1 Statutory Linkage to FEMA

• Section 16(3) of the IGST Act governs zero‑rated supplies and refunds for exports; the proviso notified from 1‑10‑2023 (Notification No. 27/2023‑CT) links GST refund entitlement for export of goods to realisation of sale proceeds in foreign exchange within the period allowed under FEMA.​
• Rule 96B of the CGST Rules operationalises this by mandating that if export proceeds are not realised within the FEMA period (including extension), the exporter must deposit back the refund (ITC/IGST) attributable to the unrealised portion, along with interest under Section 50, within 30 days of expiry of that period.​
• If, after this recovery, the export proceeds are subsequently realised within the extended FEMA period, or RBI waives the requirement of realisation altogether, Rule 96B allows the exporter to re‑claim the recovered refund (including interest) within 3 months of such realisation/waiver.​
• Judicial and professional commentary (e.g. H&A’s April 2024 analysis) emphasises that only from 1‑10‑2023 onwards is this realisation condition validly in force, since the proviso to Section 16(3) was notified with effect from that date.​

3.2 Impact on Zero‑Rated Supply Under LUT vs IGST

• Under zero‑rated supply, exporters can either:
  • Export without payment of IGST under LUT and claim refund of accumulated ITC; or
  • Export with payment of IGST and claim refund of IGST paid.​
• For both routes, realisation of proceeds has now become a controlling condition for the refund to remain valid; non‑realisation beyond FEMA timelines converts the refund into an “erroneous refund” recoverable with interest, and in LUT cases may also lead to treating the supply as taxable domestically to the extent of non‑realisation.​

4. The New 15‑Month Trigger: How Your GST Risk Window Has Shifted

4.1 Old vs New Position

The risk of refund reversal is not removed but postponed and stretched; exporters now have a longer runway to secure realisation or obtain FEMA extensions before Rule 96B gets triggered.​

4.2 Practical Consequences for Exporters

• For each export invoice, the “D‑Day” for GST purposes is now 15 months from the date of export, not 9 months, because that is when the FEMA realisation period normally ends.​
• If full or partial proceeds remain unrealised on that date, and no valid extension or write‑off exists, the exporter has 30 days to voluntarily deposit back the proportionate refund plus interest; beyond that, the department can initiate recovery under Sections 73/74/74A.​
• For LUT exports, if proceeds remain unrealised even after the extended FEMA period and any sanctioned extensions, the department can argue that to the extent of non‑realisation the supply loses its zero‑rated character and is liable to GST as a taxable supply, exposing the exporter to output tax plus interest.​
• However, whenever AD bank/RBI grants extension or writes off the export value under FEMA, that extended period becomes the relevant benchmark for Rule 96B and Section 16(3), thereby protecting refunds for that longer horizon.​

5. Turning 15 Months into a Strategic Advantage

5.1 FEMA–GST Tracking Architecture

To convert this relaxation into a genuine compliance advantage, exporters need an integrated tracking system.

• For every shipping bill/invoice, maintain a FEMA–GST matrix capturing: date of export, 15‑month FEMA date, any extended date granted by AD bank/RBI, refund claimed (ITC/IGST), realisation amount and date, and any short‑realisation.​
• Build internal alerts at 9, 12, 14 and 15 months to flag invoices where (a) payment is delayed, (b) buyer risk is elevated, or (c) contract terms suggest potential staggered realisation beyond 15 months, so that extension applications can be moved in time.​
• For long‑cycle projects and capital goods exports, structure contracts consciously to leverage the 3‑year window for utilisation of advance receipts, ensuring that big advance‑backed orders do not inadvertently violate FEMA timelines and cause GST consequences.​
• In high‑risk geographies, consider insisting on LCs, bank guarantees or ECGC‑type insurance so that in case of default, you have a realistic basis to seek FEMA write‑off and still defend your GST refund position.​

5.2 Pro‑Active Management of Refund Reversal Risk

• As you approach the 15‑month line without realisation, prepare two computations:
  • Refund attributable to realised portion of export proceeds; and
  • Refund attributable to unrealised portion, along with interest under Section 50.​
• If extension from AD/RBI is unlikely or delayed, voluntarily deposit the proportionate refund and interest within 30 days of FEMA deadline expiry to avoid adverse proceedings and penalty exposure.​
• If, after such reversal, payment is finally realised within RBI/AD‑sanctioned extended period, file for re‑refund within 3 months of realisation, relying on Rule 96B(2) and professional commentary that the amount recovered (including interest) is refundable when proceeds are ultimately realised.​
• Keep documentation of all AD bank correspondence, extension approvals, EDPMS status reports and buyer communications ready as your first line of defence in any GST audit or scrutiny relating to export refunds

Worked Example: 15‑Month FEMA Window and Rule 96B in Action

This illustration shows how the 15‑month FEMA window practically interacts with GST refunds under Rule 96B and Section 16(3) for export of goods.​

1. Facts of the Case

• Exporter: XYZ Pvt Ltd (registered in India, regular exporter of engineering goods)
• Export invoice value: USD 1,00,000 (FOB), date of export: 1 January 2026
• Exchange rate on export date: ₹85 per USD → taxable value in INR = ₹85,00,000
• GST structure:
  • Inputs ITC available: ₹8,00,000
  • XYZ exports under LUT (without IGST payment) and claims refund of unutilised ITC of ₹8,00,000 in February 2026 for this and other invoices.​
• FEMA position after RBI amendment:
  • Standard realisation period for export proceeds = 15 months from date of export, i.e. till 31 March 2027.​

2. Scenario A: Full Realisation within 15 Months

• Buyer remits full USD 1,00,000 on 30 November 2026, well within 15 months.​
• Bank reports full realisation in EDPMS and the AD bank’s BRC/IRCs reflect complete payment against the shipping bill.​

GST impact:

• Realisation is within the FEMA‑prescribed 15‑month period, so the condition under the proviso to Section 16(3) is satisfied.​
• Rule 96B does not get triggered; XYZ keeps the ₹8,00,000 refund of unutilised ITC with no requirement to reverse or pay interest.​

3. Scenario B: Partial Realisation, No Extension

• By 31 March 2027 (15 months from export), only USD 60,000 has been realised; USD 40,000 remains unpaid.​
• No extension is granted by the AD bank, and XYZ has no RBI approval or write‑off by that date.​

Step‑wise consequences:

1. FEMA position
   • For FEMA purposes, USD 40,000 is unrealised beyond the standard 15‑month period, with no approved extension.​
2. GST: Rule 96B trigger
   • Realisation is short by 40% of export value (USD 40,000 out of 1,00,000).​
   • Under Rule 96B(1), XYZ must deposit back refund proportionate to the unrealised portion, along with interest, within 30 days from 31 March 2027 (i.e. by 30 April 2027).​
3. Pro‑rata computation
   • Total export value: ₹85,00,000
   • Unrealised proportion: 40%
   • Refund originally claimed on this invoice (say refund mapping shows full ₹8,00,000 ITC relates to this invoice for simplicity): ₹8,00,000
   • Refund to be reversed = 40% of ₹8,00,000 = ₹3,20,000.​
   • Interest under Section 50:
     • Assume effective monthly interest rate of 1.5% and that refund was sanctioned on 15 February 2026.
     • Period for interest = from 15 February 2026 (refund credit) to date of reversal (assume 30 April 2027) ≈ 14.5 months.
     • Interest ≈ ₹3,20,000 × 1.5% × 14.5 ≈ ₹69,600 
4. Compliance action

• XYZ deposits ₹3,20,000 + ₹69,600 = ₹3,89,600 via DRC‑03 within 30 days of expiry of FEMA period and gets the reversal of refund recorded.​
• Where officers follow the H&A interpretation, PMT‑03 may be used to re‑credit ledger entries when re‑refund becomes due.​

4. Scenario C: Late Realisation After Reversal – Re‑Refund

Continuing Scenario B:

• After reversal, the buyer eventually pays the balance USD 40,000 on 30 September 2027.
• AD bank grants post‑facto extension and reports realisation in EDPMS; thus, FEMA realisation is treated as regularised.​

Now Rule 96B(2) becomes important:

• Where export proceeds are realised after refund has been recovered, Rule 96B(2) allows the exporter to claim back the amount so recovered (including interest) within 3 months from the date of realisation, subject to documentary proof.​
• XYZ can therefore file a fresh refund application for ₹3,89,600 (₹3,20,000 refund + ₹69,600 interest) by 31 December 2027, annexing:
  • FIRC/BRC and EDPMS printout showing receipt of USD 40,000.​
  • AD bank sanction/communication for extension/write‑off regularisation.
  • Copy of DRC‑03 / order through which earlier refund was reversed.​

If properly filed, GST authorities should re‑sanction this re‑refund as the underlying condition (FEMA‑compliant realisation) now stands fulfilled.​

“FEMA–GST Checklist” for Every Export Invoice

1. At the time of export
   • Record invoice and shipping bill details (date, amount, currency, port, HS code).
   • Map the export to LUT or IGST route and identify the related refund claim (ITC/IGST).​
   • Note the FEMA 15‑month last date (export date + 15 months).
2. At the time of refund filing
   • Segregate export invoices used in each refund application; maintain a linking sheet showing invoice‑wise share of refund.​
   • Keep FIRCs, shipping bills, E‑way bills, LUT acknowledgements, etc., ready for audit/trial balance tie‑ups.​
3. Quarterly monitoring till 15 months
   • Run an EDPMS‑wise statement from AD bank and match realisations with invoice‑wise listing.​
   • Flag all invoices where realisation is pending for more than 9–12 months for commercial follow‑up and potential AD bank extension.​
4. At 15‑month FEMA deadline
   • Compute realised vs unrealised value for each invoice.
   • For invoices with short realisation and no extension, calculate pro‑rata refund attributable to unrealised portion.​
   • Arrange voluntary reversal via DRC‑03 (plus interest) within 30 days of FEMA deadline to avoid penal disputes.​
5. If payment comes after reversal
   • Get AD bank extension/regularisation and updated EDPMS/FIRC/BRC.​
   • Within 3 months of such realisation, file re‑refund under Rule 96B(2), enclosing all earlier reversal documents.​

Simple Decision‑Flow

1. Export of goods done → note 15‑month FEMA date.
2. Refund claimed (ITC/IGST) → link invoice to refund and track in dashboard.
3. Before 15 months:
   • If full realisation → No GST issue, refund safe.
   • If partial/no realisation → go to step 4.
4. By 15 months:
   • If AD bank/RBI grants extension or write‑off → New extended date becomes relevant FEMA deadline; continue monitoring till that date.
   • If no extension and amount still unrealised → go to step 5.
5. Within 30 days after FEMA deadline:
   • Compute proportionate refund for unrealised portion + interest.
   • Voluntarily pay back via DRC‑03 → Rule 96B(1) satisfied, litigation risk reduced.
6. If later realisation (within extended FEMA period):
   • Collect FIRCs/BRC + AD bank extension letter.
   • Within 3 months, file re‑refund claim under Rule 96B(2) → get back refund + interest.

CA Ankit Gulgulia (Jain)

FCA, CWM (AAFM-US), CBV, CIFRS, R-ID, B.COM (H), RV* (IBBI)

Practising Chartered Accountant in Delhi NCR Since 2011. He can be contacted at ankitgulgulia@gmail.com or +91-9811653975.