Pre-Import Ghost Finally Laid to Rest: DGFT's 2025 Circular Unlocks Stuck Advance Authorisations
Why This Circular Matters
For seven long years, a peculiar mix of GST rules, customs notifications and FTP conditions kept a large chunk of Advance Authorisations (AAs) stuck in redemption limbo. Regional Authorities (RAs) hesitated to issue Export Obligation Discharge Certificates (EODCs), customs formations were wary of revenue loss, and exporters - who had largely acted in good faith - were caught between three different policy silos.
On 11 November 2025, the Directorate General of Foreign Trade (DGFT) issued Policy Circular No. 07/2025-26, finally telling everyone how to close this chapter. The circular clarifies when AAs impacted by erstwhile Rule 96(10) of the CGST Rules and imports made between 13 October 2017 and 9 January 2019 can be redeemed and EODC issued
In simple terms: if you fall within one of the clearly spelt-out safe categories and your export obligation is complete, EODC cannot be withheld merely because the authorisation lived through the "Rule 96(10)/pre-import" era
Quick Refresher - What Went Wrong in 2017-2019?
1 Advance Authorisation under FTP
The Advance Authorisation Scheme allows duty-free import of inputs for making export products. Under FTP 2015-20, exemption from Basic Customs Duty (BCD) on AA imports was standard; with GST's arrival, the question was: what about IGST and Compensation Cess?
To extend parity, the government issued Notification No. 79/2017-Cus., dated 13.10.2017, granting exemption from IGST and Cess for AA imports - but only if a "pre-import" condition was satisfied, i.e. inputs had to be imported before the exports.
DGFT simultaneously amended Para 4.14 of FTP via Notification No. 33/2015-2020, mirroring this pre-import requirement for AAs.
2 Rule 96(10) - The Refund Gatekeeper
Around the same time, Rule 96(10) of the CGST Rules, 2017 was framed. In essence, it said:
If you avail specified duty exemptions (including under AA/EPCG/EOU) on inputs, you cannot simultaneously claim IGST refund on exports.
The idea was to avoid "double benefits" - duty-free inputs and cash refund on export IGST. In practice, however, this resulted in harsh, all-or-nothing outcomes, even where only a tiny portion of inputs came under AA.
The years 13.10.2017 to 09.01.2019 were therefore uniquely messy:
AA imports potentially enjoyed IGST+cess exemption subject to pre-import;
Exporters who availed this exemption risked losing IGST refund on exports under Rule 96(10);
Many AAs from this window sat unresolved - RAs were unsure whether redemption/EODC was legally safe.
3 Policy Cleanup in 2019 - But Only Prospectively
Industry pressure eventually worked. With Notification No. 01/2019-Cus., dated 10.01.2019, the pre-import condition was withdrawn for AA IGST exemption. DGFT aligned FTP via Notification No. 53/2015-2020, removing pre-import from Para 4.14.
From 10 January 2019 onwards, the IGST exemption under AA functioned without the pre-import straitjacket. But what about:
AAs issued earlier,
imports already made in 2017-2019, and
export obligations based on those imports?
Those cases stayed in a grey zone for years.
The Supreme Court's Intervention: Union of India v. Cosmo Films Ltd [2023(04)LCX0010].
The turning point was the Supreme Court judgment in Union of India & Ors. v. Cosmo Films Ltd., decided on 28 April 2023
Broadly, the Court:
Upheld the validity of the pre-import condition and the corresponding framework,
But simultaneously directed the Government to allow refund or input tax credit (ITC) wherever law otherwise permits, thus preventing a pure revenue-grab where tax had already been borne by the exporter.
Following this, CBIC issued Circular No. 16/2023-Cus., dated 07.06.2023, prescribing how importers could regularise past non-compliance with pre-import and pay IGST/cess (with interest) where due, and then seek relief (refund/ITC) in line with the Supreme Court's directions.
In parallel, DGFT came in with Trade Notice No. 07/2023-24 (08.06.2023) and Trade Notice No. 27/2023 (25.09.2023), explaining how such imports and exports under AA in the 2017-2019 window could be regularised and what evidence RAs could accept.(
Yet, one crucial question remained unanswered in a crisp, circular-style sentence:
"Can RAs safely redeem these AAs and issue EODCs, or should they continue to hold back?"
Policy Circular 07/2025-26 finally answers that.
DGFT Policy Circular 07/2025-26 - What Exactly Has Been Clarified?
1 Scope of the Circular
The circular covers Advance Authorisations impacted by the erstwhile Rule 96(10) in relation to imports made between 13.10.2017 and 09.01.2019. It is directed to all DGFT RAs, customs authorities and the trade, and is clearly intended as a closure mechanism for long-pending EODC cases
2 The Three "Safe" Categories
DGFT now states in black-and-white that EODC/redemption shall not be withheld purely on the basis of Rule 96(10)/pre-import disputes if export obligation is otherwise fulfilled and the case fits any of these situations:
1. IGST paid in cash at import
Where the AA holder actually paid IGST in cash on imports during 13.10.2017-09.01.2019 - instead of claiming exemption - and has complied with all other AA conditions, there is no bar on redemption.
In such cases, the Rule 96(10) controversy is largely academic - there is no "double benefit" to investigate because no IGST exemption was ever taken.
2. No exemption from IGST/Compensation Cess or other levies (other than BCD)
If the importer only availed BCD exemption under AA and did not claim IGST/cess exemption or other customs duty exemptions (beyond what AA normally gives on BCD), EODC should not be blocked.
This squarely covers exporters who voluntarily chose to pay IGST and take refund/ITC rather than fight over the exemption route.
3. Compliance with pre-import and procedural conditions
Where the authorisation holder actually followed the pre-import condition and other procedural requirements (timely imports, proper correlation with exports, adherence to FTP/Handbook norms) while availing IGST exemption, DGFT instructs that redemption cannot be refused merely because the authorisation sits in the "Rule 96(10) era".
Across all three categories, the common denominator is:
If exports have been made as per AA norms, and either no IGST exemption was taken or it was taken correctly, RAs must proceed to redeem and issue EODC.
The circular expressly cross-refers to earlier Customs Circular 16/2023-Cus. and DGFT Trade Notices 07/2023-24 and 27/2023, signalling that the departments are finally singing from the same hymn sheet
What About Cases That Don't Fit These Buckets?
The circular is deliberately narrowly crafted. It does not promise redemption in every conceivable fact-pattern. For instance:
If an AA holder availed IGST exemption but failed the pre-import condition and has not yet regularised the case by paying IGST/cess + interest under Circular 16/2023-Cus., the RA is unlikely to ignore that non-compliance.
If there is mismatch between shipping bills, Bills of Entry and AA details, or serious mis-declaration, the case will still be scrutinised under normal FTP/Customs enforcement standards.
In other words, Policy Circular 07/2025-26 is not an amnesty. It is a processing instruction: when an exporter has done the right things - either by paying IGST, foregoing the exemption, or satisfying pre-import - the AA should not be kept pending just because it falls in the 2017-2019 period.
Practical Playbook for Exporters and Consultants
For AA holders and advisors, the real question is: what should we do on Monday morning? Here is a structured roadmap.
Step 1 - Identify AAs in the "Problem Window"
Prepare a list of all AAs which:
Involved imports between 13.10.2017 and 09.01.2019, and
Are pending redemption/EODC or were earlier kept on hold due to Rule 96(10)/pre-import disputes.
This will often include "old" AAs whose export obligation is long complete but where the RA hesitated to issue EODC.
Step 2 - Classify Each AA into One of Four Buckets
For each such authorisation, ask:
1. Bucket A - IGST paid in cash at import?
Check Bills of Entry and duty payment records.
If yes, and exports are completed, you are squarely inside the circular.
2. Bucket B - Only BCD exemption, no IGST/cess exemption?
Verify that the "exemptions availed" column on the Bills of Entry does not reference the IGST-exemption notification.
Confirm the IGST was either paid and refunded, or taken as ITC, in line with GST conditions.
3. Bucket C - Pre-import condition complied with while availing IGST exemption
Document that imports truly preceded exports - not just on paper, but in actual utilisation.
Ensure AA logs, production records, export invoices and shipping bills all support this chronology.
4. Bucket D - Outside the above (non-compliant or unregularised)
These are the complex ones - e.g. imports after exports, exemption taken without pre-import, or no regularisation under Circular 16/2023-Cus.
These cases still need to follow the CBIC/DGFT regularisation route; the 2025 circular does not automatically bless them.
Only Buckets A-C clearly enjoy the benefit of the new DGFT instruction.
Step 3 - Build a Documentation Pack
For A-C cases, assemble a clean evidence set:
Copy of the Advance Authorisation and amendments;
Bills of Entry with IGST payment details / exemption details highlighted;
GST payment/refund/ITC records showing how IGST was treated;
Shipping bills and export invoices, mapping to the AA and demonstrating export obligation fulfilment;
A self-certified statement summarising which clause of the DGFT circular applies and how.
Also keep handy any references to:
Payment of IGST/cess and interest under Circular 16/2023-Cus., if applicable
Prior correspondence with customs or RA;
Relevant DGFT Trade Notices 07/2023-24 and 27/2023.
Step 4 - Make a Targeted Representation to RA
While filing for redemption/EODC (or reopening a previously held-up file), it is useful to:
Expressly quote Policy Circular 07/2025-26,
Clearly state under which of the three conditions your case falls, and
Attach a short legal note explaining why Rule 96(10) concerns do not survive in your facts - either because no exemption was taken or all conditions were complied with.
The tone can be calm and procedural: you are not seeking concession; you are merely asking the RA to apply DGFT's latest policy instruction.
Step 5 - Align GST and Customs Positions
A frequently overlooked risk is inconsistent positions across laws. Exporters should reconcile:
That IGST paid at import (where no exemption was claimed) has been correctly handled - either as ITC or refund, not both;
That any refund or re-credit obtained under Circular 16/2023-Cus. and related GST proceedings does not conflict with the claim being made before RA;
That tax and trade teams within the organisation are on the same factual page.
A clean, reconciled story dramatically reduces the risk of future audit issues.
Policy Significance - More Than Just a Procedural Clarification
Beyond its immediate operational relief, the circular is a signal document in the evolution of India's export policy framework.
1 Recognition of Transitional Hardship
By explicitly addressing the 2017-2019 window, DGFT implicitly acknowledges that exporters were caught in a uniquely turbulent phase:
GST had just rolled out;
Notifications and rules changed rapidly;
Different authorities read the same provisions in different ways.
Rather than brushing these problems under the carpet, Policy Circular 07/2025-26 accepts that the system, not just the taxpayer, shared responsibility for the confusion - and therefore adopts a facilitative approach.
2 Better Coordination Between DGFT, CBIC and GST Policy
The circular draws a straight line from:
1. Supreme Court's ruling in Cosmo Films
2. CBIC's Circular 16/2023-Cus. on tax regularisation; and
3. DGFT's own Trade Notices in 2023;
to the current instruction that RAs must not keep AAs pending where conditions are met.
For exporters, this is important: it shows increasing inter-departmental coherence between trade policy and tax administration, something that has often been missing in the past.
3 Not a Free Pass - But a Fair Closure
The circular carefully balances revenue concerns and trade facilitation:
It does not excuse cases where exemption was misused or pre-import was blatantly ignored.
At the same time, it removes institutional hesitation where exporters did exactly what the law (or subsequent clarifications) required of them.
This is not an amnesty scheme; it is more akin to a
"no-further-questions-if-you-did-the-right-thing" instruction.
Key Takeaways and Way Forward
Exporters and professionals should read Policy Circular 07/2025-26 as the final missing piece in the Rule 96(10)/pre-import saga:
1. If you paid IGST in cash during 13.10.2017-09.01.2019 on AA imports and met export obligations, you should push strongly for immediate EODC, relying on the circular.
2. If you never took IGST/cess exemption (beyond BCD), you now have explicit DGFT backing to close your AAs without getting dragged into double-benefit debates.
3. If you complied with pre-import and procedural conditions while availing IGST exemption, you can legitimately argue that further delay in redemption is contrary to DGFT's own instructions.
4. Cases outside these three categories must still walk the longer path of regularisation under Customs Circular 16/2023-Cus. and prior DGFT Trade Notices, and may warrant tailored legal advice.
Closing Note
The "Rule 96(10) / pre-import" story will likely be cited in future textbooks as a classic example of how complex, cross-departmental tax reforms can go wrong - and how they can eventually be corrected.
DGFT's Policy Circular 07/2025-26 does not rewrite history, but it draws a firm, sensible line under it. For genuine exporters who navigated a constantly shifting legal landscape, this is more than a procedural tweak - it is institutional acknowledgement that they should not be punished for systemic ambiguity.
For policymakers, the lesson is equally clear: when trade policy and tax policy intersect, coordinated, timely clarifications are not a luxury - they are a necessity.
Disclaimer: The information given in this article is solely for purpose of understanding the law. It is completely based on the interpretation of the author and cannot be constituted as a legal advise, the author of this article and Lawcrux team is not responsible for any legal issues if arises on the basis of the interpretation given above.