Rules 89(4A) and (4B): Refunds for Duty-Free Procurers

Rules 89 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

Most exporters compute a refund from a formula that spreads their whole credit pool across turnover. Two categories do not — they get a refund of the credit on specific inputs, and nothing else.

Rule 89(4A): in the case of supplies received on which the supplier has availed the benefit of Notification No. 48/2017-Central Tax — the deemed export notification — refund of input tax credit shall be granted to the extent of credit availed in respect of those inputs received under the said notification for export of goods, and the exporter shall not have availed the benefit of the specified duty-free notifications. Rule 89(4B): the same structure where the supplier has availed the benefit of the advance authorisation, EPCG or EOU notifications, or where the exporter itself imported inputs duty-free.

Why they exist

The ordinary Rule 89(4) formula gives an exporter a proportion of its whole Net ITC, spread across turnover. That works where the exporter paid tax on everything it bought.

Where an exporter has procured inputs duty-free — under advance authorisation, EPCG, EOU or the deemed export notification — it paid no tax on those inputs, and there is no credit to refund on them. Applying the ordinary formula would give it a share of credit attributable to other procurements, effectively refunding tax on inputs it did not use in the exports.

Rules 89(4A) and (4B) close that by confining the refund to the credit actually availed on the specific inputs received under those notifications.

Rule 89(4A): deemed export supplies received

Applies where the exporter received supplies on which the supplier availed the benefit of Notification No. 48/2017-CT — the deemed export notification.

The refund is of the input tax credit availed in respect of such inputs, received under that notification, for export of goods.

Two conditions attach:

• the exporter must not have availed the benefit of the specified duty-free import notifications;
• the claim is confined to those inputs, not to the general pool.

Deemed export refunds →

Rule 89(4B): duty-free imports and EOU supplies

Applies where the exporter:

• received supplies on which the supplier availed the benefit of Notification No. 40/2017-CT(R) or 41/2017-IT(R) — the merchant export notifications; or
• availed the benefit of Notification No. 78/2017-Customs (EOU) or Notification No. 79/2017-Customs (advance authorisation and EPCG) itself.

Again, the refund is of the credit availed in respect of inputs received under those notifications for export of goods.

Merchant exports at 0.1% →

The interaction with the ordinary formula

Both Rule 89(4) and Rule 89(5) exclude the (4A) and (4B) turnover and credit from their computations:

• Net ITC in Rule 89(4) is "other than the input tax credit availed for which refund is claimed under sub-rules (4A) or (4B)";
• Turnover of zero-rated supply of goods excludes "the turnover of supplies in respect of which refund is claimed under sub-rules (4A) or (4B)";
• Adjusted Total Turnover excludes the same.

So an exporter with a mix of ordinary and duty-free-route procurement runs two computations — the (4A) or (4B) claim on the identified inputs, and the ordinary Rule 89(4) formula on the rest, with the (4A)/(4B) figures stripped out of both sides.

That segregation is the practical work of the rule, and it requires the input-level tagging to exist in the first place. Rule 89(4): the zero-rated formula →

The Rule 96(10) counterpart

Rule 96(10) is the restriction on the other side: a person who has received supplies on which the benefit of the same notifications was availed, or who availed the customs notifications itself, is not entitled to claim refund of IGST paid on exports under Rule 96.

So the scheme is:

An exporter that procures duty-free is confined to the LUT route and the specific-input refund.

The scope of Rule 96(10) has been extensively litigated — including on whether it applies where the benefit was availed for some procurements only, and on its retrospective operation. Check the current text and the position in the relevant jurisdiction before choosing a route.

Practical notes

• Tag inputs at procurement by the notification under which they were received. Neither sub-rule can be applied retrospectively from an untagged ledger.
• Segregate the credit in the ITC working, so the (4A)/(4B) credit is identifiable and can be excluded from Net ITC.
• Run two computations where procurement is mixed, and reconcile them to the total credit.
• Choose the export route deliberately. A business planning duty-free procurement is choosing the LUT route at the same time, whether or not it realises.
• Keep the supplier's declaration that it availed the notification benefit — the exporter's own claim depends on that fact.
• Model the working capital. The LUT route with a restricted refund is materially slower than the with-payment route, and duty-free procurement buys that at the cost of this.

Key takeaways

• Rule 89(4A): refund confined to credit on inputs received under the deemed export notification.
• Rule 89(4B): the same for merchant export supplies received and for EOU, advance authorisation and EPCG imports.
• Both are input-specific, not formula-based.
• Their credit and turnover are excluded from Rules 89(4) and 89(5).
• Rule 96(10) bars such exporters from the IGST with-payment route.
• The choice of procurement route determines the export refund route.

Read next

• Rule 89(4): The Zero-Rated Refund Formula
• Deemed Export Refunds: Who Claims
• Merchant Exports at 0.1%
• Rule 96: The Shipping Bill as a Refund Application

Disclaimer: Positions stated as on 5 September 2026, based on the CGST Rules as amended to 31 March 2026 (ICAI Bare Law, 12th edition) and the ICAI Handbook on Refunds under GST (January 2026). Rule 96(10) has been extensively litigated — verify the current position.