Karnataka HC: GST Refund for Export Services Can’t Be Denied if eBRC/FIRC Submitted

1. Introduction

Exporters of services in India have long relied on the GST regime’s promise of seamless refunds for unutilised input tax credit (ITC) on zero-rated supplies. This refund mechanism is not just a matter of cash flow—it is a statutory right, designed to keep Indian exporters globally competitive. However, the process is often fraught with procedural hurdles, especially around the documentary evidence required to prove receipt of export proceeds in foreign currency.

A recurring pain point is the insistence by GST authorities on specific remittance proofs—primarily electronic Bank Realisation Certificates (eBRCs) or Foreign Inward Remittance Certificates (FIRCs)—and the frequent disputes over their sufficiency or alleged non-production. Many exporters have faced refund denials or protracted litigation, even after submitting these documents, due to technical or clerical lapses in departmental records.

The recent ruling of the Karnataka High Court in Mavenir Systems (P.) Ltd. v. Union of India [2025] has brought much-needed clarity to this issue. The Court held that GST refunds for export of services cannot be denied on the ground of non-production of remittance proofs if eBRCs, FIRCs, or equivalent bank evidences have already been submitted and are on record. The judgment not only quashes the refund rejection but also directs the authorities to process the refund with applicable interest, reinforcing the legal and practical rights of exporters.

This article will cover:

• The statutory and procedural landscape for GST refunds on export of services
• The evidentiary standards for remittance proofs (eBRC, FIRC, FIRA, SWIFT, etc.)
• Practical checklists and response strategies for SCNs and departmental reviews
• Legal implications, risk mitigation, and best practices for documentation and reconciliation
• How to leverage the Mavenir Systems precedent, including its jurisdictional reach and persuasive value

2. Legal Framework: Refund of Unutilised ITC on Export of Services

The GST law recognises exports—both of goods and services—as “zero-rated supplies.” This means that while the supply itself is not taxed, the exporter is entitled to claim a refund of the input taxes paid on inputs and input services used in making such exports. The legal foundation for this right is anchored in three key provisions:

Section 54, CGST Act:
This section provides the substantive right to claim a refund of unutilised ITC in cases of zero-rated supplies made without payment of tax. It also lays down the procedural preconditions, such as the time limit for filing refund applications (generally two years from the relevant date) and the requirement to furnish prescribed documents.

Section 16, IGST Act:
Section 16 defines “zero-rated supply” to include exports of goods or services. It clarifies that exporters can either supply under bond/LUT without payment of IGST and claim refund of unutilised ITC, or supply on payment of IGST and claim refund of the tax paid. For detailed information, see our blog on All About LUT in GST for Exporters.

Rule 89, CGST Rules:
Rule 89 operationalises the refund process. It prescribes the application form (RFD-01), the procedure for filing, and the list of documents to be submitted. Of particular importance is Rule 89(2), which specifies the evidentiary requirements for proving that the export proceeds have been realised in convertible foreign exchange (or in Indian rupees wherever permitted by RBI).

Rule 89(2): Documentary Proofs and Compliance Thresholds

Rule 89(2) requires the applicant to furnish evidence of receipt of payment in respect of export of services. The accepted forms of evidence include:

• eBRC (electronic Bank Realisation Certificate) issued by authorised banks
• FIRC (Foreign Inward Remittance Certificate)
• FIRA (Foreign Inward Remittance Advice)
• SWIFT/MT103 messages or equivalent bank certificates

The rule does not mandate a single format, but the evidence must be sufficient to establish that the export proceeds have been received in accordance with FEMA and RBI regulations. For assistance with RBI compliance aspects, refer to our RBI Services page.

3. Case Analysis: Mavenir Systems (P.) Ltd. v. Union of India (Karnataka HC, 2025)

The Mavenir Systems case is a watershed moment for exporters grappling with GST refund denials on technical grounds. Let’s break down the facts, the court’s reasoning, and the practical lessons for the trade.

3.1 Factual Matrix: Refund Claim, Department Action, and Production of eBRC/FIRC

Mavenir Systems, a Bengaluru-based exporter of software services, filed refund claims for unutilised ITC on export of services without payment of tax for FY 2018-19 and 2019-20. The company submitted all required documents, including eBRCs and FIRCs, as proof of receipt of export proceeds in foreign currency. The jurisdictional GST authority initially sanctioned the refunds.

However, during a subsequent departmental review, show cause notices (SCNs) were issued, alleging non-production of remittance proofs. Mavenir responded by re-submitting the eBRCs/FIRCs and providing detailed reconciliations. Despite this, the appellate authority set aside the refund sanctions, citing “non-production” of these documents, and recovery proceedings were initiated.

3.2 Chronology: Refund Claim, SCN, Review/Adjudication, Rejection, Writ Petition

• Refund applications filed and sanctioned (FY 2018-19, 2019-20)
• Departmental review and SCNs issued, questioning remittance proof
• Detailed replies with eBRCs/FIRCs submitted by Mavenir
• Appellate authority rejects refund, claims non-production of documents
• Recovery notices (DRC-07) issued for refund amounts
• Writ petition filed before Karnataka High Court challenging the rejection

3.3 Court’s Factual Findings: Verification of eBRC/FIRC Submissions

The High Court meticulously examined the record and found that Mavenir had, in fact, submitted the eBRCs and FIRCs along with its replies to the SCNs. The court noted that the department’s own files contained these documents, and the assertion of “non-production” was factually incorrect. The court also observed that the details of foreign remittances were available with the authorities, and there was no substantive dispute regarding the realisation of export proceeds.

3.4 Legal Conclusions

a. Factual Error in Appellate Authority’s Findings
The court held that the appellate authority’s finding of non-production was a clear factual error, as the documents were on record and had been duly submitted.

b. Departmental Records Corroborating Receipt of Remittance Evidence
It was emphasised that the department’s own records corroborated the receipt of export proceeds, and the authorities could not ignore this evidence.

c. Rejection of Refund on Non-Production Ground Held Unsustainable
The High Court ruled that denying refund solely on the ground of alleged non-production of eBRC/FIRC—when such documents were already submitted—was unsustainable in law. The court stressed that procedural lapses or oversight in departmental record-keeping cannot defeat a substantive statutory right.

3.5 Directives Issued—Refunds and Interest

The court quashed the impugned orders, including the refund rejection, recovery notices, and adjudication orders. It directed the authorities to grant the refund as originally sanctioned and to release the payment with applicable interest within two months. This reinforces the right to interest under Section 56 of the CGST Act for delayed refunds. For legal remedies in GST litigation, you can explore our GST Litigation Services page.

3.6 Distinction from Intermediary Services: The Principal-to-Principal Test

A recurring departmental argument is to deny export status by misclassifying the service as “intermediary,” which is not eligible for zero-rating. The High Court, echoing earlier precedents, clarified that Mavenir’s services were provided on a principal-to-principal basis to overseas clients, not as an intermediary. The court reiterated that intermediary services require a tripartite arrangement and a principal-agent relationship, which was absent in this case. See our detailed blog post on Karnataka HC Landmark Judgement Clarifying Intermediary Vs Principal-to-Principal Distinction in GST for more insights.

4. Evidentiary Standards: What Documentary Evidence Suffices?

The heart of most refund disputes is the sufficiency and format of remittance proofs. Rule 89(2) of the CGST Rules, read with RBI/FEMA guidelines, recognises several forms of documentary evidence for receipt of export proceeds:

• eBRC (electronic Bank Realisation Certificate): The most widely accepted proof, issued by authorised banks through the DGFT portal, confirming receipt of foreign currency against export invoices.
• FIRC (Foreign Inward Remittance Certificate): Traditionally issued by banks, now largely replaced by eBRCs/FIRAs for services exports.
• FIRA (Foreign Inward Remittance Advice): Modern equivalent of FIRC, especially for software and IT services exports.
• SWIFT/MT103 messages: International bank transfer messages, often used for high-value or complex transactions.
• Bank certificates or statements: Where eBRC/FIRC is not available, a certificate from the authorised dealer bank confirming receipt of export proceeds may suffice.

Contemporary Changes:
With the digitalisation of banking and export documentation, FIRCs are being phased out in favour of eBRCs and FIRAs. Exporters should ensure they obtain the latest format as per their bank’s and DGFT’s protocols.

For a comprehensive understanding of FIRCs and their usage, see our blog A Complete Guide to Foreign Inward Remittance Certificate (FIRC).

Checklist: Maintaining and Presenting Proper Remittance Proofs

• Retain original digital copies of eBRCs/FIRAs as downloaded from the DGFT/bank portal.
• Ensure all remittance proofs are mapped to corresponding export invoices and GST returns.
• Maintain a reconciliation statement linking each eBRC/FIRA to the relevant refund claim.
• Keep backup copies (digital and, if possible, physical) in a secure, indexed manner.
• For legacy cases, retain FIRCs and any correspondence with the bank regarding transition to eBRC/FIRA.

Best Practice Pointers

• Submit remittance proofs proactively with the initial refund application and in response to any SCN.
• For SWIFT/MT103 or bank certificates, ensure they clearly mention the exporter’s name, invoice number, and amount received.
• Digital submissions are preferred, but always retain email acknowledgments or portal receipts as evidence of submission.
• For older transactions, clarify the transition from FIRC to FIRA/eBRC in your covering letter to pre-empt objections.

To assist in maintaining your GST documentation, explore our Outsourcing Services which include compliance support.

5. Responding to SCNs and Reviews: Practical Guidance

When GST authorities issue a Show Cause Notice (SCN) or initiate a departmental review alleging non-production or insufficiency of remittance proofs, exporters must respond with precision and confidence. The Mavenir Systems case demonstrates that even when documents are on record, procedural lapses or miscommunication can lead to wrongful denial. Here’s how to navigate such situations effectively:

5.1 Preparation and Collation of Response Documents

A robust response begins with meticulous collation of all relevant documents:

• eBRCs/FIRCs/FIRAs: Ensure these are the latest, digitally signed versions, directly downloaded from the DGFT or bank portal.
• Export invoices and contracts: Attach copies of the underlying export invoices and the service agreements with foreign clients.
• Reconciliation statements: Prepare a clear mapping of each remittance proof to the corresponding invoice and GST return entry.
• Shipping bills (if applicable): For services with a physical component, include shipping documentation.
• Bank statements/SWIFT messages: Where required, supplement with bank statements or SWIFT/MT103 messages showing receipt of funds.

5.2 Drafting Robust Written Responses

• Reference annexures: Clearly index and refer to each document in your reply (e.g., “Please see Annexure 2: eBRC for Invoice #123”).
• Highlight prior submissions: If documents were already submitted, state the date, mode, and acknowledgment reference. Attach proof of earlier submission.
• Narrate the paper trail: Briefly explain the sequence of submissions and responses, so the reviewing officer can easily follow the compliance trail.
• Address each allegation: Respond pointwise to every issue raised in the SCN, cross-referencing supporting evidence.

5.3 Tips for Smooth Departmental Review or Appellate Proceedings

• Be proactive: Don’t wait for a hearing—submit a comprehensive written reply with all evidence upfront.
• Request a personal hearing: If the matter is complex, seek an opportunity to explain the documentation in person or via video conference.
• Follow up in writing: After any hearing or meeting, send a summary email or letter recapping what was discussed and what was submitted.
• Escalate if needed: If the officer persists with a denial despite clear evidence, reference the Mavenir Systems ruling and request reconsideration.

For professional help, consider our GST Litigation Services.

7. Addressing Mismatches: Reconciliation Strategies

One of the most common reasons for refund disputes is a mismatch between remittance proofs (eBRC/FIRC) and GST returns or refund applications. Here’s how to pre-empt and resolve such issues:

7.1 Typical Discrepancies

• Amount mismatch: Differences between the amount realised (as per eBRC/FIRC) and the invoice value due to bank charges, exchange rate fluctuations, or partial payments.
• Invoice mapping errors: Incorrect or missing invoice numbers in eBRCs/FIRCs.
• Timing differences: Export proceeds received in a different financial year than the invoice date.

7.2 Recommended Reconciliation Processes

• Prepare a reconciliation statement mapping each eBRC/FIRC to the corresponding export invoice and GST return entry.
• Document explanations for any differences (e.g., attach bank advice for exchange rate differences).
• Cross-check GST returns (GSTR-1, GSTR-3B) with the refund application and remittance proofs before filing.

7.3 Proactive Checks Before Refund Filing

• Verify all remittance proofs are in the correct format and match the invoice and GST data.
• Flag and resolve discrepancies internally before submission.
• Attach a reconciliation summary as part of the refund application to pre-empt departmental queries.

7.4 Real-Life Examples and Checklists

• Example: If an eBRC shows receipt of USD 9,950 against an invoice of USD 10,000, explain the deduction (e.g., bank charges) and provide supporting bank advice.
• Checklist:
• All eBRCs/FIRCs/FIRAs downloaded and indexed
• Each remittance mapped to invoice and GST return
• Reconciliation statement prepared and attached
• Covering letter explains any differences