Prospective Omission of GST Rules and the Saving Clause Debate: Rethinking Goodluck India in Light of Kolhapur

Introduction

The Supreme Court of India, by its order dated 06.08.2026 in M/s Goodluck India Limited & Anr. v. Union of India & Ors. [SLP(C) No. 24550 of 2025], delivered a significant ruling on the legal consequences of omitting a subordinate legislation without an accompanying saving clause. The Court held that the omission of Rule 96(10) of the CGST Rules, 2017 — effected by Notification No. 20/2024-Central Tax with effect from 08.10.2024 — without any saving clause, must be treated as obliterating the sub-rule as though it had never existed. As a consequence, even pending proceedings stood to benefit from this omission, irrespective of when they were initiated.

The Court placed primary reliance on the Constitution Bench decision in Kolhapur Canesugar Works Ltd. v. Union of India, treating it as controlling authority on the question of what happens to pending proceedings when a rule is omitted without a saving clause.

This article respectfully raises a critique of that application. The central argument is that the Kolhapur principle — developed in a specific factual context where there was no acknowledged operative period for the omitted rule — was applied mechanically in Goodluck India to a materially different situation: one involving a prospective omission from a specified future date, where the very notification effecting the omission acknowledged the rule's prior legal existence. The article also examines the statutory architecture of Section 166 of the CGST Act, 2017, and contrasts it with Section 38 and Section 38A of the Central Excise Act, 1944, to demonstrate why the absence of a saving clause should not, in all circumstances, be equated with retroactive obliteration.

Background: Rule 96(10) and Its Omission

Rule 96(10) of the CGST Rules, 2017, as it stood before its omission, operated as a restriction on the entitlement to claim an IGST refund under Rule 96. Specifically, it disentitled assessees who had received supplies at concessional or exemption rates from availing such a refund under the zero-rated supply framework. The sub-rule was inserted by Notification No. 3/2018-Central Tax dated 23.01.2018 and remained operative for over six years.

It was eventually omitted by Notification No. 20/2024-Central Tax dated 08.10.2024, prospectively and without a saving clause. The 54th GST Council meeting held on 09.09.2024 had itself recommended that the omission be given prospective effect — a position consistent with the rule having had a defined operative life until 08.10.2024.

In Goodluck India, the Department argued that the omission should be treated as operating only prospectively, consistent with the Council's advisory recommendation and with the language of the notification specifying a future effective date. The Court rejected this, holding that GST Council recommendations do not bind the rule-making authority, and that in the absence of a saving clause, the Kolhapur principle applied — resulting in the obliteration of Rule 96(10) for all purposes, including pending proceedings.

The Precise Ratio of Kolhapur Canesugar Works Ltd. v. Union of India

To properly evaluate Goodluck India, it is essential to understand exactly what the Constitution Bench decided in Kolhapur.

The facts involved Rules 10 and 10A of the Central Excise Rules, 1944, which were omitted and simultaneously substituted by a new Rule 10 on the same date — Notification No. 267/77 dated 06.08.1977. A show cause notice had been issued before the omission. The adjudication order, however, was passed after the omission. The question before the Court was whether that post-omission adjudication order was legally sustainable.

The Bench held that Section 6 of the General Clauses Act, 1897 — which protects pending proceedings upon the repeal of an enactment — does not apply to the omission of a rule, because Section 6, by its express terms, covers only the repeal of a Central Act or Regulation. Since there was no saving clause and Section 6 did not apply, all pending proceedings lapsed.

The Court in Kolhapur also quoted from Firm A.T.B. Mehtab Majid and Co. (supra) as follows:

"It has been urged for the respondent that if the impugned rule be held to be invalid, old Rule 16 gets revived and that the tax assessed on the petitioner will be good. We do not agree. Once the old rule has been substituted by the new rule, it ceases to exist and it does not automatically get revived when the new rule is held to be invalid."

Key Contextual Differences Overlooked in Goodluck India

Several features of the Kolhapur facts distinguish it from the situation in Goodluck India: