INTEREST ON DELAYED REFUND UNDER GST

[Dr. Sanjiv Agarwal]

In terms of section 54(7) of CGST Act, 2017, in case an applicant is not refunded the claim amount within 60 days from the date of receipt of application of refund, interest shall be payable to the applicant at the rate which is notified by Central or State Government on the recommendation of GST Council for the period starting immediately after the expiry of due date as above.

Triggers for Payment of Interest

Interest shall be payable under section 56 for delayed payment of refund if the following triggers are hit:

1. Tax paid becomes refundable under section 54(5) of CGST Act, 2017 to the applicant;
2. It is not refunded within 60 days from the date of receipt of application for refund of tax under Section 54(1) of the CGST Act, 2017.

Further, section 56 of CGST Act, 2017, provides for interest on delayed refunds. Accordingly, if any tax ordered to be refunded under sub-section (5) of section 54 to any applicant is not refunded within sixty days from the date of receipt of application under subsection (1) of that section, interest at such rate not exceeding six per cent as may be specified in the notification issued by the Government on the recommendations of the Council shall be payable in respect of such refund from the date immediately after the expiry of sixty days from the date of receipt of application under the said sub-section till the date of refund of such tax.

Where any claim of refund arises from an order passed by an adjudicating authority or Appellate Authority or Appellate Tribunal or court which has attained finality and the same is not refunded within sixty days from the date of receipt of application filed consequent to such order, interest at such rate not exceeding nine per cent as may be notified by the Government on the recommendations of the Council shall be payable in respect of such refund from the date immediately after the expiry of sixty days from the date of receipt of application till the date of refund.

However, where any order of refund is made by an Appellate Authority, Appellate Tribunal or any court against an order of the proper officer under sub-section (5) of section 54, the order passed by the Appellate Authority, Appellate Tribunal or by the court shall be deemed to be an order passed under the said sub-section (5).

Period of Interest

As per section 56(1) of CGST Act, 2017, interest shall liable to be paid from the date immediately after the expiry of sixty days from the date of receipt of an application till the date of sanction or grant of refund. 

However, it may be noted that where any claim of refund arises from an order passed by an adjudicating authority or Appellate Authority or Appellate Tribunal or court which has attained finality and the same is not refunded within sixty days from the date of receipt of application filed consequent to such order, interest at such rate not exceeding nine per cent. as may be notified by the Government on the recommendations of the Council shall be payable in respect of such refund from the date immediately after the expiry of sixty days from the date of receipt of application till the date of refund.

Further, where any order of refund is made by an Appellate Authority, Appellate Tribunal or any Court against an order of the proper officer under sub-section (5) of section 54, the order passed by the Appellate Authority, Appellate Tribunal or by the Court shall be deemed to be an order passed under the said sub-section (5) of section 54.

Therefore, following order shall be considered for the purpose of payment of interest for delayed refunds:

Section of CGST Act, 2017	Order	When interest payable	Interest rate (%)	Period for which interest payable
54(5), 56	Order passed by proper officer under section 54(5)	If not refunded within sixty days of the application	6%	Date immediately after the expiry of 60 days from the receipt of application till the date of refund
Proviso to section 56	Refund arising out of : Adjudicating Authority First appellate authority Appellate Tribunal Court after order obtaining finality	If not refunded within sixty days of the application filed consequent from adjudication / appellate order	9%	Date immediately after the expiry of 60 days from the receipt of application till the date of refund

Note: For the purpose of interest, any order of appellate authority or appellate tribunal or court shall be deemed to be in order passed under section 54(5) of CGST Act, 2017.

When is refund amount deemed to be paid

According, to section 56 of CGST Act, 2017, it has been stipulated that if the amount is not refunded within sixty days of the receipt of application, then interest is payable. It implies that amount should be refunded i.e., it should go to the credit of the amount of claimant and not just sanction order.

Interest on Refund

Where an assessee gets a favorable decision (fully or partially), the amount paid as pre-deposit would be refunded along with interest which is computed from the date of deposit till date of refund.

Interest shall be payable at the rate specified in section 56 and it shall be payable in respect of refund from the date of payment of the amount till the date of refund of such amount. Section 56 of the CGST Act, 2017 specifies the rate of interest payable which will be notified by the central or state government on the recommendation of GST Council.

According to section 115 of the CGST Act, 2017, where an amount deposited by the appellant is required to be refunded consequent to any order of the appellate authority or of the appellate tribunal, interest shall be payable in respect of such refund from the date of payment of the amount till the date of such refund amount. The rate of interest shall be 9% (Notification No. 13/2017-Central Tax dated 28.06.2017).

The interest shall be calculated from the date of pre-deposit to the date of actual refund of the deposit.

The rate of interest shall be @ 9% but interest shall be payable from the date of payment of the pre-deposit amount till the date of actual refund of such amount. The date of receipt of refund application shall not be considered in such cases.

Rate of Interest

Rate of interest at which interest for delayed refund is as follows:

1. Not exceeding 6% if refund is not sanctioned within 60 days of the receipt of refund application for the period after the 60 days from the receipt of refund application till the date of actual refund.
2. In cases of refund arising from appellate orders, then interest shall be paid at the rate not exceeding 9% for the period starting from date of expiry of sixty days from the date of application filed consequent upon the order till the date of actual refund.

CBIC vide Notification No. 13/2017-CT dated 28.06.2017 has prescribed the following rates of interest :

1. In case of (a) above, @6%
2. In case of (b) above, @ 9%

It may be noted that the period of sixty days shall be reckoned from the date of receipt of application and not from the date of acknowledgement of application because date of acknowledgement is not the date of receipt of application.