INTEREST ON REFUND UNDER GST- SOME ISSUES

[Dr. Sanjiv Agarwal]

Interest on refund of amount paid for admission of appeal (Section 115)

Section 115 of CGST Act, 2017 provides for payment of interest on refund of amount which was paid at the time of admission of appeal. It may be noted that for filing an appeal under section 107 of CGST Act, 2017, a deposit is required to be made. It has been provided in section 112(8) of CGST Act, 2017 for filing the appeal before appellate tribunal that no appeal shall be filed under sub-section (1), unless the appellant has paid–

1. in full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him, and
2. a sum equal to twenty per cent. of the remaining amount of tax in dispute, in addition to the amount paid under sub-section (6) of section 107, arising from the said order 134 subject to a maximum of fifty crore rupees, in relation to which the appeal has been filed.

Payment Order (Rule 94)

In terms of rule 94 of CGST Rules, 2017, the proper officer is required to issue an order along with ‘payment order’ specifying the following:

1.  Amount of refund which is delayed
2. Period of delay for which interest is payable
3. Amount of interest payable

Prior to 24.09.2019, instead of payment order, payment advice is required to be issued.  The rule was accordingly, amended vide Notification No. 31/2019-CT dated 28.06.2019.

The amount of interest payable under section 56 shall have to be electronically credited to the bank account of the applicant as mentioned in the registration particulars as well as application for refund.

Refund of pre-deposit

There may be situations where refund of pre-deposit made under section 107(6) or 112(8) of the CGST Act, 2017 and refund application is made for the same. In such cases, different provisions for interest on delayed payment will apply for the purpose of section 56 the CGST Act, 2017.

CBIC clarification on refund

CBIC vide Circular No. 79/53/2018-GST dated 31.12.2018 has clarified that the refund will be considered as refunded only when the refund amount has been credited to the bank accurate of the claimant.

The same Circular also clarifies that revenue officers should first issue sanction order in FORM GST RFD-06 within 45 days of the date of generation of Acknowledgment Receipt Number (ARN) so as to ensure that the disbursement process of refund is complete in next 15 days i.e., involving a total period of 60 days.

The relevant extract of Circular No. 79/53/2018-GST dated 31.12.2018 is extracted hereunder:

“Disbursal of refund amounts after sanction

Section 56 of the CGST Act clearly states that if any tax ordered to be refunded is not refunded within 60 days of the date of receipt of application, interest at the rate of 6 per cent (notified vide notification No. 13/2017-Central Tax dated 28.06.2017) on the refund amount starting from the date immediately after the expiry of sixty days from the date of receipt of application (ARN) till the date of refund of such tax shall have to be paid to the claimant. It may be noted that any tax shall be considered to have been refunded only when the amount has been credited to the bank account of the claimant. Therefore, interest will be calculated starting from the date immediately after the expiry of sixty days from the date of receipt of the application till the date on which the amount is credited to the bank account of the claimant. Accordingly, all tax authorities are advised to issue the final sanction orders in FORM GST RFD-06 within 45 days of the date of generation of ARN, so that the disbursement is completed within 60 days by both Central and State Tax Authorities for CGST / IGST / UTGST / Compensation Cess and SGST respectively.