Interest on Delay Refund [section 56 or CGST Act & Rule 94/ 96C of CGST Rules] - GST Ready Reckoner - GST

Interest on Delay Refund Interest on amount refundable consequent to order to order passed by proper officer under section 54(5) of CGST Act Where any tax ordered to be refunded under section 54(5) of CGST Act to any applicant is not refunded within sixty days from the date of receipt of application under section 54(1) of CGST Act , interest shall be payable to the applicant. interest at such rate not exceeding 6% p.a. , ( Notification No. 13/2017 Central Tax ) Interest 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 sub-section (1) of section 54 of CGST Act till the date of refund of such tax ( w.e.f. 01.10.2023 ) for the period of delay beyond sixty days from the date of receipt of such application till the date of refund of such tax, to be computed in such manner and subject to such conditions and restrictions as may be prescribed has been substituted. [ Section 56 ] Case law AC IMPEX VERSUS UNION OF INDIA AND ORS .( 2023 (4) TMI 1182 - DELHI HIGH COURT ) Issue : The main issue in the case was to determine the date from which statutory interest under Section 56 of the Central Goods and Services Tax Act, 2017 (CGST Act) would get triggered. Facts : The petitioner claimed that interest should be triggered from the date when the initial application for refund was filed, while the respondent/revenue asserted that interest would get triggered 60 days after the date when the court passed an order directing consideration of the application. Decision : The Delhi High Court ruled in favor of the petitioner, stating that interest should trigger in accordance with the main part of Section 56 of the CGST Act, i.e., from 18.04.2018, and that interest should run, both on CGST and DGST, up until the date when the amount was remitted to the petitioner. Interest on amount refundable consequent to order to order passed in an appeal or further proceedings 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 shall be payable on such refund. interest is payable on such refund amount at such rate not exceeding 9% p.a. . ( Notification No. 13/2017 Central Tax ) Interest shall be payable to the applicant under section 56 from the date immediately after the expiry of 60 days from the date of receipt of application till the date of refund. [ proviso Section 56 ] For the purposes of section 56 of CGST Act , 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). Order sanctioning interest on delayed refund [ Rule 94 of CGST Rules ] Where any interest is due and payable to the applicant under section 56, the proper officer shall make an order along with a payment order in FORM GST RFD-05. Such order shall specifying therein the amount of refund which is delayed, the period of delay for which interest is payable and the amount of interest payable . Such amount of interest shall be electronically credited to any of the bank accounts of the applicant mentioned in his registration particulars and as specified in the application for refund. [ Rule 94(1) ] The following periods shall not be included in the period of delay under rule 94(1), namely:- (a) any period of time beyond fifteen days of receipt of notice in FORM GST RFD-08 under rule 92(3) , that the applicant takes to- (i) furnish a reply in FORM GST RFD-09, or (ii) submit additional documents or reply; and (b) any period of time taken either by the applicant for furnishing the correct details of the bank account to which the refund is to be credited or for validating the details of the bank account so furnished, where the amount of refund sanctioned could not be credited to the bank account furnished by the applicant [ Rule 94(2) ] As Per Rule 96 C bank account shall mean such bank account of the applicant which is in the name of applicant and obtained on his Permanent Account Number Provided that in case of a proprietorship concern, the Permanent Account Number of the proprietor shall also be linked with the Aadhaar number of the proprietor. In case refund claim is filed as a consequence of any Court judgement, when will interest become due In case of refund is other than pre deposit amount:- For a claim of refund of tax paid during the course of proceedings which the Courts have held as not payable on merits, Interest liability would arise u/s 56 of the CGST Act. i.e interest would be payable if the amount has not been refunded within 60 days of filing of application for refund by the claimant. That is to say, after the judgment or decree holding the tax to be not payable, the appellant will have to file a claim a claim u/s 54(1) and thereafter if the amount is 60 days of filing of application, interest liability will arise for Revenue. In case of refund of pre- deposit amount:- For refund of amounts paid as pre-deposit (in terms of Section 107(6) 112 (8) ) interest liability will arise in terms of Section 115 of the CGST Act. As per Section 115 of CGST Act, where an amount paid by the appellant u/s 107(6) or u/s 112(8) is required to be refunded consequent to any order of the Appellate Authority or of the Appellate Tribunal, interest at the rate specified u/s 56 shall be payable after 60 days in respect of such refund from the date of payment of the amount till the date of refund of such amount. Interest liability starts from the date of making of payment (and not the date of filing of application for refund) in the case of amounts paid as pre-deposit.