Delhi HC: Interest on GST Refunds from 60 Days After Filing of Refund Application Under Finalization of Refund Claim

The Honorable Delhi High Court, in the matter of Bansal International v. Commissioner of DGST and Anr., granted the writ petition and ruled that interest at a rate of 6% will be payable for the duration beginning from the day immediately following the expiration of sixty days from the initial application until the submission of the second application, following the appellate orders.

Key Facts of the Bansal International Case

Arun Bansal, the petitioner, runs a business named Bansal International, which is involved in the export of goods. The petitioner filed a refund application for claiming Input Tax Credit (ITC) concerning tax-free exported goods in November 2019.

The Revenue Department who is respondent in this case, acknowledged the petitioner’s refund application but, through an order dated November 10, 2020, approved a refund sum of Rs. 1,08,293/- and denied the remaining refund claim of Rs. 52,84,223/- citing it as not valid as stipulated in Section 62(2)(c) of the Central Goods and Services Tax Act, 2017 (CGST Act).

Dissatisfied with the order, the petitioner appealed before the Appellate Authority, which allowed the appeal and directed the petitioner to submit a fresh GST refund application. However, the respondent denied the payment of interest.

A fresh application was filed by the petitioner along with a request for interest. The respondent approved the refund amount through an order dated December 28, 2022, but denied interest on the refunded amount. Subsequently, the petitioner again applied claiming interest, which was rejected by the respondent through an order dated July 11, 2023, through the impugned order.

Challenging the contended order, the petitioner approached the Honorable Delhi High Court and filed a writ petition to claim interest on the refund amount concerning the tax period of November 2019.

Key Issue in Bansal International Case

Whether the taxpayer is eligible for interest on the GST refund starting from the expiration of 60 days of the initial application upon submission of the refund request is filed based on the Appellate Order.

Court’s Decision in Bansal International

The Honorable Delhi High Court, in W.P. (C) 11629/2023, made the following observations and rulings:

Note that Section 56 of the CGST Act provides for a six per cent interest rate on the amount of refund due, which remains unpaid after sixty days from the date of the refund application. However, the proviso states that a higher interest rate of 9% is applicable when the claim for refund is finalized in appellate proceedings.

Recognized that the subsequent refund applications filed after the orders issued by the Appellate Authority are meant to enforce the already passed orders and do not demand fresh adjudication. These subsequent applications are solely for expediting the disbursement process and for the proper officer to regulate and disburse the payable interest.

Opined that interest at a rate of six per cent should be paid for the period starting immediately after sixty days from the initial application until the submission of the second application, following the appellate orders.

Set aside the Impugned Order and allowed the writ petition.

Ordered the respondent to process the petitioner’s refund application.