Analysis
(i) The section provides that interest is payable if –
Tax paid becomes refundable under section 54(5) to the applicant; and
It is not refunded within 60 days from the date of receipt of application for refund of tax under Section 54(1)
(ii) Interest is liable to be paid from the due date for payment of refund till the date of sanction or grant of refund.
(iii) For the above delay, the Government has specified 6% as the rate of interest vide Notification No.13 /2017 – Central Tax dated 28.06.2017.
Illustration:
A Ltd has filed a refund claim of excess tax paid with all the documents and records on 19.08.2017. The department sanctioned the refund on 30.11.2017. In such a case, interest has to be paid for the period from 19.10.2017 to 30.11.2017.
(iv) Explanation to section provides that in cases where the orders of Appellate Authority / Tribunal / Court sanctions refund in an appeal, against the order of refund sanctioning authority, the order of Appellate Authority / Tribunal / Court will be considered as orders passed by refund sanctioning authority. In other words, by virtue of such order, the refund has become due and the interest will then be computed form the date of completion of 60 days from the date of original refund claim made. For all such claims the Government has specified 9% as the rate of interest vide Notification No.13 /2017 – Central Tax dated 28.06.2017.
Illustration:
A Ltd has filed a refund claim of excess tax paid with all the documents and records on 19.08.2017. It was rejected by refund sanctioning authority. On Appeal the Appellate Authority passed the order for refund based on which the department sanctioned the refund on 30.09.2018. In such case, interest has to be paid for the period from 18.10.2017 to 30.09.2018.
(v) Rule 94 provides for Order sanctioning interest on delayed refunds- where any interest is due and payable to the applicant under section 56, the proper officer shall make an order along with a payment advice in FORM GST RFD-05, specifying the following:
(a) Amount of refund which is delayed,
(b) the period of delay for which interest is payable and
(c) the amount of interest payable, and such amount of interest shall be electronically credited to any of the bank accounts of the applicant.