Petitioner entitled to 6% statutory interest on refund from 61st day under Section 56 CGST Act, payable within two months

The HC held that the petitioner is entitled to statutory interest at 6% per annum on the refund amount, calculated from the day after sixty days from the refund application receipt until the refund is credited, as per Section 56 of the CGST Act, 2017. The Court directed payment of interest within two months. The petition was disposed of accordingly.

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ISSUES:

Whether interest under Section 56 of the CGST Act, 2017 is payable on delayed refund of tax amounts when refund orders have been passed but interest has not been granted.Whether the payment of interest under Section 56 is automatic and mandatory even if the refund application does not specifically claim interest.Whether the denial of interest on the ground that the refund application did not claim interest (via FORM GST-RFD-01) is legally sustainable.

RULINGS / HOLDINGS:

Interest under Section 56 of the CGST Act, 2017 is payable if the refund is not made within 60 days from the date of receipt of the refund application, and such interest is "statutory" and "automatically payable without any claim."Payment of interest does not depend on a specific claim made by the applicant in the refund application, and denial of interest on the ground of waiver or non-claim in FORM GST-RFD-01 is not permissible.The statutory interest at the rate of 6% must be calculated from the date immediately after the expiry of sixty days from the date of receipt of the refund application until the date the refund amount is credited to the applicant's bank account.

RATIONALE:

The Court relied on Section 56 of the CGST Act, 2017, which explicitly mandates interest on delayed refunds if not paid within 60 days from receipt of the refund application.The Court referred to a coordinate bench decision interpreting Section 56 and the CBEC Circular No. 125/44/2019-GST dated 18.11.2019, which clarifies that interest is payable automatically and is calculated until the refund is credited to the bank account.The Court rejected the respondent's argument that interest is payable only if claimed in the refund application, emphasizing the mandatory nature of the statutory interest provision.No justification was provided by the respondent for delay in refund payment beyond the stipulated period, reinforcing the entitlement to interest.

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