Refund of interest on GST Refund of pre-deposit

[Sarjeet Shekhawat]

we received GST refund of pre-deposit but department did not give us interest on such refund now my concern is that how do i get interest on such refund ?

[Padmanathan KV]

Write a letter to the department seeking interest under section 115 read with section 56 of the Act. If it is rejected or not responded, you will have to file a writ petition before HC. 

[KASTURI SETHI]

(i) Interest on pre-deposit is payable from the date of deposit with the Appellate Authority to the date of payment. Govt. Department has no right to retain your amount without any authority of law. The amount of pre-deposit was meant for availing right of appeal. It was subject to decision of the appeal. So why the department should retain the pre-deposit amount without payment of interest. ? You are strong on merits.

(ii) First step is to write a letter to the Officer who has partly rejected refund claim. If the concerned officer does not listen to you, then meet the jurisdictional Commissioner. Even then if the problem is not solved, then Appeal has to be filed against the partly rejected refund claim.

(iii) Refund Rejection Order/Sanction Order is an Adjudication Order/Order-in-Original. It is appealable to the Appellate Authority. It is afresh Order-in-Original.

[Sarjeet Shekhawat]

can I file fresh refund application on GST Portal for Interest part only?  

[KASTURI SETHI]

NO. Only filing an appeal is the option. I have dealt with such issue.

[Sarjeet Shekhawat]

but how can i file appeal bcoz  department processed my refund claim which i filed as an original application and i did not claim interest part in original refund application, only claim tax amount which was deposited as a pre deposit and department processed the same.

[KASTURI SETHI]

You should have disclosed full facts in your query dated 10.9.24 at the first instance. 

[kailash chandra]

appeal can be filed   against refund order , where by interest has not been given  against sactioned refunded amount ,  even if  interest  has not been claimed specifically   in  refund claim/application ..giving interest  on any refundable amount is  integrated machenism  & bound to be given , if it is admissible , 

   

[KASTURI SETHI]

Interest should have been sanctioned  by the refund sanctioning authority on its own. Interest is automatic.  You can file appeal. There are case laws on this issue  in your favour.

[Shilpi Jain]

Appeal against refund sanction order. 

Interest is automatic. No issue if not applied for separately. Interest due from date of pre-deposit.

[KALLESHAMURTHY MURTHY K.N.]

Dera Sir, 

Your query does not mention that the refund was made beyond the statutory period of 60 days from the date of application filed for refund.  

As per Sec. 56, the interest is payable for the delayed period after 60 days of the refund application filed. If the refund is made within 60 days no interest is payable. 

If you have paid interest at the time of pre-deposit, you can get interest so paid. 

If there is any violation of provisions in the grant of refund, you can demand, the refund authority in writing for the interest.

[KASTURI SETHI]

Sh. Kalleshamurthy Murthy Ji,:

Section 56 talks of refund of tax. Pre-deposit is not a payment of tax. It is a pre-deposit for availing right of appeal though pre-deposit has been allowed to pay through Electronic Credit Account. Interest is refundable from the date of deposit.

Pre-deposit is not a payment duty (now tax) but only a pre-deposit for availing right of appeal.---Hon'ble Supreme Court in the case of UOI Vs. Suvidhe Ltd. reported as 1996 (2) TMI 136 - BOMBAY HIGH COURT. Bombay High Court and upheld by the Supreme Court in 1996 (8) TMI 521 - SC ORDER.

[KASTURI SETHI]

It is also worthwhile to know the difference between the terms, 'pre-deposit' and 'deposit'.

[KASTURI SETHI]

The following judgement is worth reading though pertains to pre-GST era :-

CONTINENTAL ENGINES PVT. LTD. Versus COMMISSIONER (APPEALS), C. EX. & CGST, JAIPUR-I - 2022 (5) TMI 903 - CESTAT NEW DELHI

 

[KALLESHAMURTHY MURTHY K.N.]

Dear Learned Experts,

As per Sec.115, the interest is payable from the date of deposit. But the interest rate is prescribed u/s 56 under the heading, -Interest on delayed refunds -when the appeal order favoured the appellant at 9%.

Sec. 56 reads as under.

Provided that 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 at such rate not exceeding nine per cent. as may be notified by the Government on the recommendations of the Council 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 till the date of refund.

So, the Appellant has to apply for a refund. The interest payable arises only after the expiry of 60 days after the receipt of the application. That is the interest rate comes into the picture only after the expiry of 60 days. There was no rate of interest fixed for regular payments. How can the rate of interest prescribed under this provision be applicable from the date of deposit?

So, Sec.115 and Sec. 56 are contradictory provisions. The departmental authorities follow this provision. Is further appeal only the way to get the remedy?

[KASTURI SETHI]

Dear Sh.Murthy Ji,

How Sections 115 and 56 are contradictory ? Have you perused the meaning and essence of 'deposit' explained by the Hon'ble Supreme Court ?

[SHARAD ANADA]

Interest allowable on Refund of Pre-Deposit paid for filing Appeal. Pl. Refer Delhi High Court Judgement in the case of MRF LTD. vs THE COMMISSIONER OF TRADE AND TAXES & ANR - 2018 (8) TMI 995 - DELHI HIGH COURT. 

[KALLESHAMURTHY MURTHY K.N.]

Respected Kasturi Sethi Ji, 

I am in line with the provisions under the GST Act. 

Sec. 115 states the interest rate on the deposit from the date of payment of pre-deposit as prescribed u/s 56. According to section 56, The interest rate is applicable from the date after the expiry of 60 days. We can't choose the interest rate directly. 

[Padmanathan KV]

Kalleshamurthy sir,

On a plain reading of section 115 and 56, it appears that Sec 115 borrows only the rate of interest from sec 56. The period for which interest is calculated is specified in section 115 itself. 

[KALLESHAMURTHY MURTHY K.N.]

Learned Padmanathan KV Sir, 

I agree 100% with you. It is only for the discussion purpose where a litigation can be created in the legality perspective. 

[KASTURI SETHI]

Sh. Kalleshamurthy Murthy Ji,

Just for discussion sake 

Extract of FAQ dated 15.12.18

Q49. When will interest become payable in a refund claim?

Ans. As per Section 56 of CGST Act, if any tax ordered to be refunded under section 54 (5) to any applicant is not refunded within sixty days from the date of receipt of application under section 54(1), interest at such rate not exceeding six per cent, as may be specified in the notification issued by the Government on the recommendations of the Council 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 said sub-section till the date of refund of such tax.

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 at such rate not exceeding nine per cent, as may be notified by the Government on the recommendations of the Council 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 till the date of refund.

Where the claim relates to refund of pre-deposit made as per Section 107 or 112 of the GST Act, different provisions will apply for interest As per Section 115 of the GST Act, where an amount paid by the appellant under section 107(6) or section 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 under section 56 shall be payable in respect of such refund from the date of payment of the amount till the date of refund of such amount. Thus, in cases of refund of pre-deposit amount, interest will have to be paid from the date of payment till the date of refund of the amount (and not from date of receipt of claim for such refund of pre-deposit)

AI Summary

Interest on pre-deposit refunds: entitlement under Sections 115 and 56 allows interest from payment date; appeal remedies available.
Entitlement to interest on refund of a pre-deposit arises where an appellant's pre-deposit is ordered refunded. Sections 115 and 56 together prescribe that the interest rate under the refund provision applies to pre-deposit refunds while the period for interest on pre-deposit runs from the date of payment until refund. The taxpayer should demand interest in writing, appeal the refund sanction/order if interest is withheld, and may pursue writ jurisdiction if administrative remedies fail.