Interest on Delayed GST Refund is Automatic – Department Cannot Insist on CA/CMA Certification for Interest-Only Claims: Telangana High Court
Summary: The Telangana High Court considered writ petitions seeking interest under Section 56 of the CGST Act on refunds already sanctioned and disbursed for tax periods from July 2018 to March 2021, where the refunds had been released beyond the 60-day period prescribed under Section 56. The petitioners’ interest claims were met with repeated Deficiency Memos, and the Department relied on Circular No. 125/44/2019-GST and required documents including a certificate under Rule 89(2)(m) of the CGST Rules, 2017. The Court noted that the claims related only to interest on refunds whose principal amounts had already been sanctioned and paid. It considered Rule 89(2)(m), which requires certification regarding non-passing of the incidence of tax, interest or other amount claimed as refund. The Court held that once the underlying refund had been sanctioned and disbursed, the consequential interest claim could not be treated like a fresh substantive refund application requiring full Rule 89(2) compliance, including the Rule 89(2)(m) certificate. The petitioners were directed to furnish a summary statement of sanctioned refunds and corresponding interest. The Proper Officer was directed to scrutinize and decide the claims within two weeks without insisting on the Rule 89(2)(m) certificate.
Introduction
Interest on delayed refunds under Section 56 of the Central Goods and Services Tax Act, 2017 (“CGST Act”) is one of the most litigated corners of GST refund practice, primarily because field formations often treat an interest claim as if it were a fresh refund claim in itself — demanding the same certifications and declarations that accompany the principal refund application. The Telangana High Court, in M/s. Synchrony International Service Private Limited & Anr. vs. Assistant Commissioner (ST), STU-1, Hyderabad & Ors. (decided 30th July 2026), has stepped in to clarify that once the principal refund stands sanctioned and disbursed, the Department cannot hold up the consequential interest merely for want of a Chartered Accountant/Cost Accountant certificate under Rule 89(2)(m) of the CGST Rules, 2017.
The ruling is a welcome relief for exporters and other refund claimants who routinely find their legitimate interest claims stuck in a loop of repeated deficiency memos, long after the underlying refund itself has already reached their bank account.
Brief Facts
The petitioners had filed multiple writ petitions before the Telangana High Court seeking interest under Section 56 of the CGST Act on refunds that had already been sanctioned and disbursed to them, pertaining to tax periods from July 2018 to March 2021. In some instances, the refunds had been granted directly by the Refund Sanctioning Authority; in others, they had been released pursuant to appellate orders.
Since these refunds had admittedly been released beyond the statutory period of 60 days prescribed under Section 56, the petitioners claimed interest on the delayed amounts. Their interest claims had been pending before the Proper Officer since 3rd June 2025, and were repeatedly met with Deficiency Memos. Matters came to a head when a third Deficiency Memo was issued without specifying any meaningful particulars of the alleged deficiency, leaving the petitioners with no option but to approach the High Court. In processing the interest claims, the Department relied on Circular No. 125/44/2019-GST and insisted on a range of declarations and certifications, including a certificate under Rule 89(2)(m) of the CGST Rules, 2017.
Issue Before the Court
Whether the Department can insist on a Chartered Accountant/Cost Accountant certificate under Rule 89(2)(m) of the CGST Rules, along with other documentary requirements ordinarily applicable to a refund application, while processing a claim confined solely to interest on delayed refund — where the principal refund amount has already been sanctioned and disbursed.
Observations of the Court
The Telangana High Court noted that the petitioners’ claims related exclusively to interest on refund amounts that had already been sanctioned and paid — there was no dispute or pending adjudication on the principal refund itself. The Court examined the purpose of Rule 89(2)(m), which requires a certificate establishing that the incidence of tax, interest, or any other amount claimed as refund has not been passed on to any other person — in other words, a safeguard against unjust enrichment.
The Court accepted the petitioners’ submission that interest payable under Section 56 is not an independent claim in the nature of a tax refund, but a statutory consequence flowing automatically from delay in disbursing a refund that has already been sanctioned. Once the principal refund itself stood sanctioned, such interest, by its very nature, could not ordinarily be treated as an amount that gets passed on to an end consumer. The unjust-enrichment rationale underlying Rule 89(2)(m) therefore had no meaningful application to an interest-only claim of this kind, and insisting on the certificate in these circumstances amounted to an unnecessary procedural hurdle.
Accordingly, the Court held that once the underlying refund has already been sanctioned and disbursed, the Department cannot treat the consequential interest claim on the same footing as a fresh substantive refund application requiring full Rule 89(2) compliance, including the Rule 89(2)(m) certificate.
Conclusion / Result
The Telangana High Court disposed of the writ petitions with the following directions:
- The petitioners were directed to furnish a summary statement setting out the details of the refund claims already sanctioned and the corresponding interest claimed thereon.
- The Proper Officer was directed to scrutinize the interest claims and decide the matter in accordance with law within two weeks.
- The Proper Officer was expressly directed not to insist upon the certificate prescribed under Rule 89(2)(m) of the CGST Rules, since the claim related solely to interest on refunds that had already been sanctioned.
Practitioner Takeaways
- Interest under Section 56 of the CGST Act is a statutory and near-automatic consequence of delayed refund disbursement; it does not require the claimant to re-establish afresh, through fresh certification, that the underlying refund is not hit by unjust enrichment once that refund has already been sanctioned.
- Field officers cannot mechanically apply Circular No. 125/44/2019-GST and the full documentary checklist meant for substantive refund applications to what is, in substance, only a computation and payment of interest on an already-sanctioned refund.
- Taxpayers facing repeated or vague Deficiency Memos on pending interest claims now have persuasive authority to insist that the Proper Officer confine scrutiny to a summary statement of sanctioned refunds and the interest computed thereon, rather than reopening the entire refund file.
- The ruling reinforces a broader principle seen across GST refund jurisprudence: procedural requirements designed for one category of claim (substantive refund) should not be mechanically transplanted onto a different, narrower category of claim (consequential interest) without regard to their underlying rationale.
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Disclaimer: This article is for general informational purposes only and is based on a summary of the judgment as reported. It does not constitute legal advice. Readers are advised to refer to the full text of the judgment and consult a qualified professional before relying on the same for any specific matter.
