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Assessee is entitled to interest from the date immediately after the expiry of sixty days from the date of receipt of the GST refund application

The Hon’ble Delhi High Court, in the case of Raghav Ventures vs. Commissioner of Delhi [Writ Petition (Civil) No. 12209 of 2023 dated March 01, 2024], held that the payment of 6% interest under the Section 56 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) is statutory and does not depend if the claim made by the Assessee. It is automatically payable if the GST refund is not made within 60 days from the date of receipt of the application.

Facts:

Raghav Ventures (“the Petitioner”), was an exporter of mobile phones of various brands and accessories to M/s AZ Logistic, Dubai, UAE, on payment of Integrated Goods and Services Tax (“IGST”). The GST refunds in the normal course were claimed through shipping bills, which were released by the Customs through ICEGATE after processing the shipping bills filed from time to time.

During December 2022, mobiles worth Rs. 9,06,49,174/- were exported on payment of IGST of Rs. 1,63,16,851/-. For February 2023, exports to the tune of Rs. 2,80,38,271/- were made, on which, IGST of Rs. 50,46,889/- was paid. Likewise, in March 2023, exports worth Rs. 95,90,489/- were made on which IGST of Rs. 17,26,288/- was paid and for May 2023, mobiles and their accessories worth Rs. 76,96,568/- were exported after discharging burden of IGST of Rs. 13,85,382/-.

However, as per Sub-Rule (2) of Rule 96 of the Central Goods and Services Tax Rules, 2017 (“the CGST Rules”), details of export invoices in respect of the export of goods contained in Form GSTR-1 are transmitted electronically by the common portal to the system designed by the Customs. Thereafter, the system electronically transmits to the common portal a confirmation that the goods covered by the said invoices have been exported out of India, whereafter, the GST refund is processed by the Customs through ICEGATE in terms of Rule 96 (3) of the CGST Rules.

The Petitioner furnished the GST returns in Form-GSTR-3B and submitted applications for refunds of IGST as mentioned above periods via Form-GST-RFD-01, as per the prescribed procedure under the Rule 96 of the CGST Rules. The Petitioner received system-generated acknowledgments via Form-GST-RFD-02, acknowledging the receipt of the GST refund applications.

When the writ petition was pending before the Hon’ble High Court, the IGST refund for the period was sanctioned and credited into the Petitioner’s bank account on December 4, 2023, but without any interest. The Petitioner filed an application dated December 6, 2023, to the proper officer (Special Commissioner), Department of Trade & Taxes, (“the Respondent”), praying for the grant of interest at the rate of 6% from the date of filing of refund applications till December 3, 2023.

Hence, aggrieved by the circumstances, the present writ petition was filed, seeking direction to the Respondent to grant the total IGST refund of Rs. 2,44,75,410/- for the tax period December 2022, February 2023, March 2023 and May 2023 with interest in terms of Section 56 of CGST Act.

Issue:

Whether the Assessee is entitled to statutory interest on the delayed refund of GST?

Held:

The Hon’ble Delhi High Court in Writ Petition (Civil) No. 12209 of 2023 held as under:

  • Observed that, the payment of interest under the Section 56 of the CGST Act is statutory and does not depend on the claim made by the Assessee. It is automatically payable if the GST refund is not made within 60 days from the date of receipt of the application. The GST refund cannot be denied on the grounds of waiver on the claim of interest in FORM GST-RFD-01. Moreover, the question of payment of grant of interest arises only if the refund is not granted within 60 days from the date of receipt of the application. Therefore, the payment of interest is mandatory and payable automatically.
  • Noted that, the Circular No. 125/44/2019-GST dated November 18, 2019 which clarifies that interest will be calculated starting from the date immediately after the expiry of sixty days from the date of receipt of the application till the date on which the amount is credited to the bank account of the applicant.
  • Held that, the Petitioner is entitled to statutory interest at the rate of 6% starting from the date immediately after the expiry of sixty days from the date of receipt of refund applications till the date on which the refund is credited to the Petitioner’s bank account. The Respondent was directed to refund to process the refund of interest and credit the same into the Petitioner’s account within four weeks. Hence, the Petition was disposed of along with the pending application.

Our Comments:

Section 56 of the CGST Act talks about “Interest on delayed refunds”. According to the Section 56(1) of the CGST Act, if any tax ordered to be refunded under the Section 54 (5) of the CGST to any applicant is not refunded within sixty days from the date of receipt of application under the Section 54(1) of the CGST Act, interest at such rate not exceeding six percent 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.

In Pari Materia case, Bansal International v. Commissioner of DGST [Writ Petition (Civil) No. 11629 of 2023 dated November 21, 2023], the Hon’ble Delhi High Court held that as per the Section 56 of the CGST Act, a taxpayer would be entitled to 6 percent interest from date immediately after the expiry of sixty days from receipt of first application under the Section 54(1) of the CGST Act, which is accompanied by documents as specified under the Section 54(4) of the CGST Act read with Rule 89 of the CGST Rules and interest at the rate of 9 percent per annum would be payable from date immediately after expiry of sixty days from receipt of an application, which is filed as a consequent to an order passed by the appellate authority, Adjudicating Authority, Appellate Tribunal or a Court that had attained finality. Therefore, in view of SBI Cards & Payment Services Ltd. v. Union of India [CWP-1851/2022 decided on January 06, 2023], order denying interest on the refund amount was to be set aside and revenue was directed to process assessee’s application for refund.

Therefore, in the current case, the Petitioner is entitled to interest on the GST refund from the date immediately after the expiry of sixty days from the date of receipt of the GST refund application.

Conclusion:

Affirmation of Taxpayer Rights: The Delhi High Court’s ruling reaffirms the fundamental principle of fairness in tax administration. By upholding taxpayers’ entitlement to interest on delayed GST refunds, the court underscores the importance of expeditious redressal of grievances and adherence to statutory obligations.

Legal Clarity and Certainty: The judgment provides much-needed clarity on the computation of interest and reinforces the statutory framework governing GST refunds. This clarity enhances predictability and transparency in tax matters, fostering a conducive environment for compliance and dispute resolution.

Implications for Tax Administration: The ruling serves as a wake-up call for tax authorities to streamline refund processes and adhere to statutory timelines rigorously. Failure to do so not only exposes authorities to legal scrutiny but also undermines taxpayer confidence in the efficacy of the tax regime.

Call to Action: In light of the Delhi High Court’s ruling, taxpayers should remain vigilant about their entitlements and assert their rights in cases of delayed refunds. Legal recourse is available to safeguard against undue financial burden and ensure compliance with statutory provisions.

In conclusion, the judgment in Raghav Ventures vs. Commissioner of Delhi exemplifies the judiciary’s commitment to upholding taxpayer rights and fostering a fair and equitable tax regime.

(Author can be reached at info@a2ztaxcorp.com)

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