High Court (HC) directs payment of interest on delay in granting refund of IGST

Facts of the case

• The Petitioner filed a writ petition for directing the Tax Department to pay interest on delay in granting refund of IGST paid on export of goods.
• The Petitioner submitted that officer suo motu has to order sanctioning of interest on delayed refund, without any application to be made by registered person.
• The Petitioner further stated that there is no option available on the common portal to make an application for claiming interest on delayed refund.
• Further, the Petitioner contended that refund was received after a substantial period of delay and it impacted the working capital of the business.

Gujarat HC observation and ruling

• The HC observed that provision relating to interest on refund have been consistently held as beneficial. HC rejected the Revenue’s argument that in the absence of specific provision for interest on refund, no interest would be available.
• The HC observed that Revenue has not explained the reason for delay. Accordingly, the HC held that the tax department is liable to pay simple interest at 9% per annum on delayed payment of IGST refund.
• The HC further held that interest is payable on from the date of filling of GSTR-3B.

Conclusion

Delay in grant of refund by the authorities has been a common phenomenon and despite several efforts by the government in streamlining the refund process the issue is not resolved. This is a welcome judgement and provide relief to the exporters as enormous working capital get blocked due to unjustified delays in granting refunds.

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