Right to Interest on Delayed GST Refunds 

It has recently been noted that refund orders are being issued by tax officers after the maximum allowable time period has expired, without any provision for interest to taxpayers for the delay in processing the refunds. The primary reason identified is that tax officers anticipate taxpayers to submit a separate application for claiming interest. At present, refund on exports is granted to exporters of goods and services both. Also, refund is available for tax paid or unutilized input tax credit, as the case may be. Standard process for refund of taxes paid on exported goods is automatically handled by the government through the integrated interface of GST and customs. No manual applications are filed as such. Therefore, there shouldn’t be a separate application for interest for this or any other refund case.

A similar case was brought before the Delhi High Court involving a delay in the refund of taxes paid by a mobile phone exporter. The GST department refused to grant interest due to the exporter’s failure to submit a separate application using Form GST-RFD-01. The High Court observed that payment of interest is automatic and it’s a legal right, not something somebody needs to explicitly ask for. Therefore, interest should be granted to the exporter.

The basic cycle of refund is as given below:

Source: 2024 (3) TMI 118 – DELHI HIGH COURT

Samyak Jain, Associate- Indirect Tax, SW India