Interest on IGST Refund Mandatorily Payable After 60 Days from Due Date: Gujarat HC [Read Order]

In a significant ruling, the Gujarat High Court held that statutory interest becomes mandatorily payable under Section 56 of the Goods and Services Tax Act, 2017, on delayed refunds of Integrated Goods and Services Tax (IGST) beyond a period of sixty days from the date the refund becomes due.

The petitioner, Vineet Polyfab Pvt. Ltd. is an exporter who had filed five Shipping Bills of polyester drawn texturised yarn at Hazira Port and paid IGST of ₹7,53,469 on the exported goods.

The system approved the filing and sanctioned the refund with the success status code “SB000” being indicated. However, the refund was not automatically processed through the Indian Customs Electronic Data Interchange System (ICES) due to a technical glitch.

Consequently, the system showed the refund amount payable to the petitioner as ‘NIL’, thus preventing the refund. The petitioner attempted to resolve the issue by writing letters to the DG Systems and Saksham Seva Help Desk authorities multiple times for resolution, but to no avail, hence leading to the present special civil application before the High Court.

Himanshi Patwa and Anandodaya S. Mishra appearing for the petitioner appraised the Court of their submissions while Ankit Shah, C.B. Gupta appeared for the Union of India and the GST authorities.

The Division Bench of Justice Bhargav D. Karia and Justice Pranav Trivedi noted that the refund delay was not attributable to the petitioner but was caused by a system-generated error within the customs mechanism.

It observed that the Principal Commissioner had to manually process the refund after the filing of the petition, further demonstrating administrative lapse. The High Court further rejected the department’s contention that the filing errors in the petitioner’s GSTR had caused the delay, however, they were not able to adduce any material evidence proving the same.

The Gujarat High Court referred to Section 56 of the GST Act to note that interest on delayed refunds is a mandatory and compensatory obligation that arises automatically after sixty days from the date of receipt of the refund application. The IGST cannot be held up by the department unless there is an alert on the exporter.

The Court also referred to its own ruling in Panji Engineering Pvt. Ltd. v. Union of India (2023) and the Supreme Court ruling in Ranbaxy Laboratories Ltd. v. Union of India (2011) where it was held that interest provision is compensatory and cannot be denied once the refund delay exceeds the statutory period.

Accordingly, the Bench directed the GST authorities to pay interest on the delayed refund within a period of twelve weeks from the date of receipt of the order.

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