Section 56 of CGST Act, 2017 : Section 56: Interest On Delayed Refunds

Explanation using Example

Imagine a business owner, Mr. Sharma, who has applied for a GST refund due to an excess payment of tax. He submitted his refund application on January 1, 2023. According to Section 56 of the Central Goods and Services Tax Act, 2017, if the tax authorities do not process his refund within 60 days, which would be by March 2, 2023, Mr. Sharma is entitled to receive interest on the refund amount. The interest rate is specified by the government and will not exceed six percent.

For example, if Mr. Sharma's refund is not processed by March 2, 2023, and he receives his refund on April 15, 2023, he is eligible for interest from March 3, 2023, to April 15, 2023. However, if his refund case had been due to an order by an adjudicating authority, and the application was made following that order which became final, and the refund is still not processed within the 60-day period, Mr. Sharma would be entitled to a higher interest rate not exceeding nine percent as notified by the government.