Interest on delayed refunds under Section 56
Payable by law, rarely paid without being asked for, and almost never computed correctly by the department.
Section 56 provides that where a refund is not paid within sixty days from the date of receipt of an application, interest at the notified rate is payable on the refund from the date immediately after the expiry of sixty days to the date of refund. Where the refund arises from an order of an adjudicating authority, appellate authority, Tribunal or court, the proviso provides for interest at the higher notified rate. The Supreme Court in Ranbaxy Laboratories held that interest runs from the expiry of the statutory period after the application, not from the date of the appellate order.
The two rates
The ordinary rate applies where the refund itself is delayed beyond sixty days from the application.
The higher rate under the proviso applies where the refund arises as a consequence of an order and is not paid within sixty days from the application made pursuant to that order.
The distinction is worth pressing, because the difference on a large refund over two years is substantial.
Computing it
Establish the date of receipt of the application. Where an acknowledgement in RFD-02 issued, that date governs. Where a deficiency memo intervened, compute from both the original and the fresh application and claim on the basis that best fits the authority.
Count sixty days. Interest runs from the day after.
Compute to the date of the payment order, and check the credit to the bank account against it.
Present the computation as a table with the application date, the sixty day date, the payment date, the days of delay, the rate and the amount. A claim without this table is not processed.
Getting it paid
Claim it in writing, addressed to the sanctioning authority, with the computation and the sanction order attached.
Where the refund order is silent on interest, apply for rectification of that order as well as making the claim, because the sanctioning authority frequently treats the absence of a direction as a bar.
Where a written claim is not answered, a writ for a direction is effective and is routinely allowed. Interest on delayed refund is one of the least defensible departmental positions.
Keep the interest claim register alongside the refund register, because these amounts are otherwise written off silently.
Authorities relied on
Interest on a delayed refund runs from the expiry of the statutory period computed from the date of the refund application, not from the date of the appellate order.
What to do on Monday
Diarise the sixty day date for every refund application on the day of acknowledgement.
Prepare the interest computation table and file the claim in writing when the date passes.
Apply for rectification where the sanction order is silent on interest.
Maintain an interest claim register; these amounts are otherwise lost quietly.
This page states the general position. A reader with a specific question on their own facts may write to the GST practice at AMLEGALS.
Write to the GST practiceQuestions we are asked on this
Is interest payable where a deficiency memo intervened?
The department computes from the fresh application. The taxpayer's claim is from the original, and the argument turns on whether the memo was justified.
Is interest payable on a provisional refund?
Interest is on the refund; the provisional sanction reduces the amount outstanding but does not restart the clock.
Does interest run during a departmental appeal?
Where the refund is withheld under Section 54(11), the position is governed by that provision and the outcome of the appeal. Claim interest in the alternative.
What is the rate?
The rates are notified separately for the two limbs of Section 56. Verify the currently notified rates when computing.
Can interest be claimed years later?
Claim it as soon as the delay occurs. A stale claim invites a limitation objection that is entirely avoidable.
In this cluster
- GST refunds: every category, every form, every deadline
- Export refunds: the LUT route versus the IGST route
- VKC Footsteps: why input service tax stays stuck in an inverted duty structure
- Provisional refund of ninety percent: the mechanism and how to keep it
- Replying to RFD-08: the refund rejection notice
- Deficiency memos in RFD-03 and the limitation reset problem
- Unjust enrichment in GST refunds: when it applies, and when it does not
- Section 77: refund where tax was paid under the wrong head
- SEZ supplies and refund: endorsement, authorised operations and the disputes
- Deemed exports and the refund to the recipient
GST Insights is published by AMLEGALS for general information. Law stated as on 3 September 2026. Not advice on any particular set of facts; not an advertisement or a solicitation under Rule 36 of the Bar Council of India Rules. Readers with a question on their own facts may write to the GST practice of their own accord.