GST Refund Interest Must Run From Original Application Date After Illegal Rejection: Gujarat High Court

The Gujarat High Court on 2 July held that GST authorities cannot deny interest on refunds by treating a refund application filed pursuant to a Court order as a fresh application, ruling that where the original rejection of a refund claim is set aside as illegal, interest under Section 56 of the Central Goods and Services Tax (CGST) Act (which provides for interest on delayed refunds) must be calculated from the date of the original refund application.

A Division Bench of Justices A.S. Supehia and Vaibhavi D. Nanavati allowed a batch of writ petitions led by Kuehne Nagel Pvt. Ltd. and set aside orders denying interest on GST refunds. It observed:

“The respondent authority was required to consider the date of initial refund application filed by the petitioner for calculating the interest instead of the subsequent application, which was filed after the order passed by this Court.”

Petitioners had filed refund applications on 14 October 2023, which the GST authorities rejected. They then approached the High Court, which by an order dated 6 November 2025 set aside the rejection orders and directed the authorities to process the refund claims.

Following the Court's direction, the authorities sanctioned the refund amounts but denied interest by treating the application filed after the High Court's order as the relevant application for computing interest under Section 56 of the CGST Act. In the lead matter, although the authorities sanctioned a refund of Rs. 2.29 crore, they denied interest of Rs. 29.51 lakh.

The petitioners argued that once the earlier rejection of the refund claim was declared illegal, the subsequent application filed pursuant to the High Court's direction could not be treated as a fresh application for calculating interest. They submitted that the period for payment of interest had to be computed from the date of the original refund application filed in October 2023.

Accepting the contention, the Court noted that its earlier judgment had held that the refund application should have been processed on the basis of the Chartered Accountant's certificate submitted by the petitioners. It noted that once the rejection order was set aside, the original application continued to remain the basis for determining the interest liability, and the subsequent application was only a procedural step arising from the Court's directions.

Further, the Bench observed that “upon setting aside the former action of denial of refund, the fresh application filed for refund satisfies the provisions of Section 56 of the Act and the claim of interest has to be processed by considering the date of earlier application.”

Accordingly, the High Court set aside the orders denying interest and directed the authorities to reconsider the petitioners' claims by calculating interest from the date of the original refund applications. It directed the exercise to be completed within twelve weeks.

For Petitioners: Mr. Dhruv Toliya, Advocate.

For Respondents: Mr. Ankit Shah, Senior Standing Counsel; Mr. Raj Tanna, AGP and Ms. Nimisha J. Parekh, AGP