Section 56 – Interest on Delayed Refunds
Section 56 of CGST Act, 2017 – Interest on Delayed Refunds
Updated on: February 2026 (as applicable till date)
Prepared by: Yours Tax Consultant
1. Scope and Objective of Section 56
Section 56 provides for payment of interest to the taxpayer where refund sanctioned under GST is not paid within the prescribed time.
This provision:
- Protects taxpayer’s liquidity
- Ensures accountability of tax administration
- Acts as compensation for delayed refunds
2. Statutory Provision – Section 56
Section 56:
If any tax ordered to be refunded under section 54
is not refunded within sixty days
from the date of receipt of application,
interest at such rate,
not exceeding 6%,
as may be notified,
shall be payable in respect of such refund
from the date immediately after the expiry of sixty days
till the date of refund of such tax.
Proviso:
Where any claim of refund arises from an order
passed by an adjudicating authority or Appellate Authority or Court,
which has attained finality,
and the refund is not made within sixty days
from the date of receipt of application,
interest at such rate,
not exceeding 9%,
as may be notified,
shall be payable.
3. When Does Interest Become Payable?
Interest under Section 56 becomes payable when:
- Refund is sanctioned under Section 54, and
- Refund amount is not paid within 60 days from the date of receipt of refund application
Interest starts:
- From the 61st day
- Till the actual date of refund
4. Rate of Interest on Delayed Refund
As notified:
- 6% per annum – Normal refund cases
- 9% per annum – Refund arising from:
- Adjudication order
- Appellate order
- Court order
Interest rate is subject to Government notification but cannot exceed the statutory ceiling.
5. Section 56 Read with Section 54
Section 56 is supplementary to:
Without a valid refund claim under Section 54, interest under Section 56 cannot arise.
6. Interest is Automatic and Mandatory
Interest under Section 56:
- Is automatic
- Does not require a separate claim
- Is payable even if delay is unintentional
Courts have consistently held that interest on delayed refund is a statutory right.
7. Situations Where Interest Is Not Payable
Interest is not payable where:
- Refund is paid within 60 days
- Delay is due to deficiencies in refund application
- Refund application itself is rejected
The 60-day period is counted from the date of receipt of a complete application.
8. Section 56 vs Section 50
Key distinction:
- Section 50: Interest payable by taxpayer to Government
- Section 56: Interest payable by Government to taxpayer
Both provisions are compensatory in nature.
9. Common Practical Issues
- Incorrect calculation of 60-day period
- Interest not auto-credited with refund
- Department disputing date of receipt of application
- Delay after appellate orders
10. Related Provisions
- Section 54 – Refund of tax
- Section 53 – Consumer Welfare Fund
- Section 50 – Interest on delayed payment of tax
11. Professional Insight
Interest on delayed refund is not a concession—it is a statutory right. Track the 60-day timeline rigorously. In refund litigation, Section 56 often becomes the strongest relief provision for taxpayers.
Disclaimer: This article is prepared based on the CGST Act, CGST Rules, notifications and prevailing legal position as applicable till date. Interest rates and procedures are subject to Government notification.
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