The Telangana High Court has directed the GST authorities to scrutinise and decide claims for interest on delayed GST refunds without insisting upon the Chartered Accountant (CA) or Cost Accountant (CMA) certification prescribed under Rule 89(2)(m) of the Central Goods and Services Tax Rules, 2017, where the claim relates exclusively to interest payable on a refund that has already been sanctioned and disbursed.
The Bench of Chief Justice Aparesh Kumar Singh and Justice G. Mohiuddin has directed that the summary sheet containing details of the principal refund claims allowed pursuant to the original and appellate orders, together with the corresponding interest claims, should be placed before the Proper Officer for scrutiny and sanction.
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The petitions arose from claims concerning interest on GST refunds that had already been sanctioned. In some instances, the refunds had been granted by the Refund Sanctioning Authority, while in others the refunds followed orders passed by the appellate authority.
According to the petitioners, although the principal refund amounts had already been disbursed, the corresponding claims for statutory interest remained pending before the Proper Officer from June 3, 2025. The petitioners approached the High Court after repeated deficiency memos were issued, including a third deficiency memo which, according to them, did not contain specific particulars explaining the deficiency.
The petitioners argued that once the refund had been sanctioned, the statutory interest for the period of delay was required to follow. They contended that interest becomes payable for the delay beyond the prescribed period from the date of the refund application and that insistence upon documents irrelevant to an interest-only claim would merely prolong the process and result in further accrual of interest against the revenue.
A key contention before the High Court was that Section 16(2)(c) of the CGST Act could not be invoked in the same manner once the underlying refund had already been sanctioned and paid.
The petitioners submitted that the subsequent claim was not for a fresh refund of tax but only for interest relating to the delayed disbursement of the already-sanctioned refund. They further contended that there could be no question of passing the incidence of such interest on to another person after the principal refund had already been sanctioned and disbursed.
The State Tax Department defended the deficiency memos by relying upon CBIC Circular No. 125/44/2019-GST dated November 18, 2019, concerning the electronic refund process. The circular had also been adopted by the State Tax Department.
The Department pointed out that the refund applications had been filed under the category of “any other ground” in Form GST RFD-01. According to the Department, the applicable documentation prescribed under the circular had therefore to be furnished along with the refund applications.
Among the documents referred to by the Department were an undertaking concerning Section 16(2)(c) and Section 42(2) of the CGST Act and the prescribed declaration or certification under Rule 89(2)(l) or Rule 89(2)(m), depending upon the amount of refund claimed.
The Department’s position was that since the petitioners had not supplied the required documents, the refund claims could not be processed.
The central legal issue concerned Rule 89(2)(m) of the CGST Rules.
The provision requires a certificate in Annexure 2 to Form GST RFD-01, issued by a Chartered Accountant or Cost Accountant, confirming that the incidence of tax, interest or any other amount claimed as refund has not been passed on to another person where the refund claimed exceeds ₹2 lakh.
The petitioners argued that this requirement was inapplicable to their case because the principal refund had already been sanctioned and paid. The subsequent claim was restricted to interest payable on that refund.
According to the petitioners, once the principal refund had been disbursed pursuant to the relevant original and appellate orders, there was no realistic question of the subsequently claimed interest component having been passed on to an end consumer. They further maintained that the interest component should itself have been calculated up to the date of disbursement of the principal refund under Section 56 of the CGST Act.
After considering the rival submissions and the relevant statutory provisions, the High Court adopted a practical approach.
The Bench specifically directed the Proper Officer not to insist upon the certification under Rule 89(2)(m)because the claims before it related only to the interest component on refunds that had already been sanctioned.
The Court ordered the petitioners or their authorised representatives to appear before the Proper Officer on August 6, 2026, with the relevant details. The Proper Officer was then directed to scrutinise the claims and take a decision in accordance with law within two weeks, without insisting upon the Rule 89(2)(m) certification.
The High Court ultimately disposed of all the writ petitions with directions for scrutiny and adjudication of the interest claims. There was no order as to costs, while pending miscellaneous applications were also closed.
The Telangana High Court has directed that, in the circumstances of the present batch of cases, a claim exclusively seeking interest on an already-sanctioned GST refund should be scrutinised without insisting upon the Rule 89(2)(m) CA/Cost Accountant certificate, with the Proper Officer required to decide the claim in accordance with law within the time stipulated by the Court.
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