The Gujarat High Court has held that GST refund interest must be calculated from original refund application, not fresh filing after court order.

The bench of Justice A.S. Supehia and Justice Vaibhavi D. Nanavati has observed that the tax department cannot deny interest by treating a fresh refund application filed pursuant to a court order as the relevant date for calculating interest. Instead, the authorities must compute interest from the date of the original refund application, where the initial rejection was found to be illegal.

The lead petitioner had filed a GST refund application on October 14, 2023, seeking a refund of tax. However, the tax authorities refused to process the application, compelling the company to approach the Gujarat High Court through an earlier writ petition.

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In November 2025, the High Court ruled in the taxpayer’s favour and directed the authorities to process the refund claim in accordance with law. Following the court’s directions, the taxpayer submitted a fresh refund application on November 11, 2025.

Although the department subsequently sanctioned the refund amount of ₹2.29 crore, it rejected the claim for interest amounting to approximately ₹29.51 lakh under Section 56 of the Central Goods and Services Tax Act, 2017.

The authorities contended that interest was not payable because the statutory conditions under Section 56 had not been fulfilled, treating the later application filed after the High Court’s order as the operative refund application.

The principal question before the Court was whether interest on delayed GST refunds should be computed from the date of the original refund application that was wrongly rejected; or the date of the fresh application filed after the High Court directed reconsideration of the refund.

The High Court rejected the department’s stand and held that once the earlier rejection of the refund application had been declared illegal, the authorities could not rely on the subsequent application to deprive the taxpayer of statutory interest.

The Bench observed that its earlier judgment had already held that the original refund application ought to have been processed, particularly since the petitioner had produced the requisite Chartered Accountant’s Certificate supporting the refund claim.

Consequently, the Court held that the taxpayer’s entitlement to interest must be linked to the initial refund application dated October 14, 2023, and not to the application submitted after the court’s intervention.

The Court reasoned that accepting the department’s interpretation would effectively allow authorities to benefit from their own unlawful refusal to process a valid refund application, defeating the object of Section 56.

Setting aside the impugned orders to the extent they denied interest, the High Court directed the GST authorities to reconsider and process the petitioner’s claim for interest by taking into account the date of the original refund application.

The Court further directed the respondents to pass fresh orders on the interest claims within twelve weeks from the receipt of the judgment.

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Read More: JURISHOUR | TAX LAW DAILY BULLETIN : 09 JULY, 2026