Interest on Delayed GST Refund (Sec 56): 2026 Guide

Refund sanctioned, money credited, but nobody mentioned interest for the months it sat pending? This happens more often than it should, since most businesses assume interest on GST refund is something the department pays automatically without needing to ask.

It is automatic in law, but not always in practice, and the burden of noticing the shortfall usually falls on the taxpayer. This guide explains what Section 56 of the CGST Act actually entitles you to, how the interest is calculated, and what to do when the department pays the refund but quietly skips the interest.

What is the Interest on the Delayed GST Refund?

Interest on a delayed GST refund is compensation the government owes a taxpayer when a valid refund application is not processed within the statutory 60-day window. 

It exists because a refund is the taxpayer's own money, and holding it beyond a reasonable processing period without compensation would be no different from an interest-free loan taken from the business without consent.

What Does Section 56 of the CGST Act Say?

Section 56 of the CGST Act provides that in case a refund order made under Section 54(5) is not paid within 60 days of the receipt of the refund application, the interest shall be payable till the refund amount is collected at a rate as notified by the government, which may not exceed 6 percent per annum.

A proviso to this section increases this rate to a maximum of 9 per cent in the case of a refund, where the refund arises from an order received by the taxpayer from an adjudicating authority, Appellate Authority, Appellate Tribunal, or court and is not received by the taxpayer within 60 days after the date of the order.

What Is the Interest Rate on Delayed GST Refund?

Both rates are notified under Notification No. 13/2017-Central Tax, and this is the key difference readers searching for what is the difference between 6 percent and 9 percent interest are usually asking about.

The higher 9 percent rate is reserved specifically for cases where the taxpayer already had to litigate to get the refund sanctioned in the first place.

If your GST refund was delayed and interest was never paid, our GST experts at MYGSTRefund can calculate the exact amount owed and help you pursue it.

Check your GST refund eligibility using the MYGST Refund calculator and read our related guide on GST refund stuck issues for what to do when a claim is delayed beyond the usual timeline.

When Does Interest on GST Refund Start?

Interest under Section 56 is payable from the day immediately after the expiry of 60 days from the date of receipt of the refund application, until the date the refund is actually paid

This distinction is important as sometimes departments would calculate the interest from the sanction order date and pay a lower interest rate for the whole period till the sanction was made.

How to Calculate Interest on Delayed GST Refund?

Once you have the right dates, the GST refund interest calculation formula should be clear.

Interest = Refund Amount × Applicable Interest Rate × (Number of Days of Delay After 60 Days / 365). The delay period starts only after the statutory 60-day period expires

Let's consider a refund application submitted by a business for refunding a specific amount of Rs. 10 lakh on 1 January 2026, which is credited to the account holder on 1 June 2026, which is beyond 60 days.

This verification is possible using a GST portal refund interest calculator or via a tax advisory tool, but checking the day count by yourself against the application date for the refund is the safer and most efficient approach.

Is Interest Payable on All Types of GST Refunds?

Not every refund category accrues interest in the same way, and this is where many businesses make incorrect assumptions.

What Happens If Only Part of the GST Refund Is Sanctioned?

If the department approves a monetary claim for less than the entire refund, rejects or withholds the remaining portion, and sanctions the approved portion, then Section 56 continues to apply to the sanctioned amount for the 60 days that the amount has not been paid.

Where only part of a refund claim is sanctioned, interest under Section 56 should be determined with reference to the amount that is actually refundable and the statutory conditions applicable to that refund

Is GST Refund Interest Paid Automatically?

In law, yes. In practice, often no. Section 56 does not require the taxpayer to separately claim interest in Form GST RFD-01 for it to become payable, since the entitlement arises purely from the delay itself.

But refund sanctioning officers frequently issue the principal refund amount and simply omit the interest calculation, leaving it to the taxpayer to notice the gap and follow up.

How to Claim Interest on Delayed GST Refund?

• Calculate the number of days from the day immediately following the expiry of 60 days from the refund application date until the date of the actual refund credit.
• Write to the jurisdictional refund sanctioning officer, citing Section 56 and the delay period.
• Reference the refund sanction order number and ARN in your representation
• If no response follows, escalate through a formal grievance on the GST portal or a written representation to the Deputy or Assistant Commissioner
• Where departmental inaction continues, a writ petition before the jurisdictional High Court remains the final recourse, as several taxpayers have successfully done

What If the GST Department Does Not Pay Interest?

If the department pays the refund but skips interest entirely, don't treat this as final. The Delhi High Court has held that interest under Section 56 is statutory and becomes payable when the refund is not made within the prescribed 60-day period

Follow up in writing first, escalate to the jurisdictional Commissioner if there is no response within a reasonable period, and consider a writ petition if the amount involved justifies the litigation cost, since courts have repeatedly directed departments to pay interest even where it was never separately claimed in the original application.

Important Documents and Records for GST Refund Interest

• Copy of the original refund ARN and acknowledgment showing the application date
• The refund sanction order, RFD-06, shows the amount and date of disposal
• Bank statement showing the actual date of credit
• Any appellate or court order, where the refund arose from litigation
• Correspondence or grievance tickets raised for the interest shortfall

Common Reasons for Delay in GST Refund

• Deficiency memos issued late, restarting the effective processing clock
• Mismatch between GSTR-1, GSTR-3B, and the refund application figures
• Missing or incomplete CA certification on claims above the prescribed threshold
• Manual verification backlog at the jurisdictional refund sanctioning office
• Refund withheld pending an unrelated departmental proceeding against the same taxpayer

Conclusion

The interest on delayed GST refund under Section 56 is not a favour granted by the department; it is a legal right that arises at the point when the 60-day window expires, irrespective of requesting it expressly.

Businesses that track their ARN date, verify the actual credit date, and follow up in writing when interest is missing recover money that would otherwise simply be written off as an administrative oversight.

Frequently Asked Questions

1. What if the refund is sanctioned but the payment is delayed? 
Section 56 provides that interest will continue to be charged for the entire period between the date of application and the date of credit, from the date of the sanction order, even if the order of sanction is issued on a later date.

2. Can I claim interest if my refund is pending for more than 60 days? 
Yes, after 60 days from the date of application without payment, the interest accrues automatically at the rate of 6 per cent per annum, and this can be increased by informing the sanctioning officer before the refund is credited.

3. Is interest payable on the accumulated ITC refund? 
Yes, accumulated ITC on exports and for an inverted duty structure is similarly dealt with as any other Section 54(5) refund, and interest is payable on delay in paying the refund along with a 60-day timeframe as provided in Section 56.

4. What is the difference between 6% and 9% interest? 
The 6% rate applies to the normal refund, and the 9% the refund that is caused by an appellate authority or an order of court beyond 60 days from the application grant.

5. How can I claim interest on a delayed GST refund? 
Calculate the delay period from your ARN date, write to the jurisdictional refund officer citing Section 56, escalate through the GST portal grievance system if unaddressed, and consider a writ petition as a last resort for significant unresolved amounts.

6. What can I do if the department does not pay the interest? 
Follow up in writing to the department with reference to the sanction order and delay period, escalate to the Commissioner of the jurisdiction, and use precedents such as Xilinx India Technology Services and Raghav Ventures if the department withholds interest despite its statutory entitlement.