2023 Taxo.online 671

Gujarat High Court's Ruling Demands Interest on Delayed GST Refunds – A Win for Businesses!

Introduction:

In a recent ruling by the Gujarat High Court, Justices Vipul M. Pancholi and Devan M. Desai handed a significant victory to M/s. PANJI ENGINEERING PRIVATE LIMITED, a business that had faced frustrating delays in obtaining a GST (Goods and Services Tax) refund. This judgment highlights the importance of timely refund processing and its implications for businesses.

What Happened:

M/s. PANJI ENGINEERING PRIVATE LIMITED, an exporter, had applied for a refund of Integrated Goods and Service Tax (IGST) paid on export supplies, along with duty drawback, as per the GST law. However, the tax authorities denied the refund, citing a supposed mismatch between Input Tax Credit (ITC) availed in GSTR-3B and GSTR-1.

The petitioner vehemently contested this claim, asserting that there was no such discrepancy in the ITC data. Frustrated by the delay and denial, the company sought relief from the High Court, urging the court to compel the tax authorities to disburse the refund.

During the pendency of the writ, the tax authorities eventually released the refund. However, the petitioner argued that the delay in disbursement entitled them to interest, as per Section 56 of the Central Goods and Services Tax Act, 2017.

Why it Happened:

The core issue in this case revolved around the delay and bureaucratic hurdles in the GST refund process. The petitioner claimed that they had adhered to all GST laws and procedures, yet their refund was withheld without justifiable reasons. This delay led to the petitioner's demand for interest on the delayed refund, a claim contested by the tax authorities.

Analysis & Impact:

The Gujarat High Court's judgment highlights the significance of Section 56 of the Central Goods and Services Tax Act, 2017, which addresses interest on delayed refunds. The court ruled that the provisions of Section 56 are clear and unambiguous, making it mandatory for authorities to pay interest on delayed refunds. While the tax authorities eventually disbursed the refund, they failed to grant the interest owed to the petitioner.

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