"Tick-Tock, Pay the 6%": Bombay HC Says Interest on Delayed GST Refunds Runs from the First Application-Not the Re-filed One

Executive summary

The Bombay High Court has clarified a question that routinely trips up refund files: when does interest under Section 56 of the CGST Act start ticking? In Altisource Business Solutions India Pvt. Ltd. v. Union of India (2025(09)LCX0408), the Court held that 6% interest is payable if a GST refund is not paid within 60 days from the date of the original refund application filed under Section 54(1)-even if that application was initially rejected but later allowed on appeal. The Court read Sections 54 and 56 as one integrated scheme to compensate taxpayers for administrative delay and rejected the contention that the "clock" restarts only after a fresh, post-appeal application.

Why this matters

Refund cash flow is oxygen for exporters, IT/ITES units, and businesses accumulating ITC (including under IDS). This ruling cements a taxpayer-friendly position: once you file a valid refund application, the 60-day timer starts. If the department denies the claim and you later win on appeal, interest for the entire delay beyond 60 days from the first application is due at 6% (and, where the proviso applies to the post-appeal application itself, at 9% from the relevant date there). The judgment aligns Bombay HC with Delhi and Telangana HCs and sits comfortably with the Supreme Court's Ranbaxy principle in central excise.

The facts in brief

Altisource filed an export refund application (April 23, 2020). The adjudicating authority rejected it on September 14, 2020. On appeal, the first appellate authority allowed the claim on October 27, 2023. Altisource then re-applied on November 28, 2023; the refund was sanctioned on January 15, 2024 and credited on February 5, 2024-but no interest was paid. The department argued that because payment followed within 60 days of the re-application, no Section 56 interest was payable. Altisource maintained that interest ran from 60 days after the original 2020 application. The High Court agreed with Altisource.

The legal issue

When does interest under Section 56 start-after 60 days from the original refund application under Section 54(1), or only after a fresh application filed following an appellate order? The department urged the latter; the Court held the former, emphasizing that Section 56's design is compensatory and the explanations deem appellate orders to fit within Section 54(5)'s framework.

What the Bombay High Court held

1. Sections 54 and 56 form a single, coherent scheme. Read together, they establish that the 60-day period is computed from the date the original refund application is received under Section 54(1). Treating only the re-application as relevant would "defeat" the compensatory purpose of interest.

2. Two different interest clocks exist in Section 56.

• Main limb (6%): if refund ordered under Section 54(5) is not paid within 60 days from receipt of the original application, 6% interest accrues until the refund is paid.

• Proviso (9%): where the refund arises consequent to an appellate/adjudicatory/judicial order that has attained finality, and is still not paid within 60 days of the application filed consequent to that order, 9% applies for that later period.

3. "First Authority" ≠ "First Appellate Authority." The Court clarified that the 6% limb relates to the proper officer's (adjudicating) order under Section 54(5) and the original Section 54(1) application; the 9% limb addresses the post-appeal application if that too is delayed beyond 60 days. Altisource sought only 6% for delay from the first application-so the Court directed payment accordingly.

4. Administrative rejection later set aside cannot wipe out interest. An unsustainable rejection does not erase the taxpayer's right to be compensated for time-value lost since the initial, valid application.

The Court's anchors: Lupin, Delhi & Telangana HCs, and Ranbaxy

• Bombay HC in Lupin Limited (2025(08)LCX0120) had already articulated the same reading: compute 6% from 60 days after the original Section 54(1) application; if, after a favorable appellate order, the refund still isn't paid within 60 days of the consequent application, 9% applies for that subsequent delay. Altisource expressly follows Lupin.

• Delhi HC in Bansal International v. Commissioner of DGST rejected attempts to deny interest for the "pre-appeal" period, holding Section 56 interest is not defeated by an incorrect initial order.

• Telangana HC in Qualcom India Pvt. Ltd. (2024(03)LCX0454) likewise treated interest under Section 56 as automatic once the statutory timeline passes.

• Supreme Court in Ranbaxy Laboratories Ltd. v. UOI (2011(10)LCX0167) held that interest on delayed refunds runs from the expiry of the prescribed period after the original application, not from the date of an appellate order. That pari materia logic underpins the GST result.

What Section 56 really does (and doesn't)

• It compensates; it doesn't punish. Interest is a make-whole remedy for the taxpayer's loss of money's time-value caused by departmental delay. The Bombay HC stressed this compensatory purpose in reading the main limb and proviso together.

• It creates two clean stages for interest-a 6% stage tied to the original application; a 9% stage (higher compensation) tied to post-appeal delay. The proviso does not erase or replace the main limb.

• It is largely automatic. Multiple High Courts have held that if the refund isn't paid within 60 days of the relevant application, interest flows by statute, not by discretion or by whether the assessee specifically "claimed" it in the application.

Practical implications and playbook

For taxpayers

1. Preserve the "first-application" date. Your computation of 6% interest starts 61 days after your first Section 54(1) application, even if the department rejects and you later win on appeal. Keep all acknowledgements and ARN proof safe.

2. Calculate in two tranches when applicable.

• Tranche A (6%): from day 61 after the original application till the earlier of (i) refund payment date; or (ii) date you file the post-appeal application.

• Tranche B (9%): if payment is not made within 60 days of the post-appeal application, 9% applies for that later period until payment.

3. Cite the right authorities in your representation. Attach Altisource (Bombay HC), Lupin (Bombay HC), Bansal International (Delhi HC), Qualcom India (Telangana HC), and Ranbaxy (SC) to reinforce both the timing and the compensatory nature of interest.

4. Make a clean, data-backed claim.

• Timeline table: application date(s), appellate order date, sanction date, credit date.

• Interest computation sheet: days beyond 60 in each tranche, rates applied, total interest.

• Evidence of no taxpayer-caused delay (to fend off any "attributable to assessee" argument).

5. Use writ remedy, if needed, for pure interest disputes. Altisource succeeded by challenging a denial confined to interest on a refund already sanctioned.

For the department

1. Stop the "reset the clock" approach. Treat the first application date as the start point for 6% under Section 56, regardless of interim rejections that are later overturned.

2. Automate interest with refund payment. Systemic computation-especially when appeal orders arrive-reduces litigation and aligns with the compensatory purpose recognized by courts.

3. Train on two-clock logic. Officers should know the distinction between the 6% main limb and the 9% proviso period to prevent underpayment or overpayment.

Common pitfalls-and how to avoid them

• Assuming a fresh application wipes the slate clean. It doesn't. The main limb compensates you from the original application; the proviso only adds a higher rate for any later, post-appeal delay.

• Confusing "First Authority" with "First Appellate Authority." The Bombay HC expressly cautioned against this confusion; the former is the proper officer under Section 54(5).

• Missing documents that prove timelines. If your ARN, acknowledgement, or portal screenshots are missing, your interest math is harder to defend.

• Not pressing for interest where refund is already paid. Courts recognize independent writs for interest where the principal refund stands concluded.

Worked example (framework you can adapt)

• Original application: 1 Jan 2022 → 60-day deadline: 2 Mar 2022.

• Rejection: 15 Apr 2022 → Appellate order allowing refund: 10 Oct 2023.

• Post-appeal application: 1 Nov 2023 → 60-day deadline (proviso): 31 Dec 2023.

• Refund paid: 15 Feb 2024.

Interest claim

• 6% from 3 Mar 2022 (day 61 after original application) to 31 Oct 2023 (day before post-appeal application), and

• 9% from 1 Jan 2024 (day 61 after post-appeal application) to 15 Feb 2024 (actual credit).
  This mirrors the two-clock structure affirmed by Bombay HC following Lupin and consistent High Courts.

How Altisource fits the growing consensus

• Bombay HC (Altisource and Lupin): integrated reading of Sections 54 & 56; interest flows from original application (6%) and, if needed, a higher 9% rate for delay after the post-appeal application.

• Delhi HC (Bansal International): erroneous initial orders cannot deprive the taxpayer of interest from the first application.

• Telangana HC (Qualcom India): interest is automatic once statutory timelines are breached.

• Supreme Court (Ranbaxy): for pari materia interest provisions, the clock runs from the original application, not the appellate order.

Compliance checklist (save this)

☑ File refund in complete form under Section 54(1); keep ARN, acknowledgement, and all supporting documents.

☑Track the 60-day milestone; document every communication and portal status change.

☑If rejected, appeal promptly; when you win, file the post-appeal application-but remember your 6% claim survives for the earlier period.

☑While drawing interest computations, split into (A) original-application delay (6%) and (B) post-appeal delay (9%), if any.

☑In representations, cite Altisource, Lupin, Bansal International, Qualcom India, and Ranbaxy together for a well-rounded legal basis.

Closing thought

The Bombay High Court has said, in effect, don't make taxpayers pay for the system's time. Section 56 interest is not a windfall; it is the statutory price of delay. The 60-day clock starts with the very first refund application-and it keeps ticking, irrespective of intermediate mistakes corrected on appeal. If the law expects taxpayers to be meticulous with timelines, it expects no less from the administration.

Disclaimer: The information given in this article is solely for purpose of understanding the law. It is completely based on the interpretation of the author and cannot be constituted as a legal advise, the author of this article and Lawcrux team is not responsible for any legal issues if arises on the basis of the interpretation given above.