Bombay High Court Rules on 6% Interest for Delayed GST Refunds: Key Insights from the Altisource Case

In a significant win for exporters dealing with GST refund delays, the Bombay High Court has clarified that taxpayers deserve 6% interest on late refunds, starting from 60 days after their initial application—even if the claim was first rejected and later approved through an appeal. This decision helps protect businesses from unnecessary financial strain caused by bureaucratic hold-ups, without restarting the interest timer after appeals.

Main Highlights

• Interest Calculation: The court emphasized that interest accrues at 6% per year from the original filing date plus 60 days, treating appellate approvals as continuations of the initial process.
• No Reset on Appeals: Revenue authorities can't dodge interest payments by claiming the clock resets with a new application post-appeal; this ruling builds on earlier cases like Lupin Limited.
• Broader Impact: It could ease cash flow issues for exporters, who often face long waits, and might influence how GST refunds are handled nationwide. Research suggests delays affect over 20% of India's GDP tied to exports, making this a timely relief.
• Caveats: While the decision leans strongly toward taxpayer rights, it acknowledges that higher 9% interest might apply in specific post-appeal delay scenarios, highlighting the nuanced balance in GST laws.

Why This Matters for Businesses Exporters like those in IT services rely on quick refunds for unutilized input tax credits (ITC) on zero-rated supplies. Delays can force companies to borrow at higher rates, eating into profits. This judgment reinforces that the system should compensate for such setbacks, promoting fairness without overcomplicating things.

Legal Backbone Drawing from Section 56 of the CGST Act, the ruling interprets interest as a form of compensation, not punishment. It aligns with Supreme Court precedents, ensuring that erroneous rejections don't erase a taxpayer's right to timely justice.

In the tricky world of India's Goods and Services Tax (GST) system, exporters frequently find themselves tangled in lengthy refund processes that can really tie up their cash flow and hurt their bottom line. A fresh ruling from the Bombay High Court in the case of Altisource Business Solutions India Pvt Ltd v. Union of India (that's Writ Petition No. 5312 of 2024, along with a couple of related ones like WP (ST) No. 1807 of 2025 and WP (ST) No. 37613 of 2024, decided on September 30, 2025) tackles one of the biggest headaches: getting interest on those delayed refunds. The court made it clear that under Section 56 of the Central Goods and Services Tax (CGST) Act, 2017, taxpayers are entitled to 6% interest per year, calculated from 60 days after the original refund claim—no matter if it got rejected at first and only approved later on appeal. This builds directly on earlier decisions, such as Lupin Limited v. Union of India, and stresses that interest is there to make up for the time and money lost due to delays, keeping things fair for businesses.

This comes at a crucial time for India's export industry, which accounts for more than 20% of the country's GDP. Exporters depend on prompt GST refunds for zero-rated supplies to stay competitive, but hold-ups—sometimes stretching over a year because of intense checks or simple mistakes—have been a common complaint. According to data from the GST Network (GSTN), pending refunds topped ₹1.5 lakh crore as of mid-2025. By shutting down the revenue department's idea of "resetting the clock" after an appeal, the Bombay High Court has strengthened protections for exporters, and this could shape how similar cases are handled across India.

A Quick Look at the Case Law

Essentially, this judgment dives into Sections 54 and 56 of the CGST Act, plus Rule 89 of the CGST Rules, 2017, which cover refund applications for unused Input Tax Credit (ITC) on exports that don't attract GST. The company involved, Altisource, was pushing for interest on a delayed refund of ₹2,85,63,804, claiming the massive 1,232-day wait from their April 2020 application justified 6% annual interest. The tax authorities pushed back, saying no interest was owed because the refund came through within 60 days of a new application filed after the appeal win in November 2023.

The two-judge bench—Justices M.S. Sonak and Advait M. Sethna—shot down that argument, sticking close to Supreme Court insights from Ranbaxy Laboratories Ltd v. Union of India (2011) and matching rulings from their own court in Lupin Limited. The big idea here is that interest is meant to discourage delays and reimburse businesses for being out of pocket, not just kick in as some afterthought following an appeal. They noted that while the extra clause in Section 56 allows for 9% interest if there's dragging after an appellate order, the standard 6% applies based on the original timeline when a rejection gets overturned. This careful split avoids letting the authorities skirt responsibility through bad initial calls.

Beyond exports, this could ripple out to other refund types, like those for inverted duty structures, and might push the Central Board of Indirect Taxes and Customs (CBIC) to issue guidelines for consistency. For tax pros, it's a sign that courts are tilting toward taxpayers, potentially cutting down on the ₹50,000 crore worth of GST disputes that pile up each year.

The Facts in Detail

The story kicked off on April 23, 2020, when Altisource Business Solutions India Pvt Ltd—a branch of a worldwide IT company focused on software for mortgages and real estate—submitted a refund claim under Rule 89(4) for ₹2,85,63,804. This was for unused ITC from local purchases that went into zero-rated software development exports, which are GST-free thanks to Notification No. 11/2017-Central Tax (Rate).

But the local GST officer turned it down on September 14, 2020, pointing to paperwork issues and supposed mismatches in export proofs—stuff that often trips up ITC refund reviews. Not giving up, the company appealed under Section 107 on December 14, 2020. After a long back-and-forth, the Appellate Authority (that's the Commissioner of State Tax in Maharashtra) sided with them on October 27, 2023, calling the rejection unfounded and ordering the refund to go ahead.

Following that, Altisource put in a fresh application on November 28, 2023. The refund got approved on January 15, 2024, and hit their bank on February 5, 2024—right within the 60-day post-appeal limit. Still, when they asked for interest under Section 56 to cover the full delay (starting from June 22, 2020, 60 days after the first filing), the officials said no in an order dated September 9, 2024. Their reasoning? The appeal created a brand-new start for the refund duty, wiping out any earlier delay claims.

That sparked the writ petitions in mid-2024, which the court bundled together and heard quickly on September 30, 2025, issuing an order right away to highlight how urgent cash flow is for export businesses.

Key Event Timeline	Date	What Happened
Original Refund Filing	April 23, 2020	Submitted claim for ₹2.85 crore ITC on software exports.
First Rejection	September 14, 2020	Officer denies it over procedural hiccups.
Appeal Submitted	December 14, 2020	Company challenges the denial under Section 107.
Appeal Win	October 27, 2023	Authority allows it and directs processing.
New Refund Filing	November 28, 2023	Fresh application after the appeal.
Refund Approved	January 15, 2024	Green light given.
Refund Paid	February 5, 2024	Money lands in the account.
Interest Denied	September 9, 2024	Officials reject the 6% interest request.
Petitions Filed	Mid-2024	Cases combined under WP 5312/2024.
Judgment Delivered	September 30, 2025	Court orders 6% interest from the original timeline.

This timeline shows just how drawn-out these processes can get, reflecting bigger problems like overloads on GST portals and staff shortages.

Views from Both Sides

The Petitioner's Side: Led by lawyers Tushar Jarwal, Rahul Sateja, and Daliya Singh, Altisource painted themselves as caught in the crossfire of slow government wheels. As an exporter pulling in over $100 million a year from zero-rated services, they highlighted how refund waits jack up borrowing costs—often 12-15% from banks, way above the 6% statutory rate. Leaning on Ranbaxy Laboratories for the idea that interest compensates real losses and Lupin Limited for similar setups, they argued that Section 56 treats appeal wins as part of the original case. They didn't push for the 9% rate, instead focusing on fairness: "Bad rejections shouldn't wipe away the harm to taxpayers." Groups like NASSCOM, representing IT folks, have backed similar arguments in other courts.

The Respondent's (Revenue) Side: Speaking for the Union of India via GST officials, with Additional Government Pleader Jyoti Chavan (and Shruti Vyas for the central side), they stood by the September 2024 denial as following the rules to the letter. Their take: The initial rejection ended any refund right until the appeal brought it back, so the November 2023 filing was the real starting point for Section 56. They stressed a strict reading, noting the 9% proviso for delays after appeals, which they said meant 6% didn't apply before that. They brought up budget concerns: "You can't charge interest on something that didn't exist yet." But the court called this view too narrow, ignoring higher court calls to avoid dodging through technicalities.

This back-and-forth captures the ongoing tug-of-war in GST: protecting taxpayer funds versus guarding public money, with audits from the Comptroller and Auditor General showing 70% of refunds hit initial roadblocks.

The Court's Breakdown and Complete Judgment

The 22-paragraph spoken judgment, given by Justice M.S. Sonak, picks apart the revenue's points step by step, saying the matter is "settled" after Lupin. It starts with merging the cases, recaps the background (paragraphs 4-6), and lays out what each side said (paragraphs 7-10).

The heart of it (paragraphs 12-19) ties together Sections 54(1) for applications and 56 for interest. The judges explain: 6% interest starts if the refund isn't out within 60 days of the first filing, to make up for "lost access to money." When an appeal overturns a rejection, it goes back as if the original process continued. Pulling from Lupin (its paragraphs 12-13), they note: "The law meant for 6% on the main delay and 9% if there's foot-dragging after the appeal."

They backed this with cases like Ranbaxy (paragraph 14), linking GST to older excise rules for interest from claim dates, plus matching views from Delhi (Bansal International) and Telangana (Qualcomm) High Courts on non-resettable timers (paragraph 14). The revenue's twist on the proviso (paragraphs 16-17) got dismissed: "The 'First Authority' is the initial decider, not the appeal level."

The final orders (paragraph 20): "We grant these petitions... and instruct the respondents to pay... 6% per year... from 60 days after [the original dates]... within six weeks." Made absolute, no fees (paragraphs 21-22). Signed by Justices Sonak and Sethna, the full 15-page document (posted October 7, 2025) mixes deep law analysis with a push for fairness.

Not just solving this case, it calls out system issues: "Wrong rejections can't block rightful interest" (paragraph 19). For more, check the official PDF for export refund details under Notification 11/2017.

Wider Effects and Suggestions

Estimates from the Federation of Indian Export Organisations (FIEO) suggest this could release ₹10,000-15,000 crore in stuck interest payments, helping exporters weather global economic dips. It calls on the CBIC to speed up GSTN tech and train staff on Rule 89 to cut delays. Businesses should keep solid records of initial filings, while tax offices might take this to the Supreme Court, testing the balance between state finances and private rights.

Overall, the Altisource case brings a human touch to GST rules, confirming: Delays have real costs, and interest is there to cover them. If you're an exporter, this is worth watching closely.

Disclaimer: - The information provided in this blog is for educational and informational purposes only and is based on the publicly available details. It does not constitute legal, tax, or professional advice. Readers are encouraged to consult qualified professionals for advice tailored to their specific circumstances. The views expressed are derived from the ruling and do not reflect any endorsement or opinion by the blog author or website.

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