Skip to content

Indirect Tax Laws and Practice · GST Refunds - Inverted Duty Structure and Zero Rated Supplies

GST Refund Processing, Orders and Interest on Delay

Updated 11 October 2026 · Fact-checked

After you file a refund application, the proper officer must issue the order within sixty days of receiving an application complete in all respects (Section 54(7)). For zero-rated supplies, 90% can be refunded provisionally. If a refund ordered is not paid within sixty days, interest under Section 56 is payable.

Understand Refund Processing, Orders and Interest

A refund claim passes through stages. You file the application. The officer checks it is complete. If it is, the sixty-day clock runs and the officer issues an order. If it is not, the officer points out the defects and you must refile.

The Act fixes the key outer limit. Under Section 54(7), the proper officer shall issue the order within sixty days from the date of receipt of application complete in all respects. The words "complete in all respects" matter. An incomplete application does not start the clock.

For exporters, cash is stuck while verification goes on. So Section 54(6) allows the proper officer to refund on a provisional basis ninety per cent of the total amount claimed for zero-rated supplies by registered persons, other than a category the Government notifies on the Council's recommendation. The manner and conditions are prescribed. After verifying documents, the officer makes the final order under Section 54(5) for the balance and final settlement.

If the officer is satisfied that the whole or part is refundable, he orders accordingly. Amounts for exports, unutilised ITC, and certain other heads are paid to the applicant. Other refunds are credited to the Consumer Welfare Fund under Section 57. This is Section 54(5) and (8).

If the tax ordered to be refunded is not refunded within sixty days from receipt of the application, interest under Section 56 is payable for the period of delay beyond sixty days till the date of refund. The rate is not exceeding six per cent as notified. A higher cap of nine per cent applies where the refund arises from an order of an adjudicating authority, Appellate Authority, Tribunal or court that has attained finality.

Key rules to remember

Time to issue refund order
Order within 60 days from date of receipt of application complete in all respects
Section 54(7). An incomplete application does not start the clock.
Provisional refund
Provisional refund = 90% × amount claimed (zero-rated supplies)
Section 54(6). Available to registered persons other than notified categories. Final order follows after verification.
Interest on delayed refund
Interest = refund × rate (not exceeding 6% p.a., as notified) × days of delay beyond 60 days ÷ 365
Section 56. Period runs from the end of 60 days from receipt of application till the date of refund. The day-count formula is a working method; the Act says computation is as prescribed.
Interest after finality of an order
Rate not exceeding 9% as notified
Proviso to Section 56. Applies when the claim arises from an order that has attained finality and is not refunded within 60 days of the application filed after the order.
Minimum refund
No refund under Section 54(5) or (6) if amount < ₹1,000
Section 54(14).
Withholding of refund
Defaulted return or unpaid tax, interest or penalty not stayed by the specified date: withhold or deduct
Section 54(10). The specified date is the last date for filing an appeal.

How to solve Refund Processing, Orders and Interest questions

Use this order for any question on refund processing, orders and interest.

  1. 1Identify the type of refund: zero-rated supply, inverted duty, or other. This decides whether the provisional 90% route is open.
  2. 2Find the date the application was received complete in all respects. Ignore the date of first filing if it was incomplete.
  3. 3Add sixty days to get the due date for the order and for payment.
  4. 4Check for withholding grounds: unfiled returns or unpaid dues (Section 54(10)), or fraud with pending proceedings (Section 54(11)).
  5. 5If provisional refund applies, compute 90% of the claim. The balance is settled by the final order after verification.
  6. 6Compute delay: days from the end of the sixty days to the date of refund. Apply the notified rate, capped at 6% (or 9% for finality cases).
  7. 7Check the ₹1,000 floor and whether the refund is paid to the applicant or credited to the Fund.
  8. 8State the conclusion clearly with the section reference.

Quickest way: Date, 90%, interest in three lines

When to use it: Numerical questions in the 14-mark section or case-based MCQs where dates and amounts are given.

  1. Due date = date of complete application + 60 days.
  2. Provisional amount = 90% of the claim. Balance = 10%.
  3. Interest = amount × rate × delay days ÷ 365, only on the amount ordered but unpaid, for days beyond day 60.

Common mistakes in Refund Processing, Orders and Interest

  • Counting sixty days from the date of first filing even though the application was incomplete.

    You skip the phrase 'complete in all respects' in Section 54(7).

    Fix: Start the clock only on the date a complete application is received.

  • Computing interest from the date of application.

    You assume interest runs from the start.

    Fix: Section 56 gives interest only for the delay beyond sixty days.

  • Treating provisional refund as 90% for every refund claim.

    You generalise from exports.

    Fix: Section 54(6) covers zero-rated supplies by registered persons, excluding notified categories.

  • Using 9% interest for all delays.

    You mix up the two limits.

    Fix: Use not exceeding 6% normally. The 9% cap applies only when a final order of an authority or court gave rise to the claim.

  • Ignoring withholding powers when the exporter has defaulted in returns.

    You focus on the timeline only.

    Fix: Check Section 54(10) and (11) before concluding the refund is due.

  • Saying interest is payable on the full original claim of 100%.

    You forget that part of the claim may already be paid provisionally.

    Fix: Apply interest only to the amount refundable but not paid within time.

Worked examples

Example 1

Aarav Exports Ltd., Surat, files a complete refund application for ₹10,00,000 on zero-rated supplies on 5 March. Compute the provisional refund and the balance to be settled by the final order, assuming the entire claim is finally found due.

Show the solution
  1. Zero-rated supply by a registered person, so provisional refund under Section 54(6) is available, unless the person falls in a notified category.
  2. Provisional refund = 90% × ₹10,00,000 = ₹9,00,000.
  3. Balance = ₹10,00,000 − ₹9,00,000 = ₹1,00,000.
  4. The balance is settled by the final order under Section 54(5) after verification of documents.

Answer: Provisional refund ₹9,00,000. Balance ₹1,00,000 payable on the final order.

Example 2

Meera Textiles receives an order sanctioning an unutilised ITC refund of ₹3,65,000. The complete application was received on 1 April. The refund is paid after 100 days from that date. Assume the notified rate is 6% per annum. Compute interest under Section 56.

Show the solution
  1. Sixty days are allowed from receipt of the application. Delay = 100 − 60 = 40 days.
  2. Interest = ₹3,65,000 × 6% × 40 ÷ 365.
  3. ₹3,65,000 × 6% = ₹21,900 per year.
  4. ₹21,900 × 40 ÷ 365 = ₹2,400.

Answer: Interest payable is ₹2,400 for 40 days of delay, assuming the 6% rate.

Exam tips

  • Quote the section: Section 54(7) for sixty days, 54(6) for provisional 90%, Section 56 for interest.
  • In numerical questions, write the rate and assumption explicitly. Interest is capped at a notified rate, so state the assumed rate.
  • Watch the phrase 'complete in all respects' in case scenarios. It shifts the start date.
  • Always mention withholding powers under Section 54(10) when facts show defaulted returns.

Practice questions from GST Refunds - Inverted Duty Structure and Zero Rated Supplies

Refund Processing, Orders and Interest in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Refund Processing, Orders and Interest: frequently asked questions

What is the time limit to issue a GST refund order?

The proper officer must issue the order within sixty days from the date of receipt of an application complete in all respects. This is in Section 54(7).

Is 90% provisional refund available on all refunds?

No. Section 54(6) applies to claims on zero-rated supplies of goods or services made by registered persons, other than a notified category. It does not apply to inverted duty refunds.

When is interest payable on a delayed GST refund?

If tax ordered to be refunded under Section 54(5) is not refunded within sixty days of receipt of the application, interest is payable for the delay beyond sixty days. The rate does not exceed six per cent as notified.

Is there a higher interest rate in some cases?

Yes. Where the claim arises from an order that has attained finality and is not refunded within sixty days of the application filed after that order, the rate may be up to nine per cent as notified.