Delay in GST Refund Affecting Traders’ Capital Here’s What You Should Know
Delay in GST refund has become a major concern for Indian traders, especially small businesses and exporters. For many, blocked funds are choking their working capital, hampering daily operations, and increasing credit dependence.
In this blog, we break down the issue, the legal provisions involved, and what remedies are available to taxpayers.
Why Are GST Refunds Getting Delayed?
GST refund delays arise due to various administrative and procedural issues:
- Scrutiny of documents and invoices under Rule 89 of CGST Rules
- System errors or mismatches in GSTR-1 vs. GSTR-3B
- Verification delays at the officer level, especially for exporters
- Pending Aadhaar authentication or KYC updates
- Unprocessed Input Tax Credit (ITC) mismatches
Legal Framework for GST Refunds
- Section 54 of the CGST Act, 2017: Governs refund of tax, interest, and any other amount.
- Rule 90–97A of the CGST Rules: Covers procedures, forms (like RFD-01), acknowledgment, and deficiency memos.
📌 Case Reference:
GNC Infra LLP vs. Union of India (Delhi HC) – The court held that inordinate refund delays are violative of Article 265 and refund must be processed within the statutory limit.
How Delay in GST Refund Affects Traders
Here’s how it impacts MSMEs and exporters:
| Impact Area | Consequence |
|---|---|
| 💰 Working Capital | Funds locked with GST department |
| 🏦 Borrowing Costs | Increased loans to cover operational costs |
| 📉 Exports | Delay in IGST refund affects competitiveness |
| 📊 Profit Margins | Credit interest eats into margins |
Many businesses, especially seasonal traders and exporters, are facing liquidity crunches due to stuck refunds.
PPBM’s Concern: What the Industry Is Saying
The Punjab Pradesh Beopar Mandal (PPBM) recently raised alarm over this issue, stating:
“Thousands of traders are facing working capital crises because refunds are not being processed even after months. This affects not just business survival but also tax morale.” – PPBM Spokesperson
Expert Tip: How to Avoid Refund Rejection or Delay
CA Akshay Mehta, GST advisor at Efiletax, suggests:
“Ensure your GSTR-1 and GSTR-3B match perfectly. File refund applications via FORM GST RFD-01 only after reconciliation. Use a GST consultant to respond to deficiency memos on time.”
Step-by-Step: What to Do If Your Refund Is Delayed
- Track refund status via gst.gov.in
- Respond to any deficiency memo (RFD-03) within 15 days
- File grievance on CBIC’s CPGRAMS portal if delay >60 days
Government Measures to Expedite Refunds
While delays persist, CBIC has taken the following steps:
- Introduced automated refund system for IGST on exports
- Issued Circular No. 125/44/2019-GST for refund uniformity
- Enabled ad-hoc disbursements for exporters in certain cases
However, implementation remains inconsistent across states.
Internal Link
👉 Read our detailed blog on GST Refund Process and Common Errors
External Source
📄 CBIC Refund FAQs – gst.gov.in
Summary
Delay in GST refund is causing cash flow issues for Indian traders. Know the legal limits, practical tips to avoid delays, and what steps to take if your refund is stuck.
FAQs
Q1. What is the time limit to receive GST refund?
60 days from the date of complete application under Section 54 of CGST Act.
Q2. Is interest payable on delayed GST refunds?
Yes, @6% for general refunds and 9% for appellate refunds as per Section 56.
Q3. How can I raise a complaint for refund delay?
You can file a grievance on the CPGRAMS portal or approach High Court.
Q4. What if my GSTR-1 and GSTR-3B don’t match?
Refund will likely be withheld. Reconcile and refile with corrections or clarifications.
Final Words
At Efiletax, we help businesses file error-free refund applications and follow-up with GST officers.