Now a days, because of enhancement in high speed computing elements, high voltage controlled semi-conductor devices and emergence of new power circuit topologies, the Voltage Source Converter (VSC) based Active Power Filter (APF) is finding applications for compensating harmonic currents drawn by the various loads. As the active filter consists of semi-conductor devices alone, the response time of this device is very fast and it doesn’t suffer from resonance and other stability problems as faced by the normal passive filters. The Active filters are generally used at harmonic producing loads. Among all APF’s the Shunt Active Power Filter (SAPF) is more prominent at medium/high voltage applications, and also it provides higher efficiency. SAPF in the power circuit can be used either by using the voltage-sourced PWM converter equipped with a DC capacitor or a current-sourced PWM converter equipped with a DC inductor. This paper presents an approach to determine reference compensation currents of the three-phase SAPF under distorted and/or unbalanced source voltages in steady state. It is planned to design a Synchronous Reference Frame (SRF) controller for Voltage Source Converter (VSC) based Shunt active power filter for harmonic compensation. The simulation results have been obtained by using MATLAB/ SIMULINK.