Last reviewed: 10 September 2026. A retrospective amendment inserted by the Finance Act 2024 — Sections 16(5) and 16(6) of the CGST Act — is now the basis on which businesses can get years-old input tax credit demand orders reopened, following CBIC's implementation Circular No. 237/31/2024-GST and a run of High Court rulings, including one from the Rajasthan High Court, directing authorities to reconsider confirmed orders rather than push taxpayers into a fresh appeal. For businesses still carrying disallowed ITC for FY 2017-18 to FY 2020-21 on their books or in dispute, this is a live, time-bound opportunity, not a settled closed chapter.
Why Section 16(4) became a mass litigation trigger
Section 16(4) of the CGST Act restricts the time within which a registered person can claim input tax credit on an invoice or debit note: ordinarily, ITC must be claimed by 30 November following the end of the financial year to which the invoice pertains, or by the date of filing the annual return for that year, whichever is earlier. In the early years of GST — FY 2017-18 through FY 2020-21 — this deadline caught out a large number of otherwise compliant businesses. GSTN's portal was still evolving, return formats and reconciliation mechanics (particularly GSTR-2A/2B matching) were new, and many taxpayers claimed genuine, invoice-backed ITC in a return filed after the technical Section 16(4) cut-off for the relevant year, simply because the compliance ecosystem itself was in transition.
Tax authorities read Section 16(4) strictly and issued a wave of demand notices and orders disallowing this late-claimed ITC — even where the underlying purchase, invoice and payment were entirely genuine and the only defect was the timing of the claim relative to the statutory deadline. For many small and mid-sized businesses, these orders translated into significant cash demands (ITC reversal plus interest, and in several cases penalty) for credit they had, in substance, always been entitled to.
The retrospective fix: Section 16(5) and 16(6)
Recognising the scale of this problem, the Finance Act 2024 inserted Section 16(5) and Section 16(6) into the CGST Act with retrospective effect. Section 16(5) specifically overrides the Section 16(4) cut-off for the affected years: it allows a registered person to claim ITC relating to invoices or debit notes for financial years 2017-18, 2018-19, 2019-20 and 2020-21, provided the claim was made in any return filed up to 30 November 2021. This is a one-time retrospective relief window tied specifically to those four financial years and that specific filing cut-off — it is not a general extension of the ITC claim period.
Section 16(6) addresses a related but distinct scenario: where a taxpayer's GST registration was cancelled and subsequently revoked (restored), ITC that could not be claimed while the registration was under cancellation is permitted within a specified window measured from the date of revocation, again as a targeted relief rather than an open-ended relaxation.
CBIC followed up with Circular No. 237/31/2024-GST, providing implementation guidance — including, importantly, a special procedure for rectification of demand orders that had already been passed and confirmed before this retrospective amendment came in. This matters because many affected businesses were not sitting on an open notice; they had already lost at the adjudication or even first-appeal stage under the old, strict reading of Section 16(4), and the circular's rectification route gives them a path to have that already-confirmed order revisited without necessarily needing to run a fresh appeal from scratch.
What courts have added: reconsideration, not just a fresh appeal
A number of High Courts have gone further than simply acknowledging the amendment exists. A Rajasthan High Court ruling, for instance, directed tax authorities to actively reconsider demand orders that had already been confirmed, in light of the retrospective insertion of Section 16(5)/16(6) — holding that the burden should not fall entirely on the taxpayer to independently litigate a fresh appeal when the underlying law disallowing their credit has itself been retrospectively changed. This is a meaningful procedural point: it supports businesses using the CBIC-notified rectification mechanism as the primary route for already-confirmed orders, rather than defaulting straight to a fresh, more expensive appeal process.
Eligibility snapshot: who this relief covers
| Situation | Covered by Section 16(5)/16(6)? |
|---|---|
| ITC for FY 2017-18 to FY 2020-21, claimed in a return filed on or before 30 November 2021 | Yes — this is the core relief under Section 16(5) |
| ITC for FY 2017-18 to FY 2020-21, claimed in a return filed after 30 November 2021 | No — falls outside the Section 16(5) window; ordinary Section 16(4) restriction continues to apply |
| ITC where registration was cancelled and later revoked, claimed within the window from revocation | Yes — covered under Section 16(6) |
| ITC for FY 2021-22 onward claimed late | No — this relief does not extend beyond FY 2020-21; ordinary Section 16(4) deadline applies for later years including FY 2025-26 |
| A demand order already confirmed for an FY 2017-18 to 2020-21 late claim that now qualifies | Eligible for rectification under CBIC Circular 237/31/2024, subject to its notified time-bound procedure |
Worked example
A trading company, ABC Traders, claimed ITC of ₹18,00,000 for invoices pertaining to FY 2018-19, but the claim was made in a GSTR-3B filed in October 2021 — after the original Section 16(4) deadline for FY 2018-19 had technically passed. The department issued a demand order in 2023 disallowing the entire ₹18,00,000, along with interest of roughly ₹6,50,000 computed to that date, on the ground that the claim was time-barred.
| Particulars | Position before Section 16(5) | Position after Section 16(5) |
|---|---|---|
| ITC claimed, FY 2018-19 invoices | ₹18,00,000 — disallowed as time-barred | ₹18,00,000 — allowable, since the return was filed before 30 Nov 2021 |
| Interest demanded | ~₹6,50,000 | Not payable if the underlying ITC is validated under Section 16(5) |
| Route to relief | Would have required a fresh appeal against the confirmed order | Rectification of the confirmed order under CBIC Circular 237/31/2024's special procedure |
Because ABC Traders' GSTR-3B was filed in October 2021 — before the 30 November 2021 cut-off that Section 16(5) uses as its benchmark — the entire ₹18,00,000 disallowance, and the associated interest, should now qualify for reconsideration through the rectification route, subject to the specific procedure and time limits CBIC has notified.
Common mistakes and red flags
- Assuming a confirmed demand order is final simply because the appeal period has lapsed — the CBIC rectification route exists precisely to reopen such orders where Section 16(5)/16(6) now applies.
- Missing the exact filing-date test — the relief turns on whether the return claiming ITC was filed on or before 30 November 2021, not on when the invoice itself was dated.
- Treating this as a general extension and assuming any late ITC claim, for any year, is now protected — it is strictly limited to FY 2017-18 through FY 2020-21 (and the registration-revocation scenario under 16(6)).
- Delaying the rectification application — CBIC's special procedure under Circular 237/31/2024 is time-bound, and missing that window can force a business back into a costlier ordinary appeal.
- Not maintaining the original return-filing proof (acknowledgement, filing date) needed to demonstrate the claim was made within the relief window.
What business owners and CFOs should do now
Businesses should, first, pull their GSTR-3B and GSTR-9 records for FY 2017-18 through FY 2020-21 and identify any ITC that was claimed after the year's original Section 16(4) deadline but in a return filed on or before 30 November 2021 — this is the precise fact pattern Section 16(5) protects. Second, cross-check this against any demand notices, orders or ongoing proceedings already on file for those years; if an order has already been confirmed, evaluate the CBIC Circular 237/31/2024 rectification route as the primary remedy, given courts including the Rajasthan High Court have supported reconsideration of such orders. Third, treat the timeline attached to that rectification procedure as firm — this is not a relief you can invoke indefinitely. Fourth, and separately, do not extend this thinking to current-year filings: the ordinary 30 November deadline under Section 16(4) remains strictly enforced for FY 2025-26 and beyond, and no similar retrospective relief should be assumed for future years.
Frequently asked questions
What does Section 16(4) of the CGST Act restrict?
Section 16(4) caps the time within which input tax credit can be claimed on an invoice or debit note — ordinarily 30 November following the end of the financial year to which the invoice relates, or the date of filing the relevant annual return, whichever is earlier. ITC claimed after this cut-off has historically been disallowed by field officers, which is what triggered a large volume of demand notices for the early GST years.
What relief does Section 16(5) give, and for which years?
Section 16(5), inserted retrospectively by the Finance Act 2024, allows input tax credit relating to financial years 2017-18 through 2020-21 to be claimed in any return filed up to 30 November 2021, overriding the normal Section 16(4) cut-off for that one-time historical window. It does not extend or relax the ordinary time limit for any later financial year.
What does Section 16(6) cover?
Section 16(6) provides relief in cases where a taxpayer's GST registration was cancelled and later revoked (restored) — allowing ITC to be claimed within a specified window measured from the revocation, for invoices that would otherwise have missed the Section 16(4) deadline while the registration was under cancellation.
I already have a confirmed demand order disallowing my ITC for FY 2018-19 — do I need to file a fresh appeal?
Not necessarily as the first step. CBIC Circular No. 237/31/2024-GST lays down a special procedure allowing rectification of orders already passed, where the disallowed ITC now falls within the Section 16(5)/16(6) relief window. Courts, including a Rajasthan High Court ruling, have directed authorities to reconsider such confirmed orders in light of the retrospective insertion rather than leaving taxpayers to a fresh appeal only. The rectification route is time-bound, so it should be evaluated and acted on promptly rather than assumed to remain open indefinitely.
Does this relief mean the 30 November ITC deadline no longer applies going forward?
No. Section 16(5) is a one-time historical fix limited to FY 2017-18 through FY 2020-21, claimed up to 30 November 2021. For FY 2025-26 and all subsequent years, the ordinary Section 16(4) deadline of 30 November following the financial year (or the annual return date, if earlier) continues to apply strictly, with no similar relief in place.
What should a business do right now to check if it qualifies for this relief?
Review GSTR-3B and GSTR-9 filings for FY 2017-18 to FY 2020-21 to identify any ITC that was claimed late (after the original 30 November cut-off for the relevant year) but before 30 November 2021, cross-check against any demand orders or notices already received for those years, and file for rectification under the CBIC-notified special procedure within its timeline if the facts fit — this is a documentation and deadline-driven exercise best done with professional review.
If your business has a confirmed GST demand disallowing late-claimed ITC for FY 2017-18 to FY 2020-21, or you want to check your eligibility for the Section 16(5)/16(6) relief and rectification route, we can help you review the facts and file within the notified timeline.
GST Notice Handling GST Advisory Services Talk to usThis article is general information based on publicly reported developments as of the review date, not an opinion on any specific case; the applicable procedure and timelines should be verified against the current CBIC circular before acting, and businesses should consult a qualified professional on their own facts.