Sections 16(5) and 16(6): The Retrospective ITC Relief

Sections 16 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

For years the single largest source of GST litigation was s.16(4) — credit denied because the return carrying it was filed after the September (later November) deadline. Thousands of demands, a split of High Court authority, and a great many businesses that had paid the tax to their supplier and lost the credit anyway.

The Finance (No. 2) Act, 2024 inserted s.16(5) and s.16(6), both with retrospective effect from 1 July 2017.

s.16(5): notwithstanding s.16(4), for invoices or debit notes pertaining to FY 2017-18, 2018-19, 2019-20 and 2020-21, a registered person is entitled to take credit in any return under s.39 filed up to 30 November 2021. s.16(6): where a registration was cancelled and the cancellation later revoked, credit is available for the intervening period on the conditions stated. Both are retrospective from 01.07.2017, and a special procedure was notified for rectifying orders already passed.

What section 16(5) does

The mischief: a business that filed its GSTR-3B for, say, March 2019 in December 2019 — late, but filed — found the credit in that return disallowed because s.16(4) capped it at the September 2019 return.

The credit was genuine. The tax had been paid to the supplier and by the supplier. The only defect was the timing of the recipient's own return.

Section 16(5) removes that defect for four financial years:

"Notwithstanding anything contained in sub-section (4), in respect of an invoice or debit note for supply of goods or services or both pertaining to the Financial Years 2017-18, 2018-19, 2019-20 and 2020-21, the registered person shall be entitled to take input tax credit in any return under section 39 which is filed upto the thirtieth day of November, 2021."

Two limits worth noting.

The credit must have been taken in a return actually filed by 30 November 2021. The sub-section does not permit fresh credit to be claimed now. It validates credit already taken in a return filed within that window.

It covers four financial years only. FY 2021-22 onwards remains on the ordinary s.16(4) timeline — 30 November following the end of the financial year, or the annual return date, whichever is earlier.

What section 16(6) does

The second mischief: a registration cancelled — often for non-filing — and later revoked under s.30 or by an appellate order. Between cancellation and revocation the person could not file returns, and by the time they could, s.16(4) had expired.

Section 16(6) provides that where the availment of credit was not restricted under s.16(4) on the date of the order of cancellation, the person is entitled to take that credit in a return under s.39, filed:

• up to 30 November following the end of the financial year to which the invoice or debit note pertains, or the annual return date, whichever is earlier; or
• for the period from the date of cancellation to the date of revocation, in a return filed within thirty days of the order of revocation, whichever is later.

So a person whose registration was restored is not penalised for the period during which the portal would not let them file.

The rectification route for orders already passed

Both sub-sections being retrospective creates an obvious problem: what about demands already confirmed, appeals already dismissed, and orders already final?

Section 150 of the Finance (No. 2) Act, 2024 provided that no refund shall be made of tax already paid or credit reversed, which would not have been so paid or reversed had s.16(5) and 16(6) been in force. So money already paid stays paid.

But for orders not yet given effect, a special procedure was notified — Notification No. 22/2024-Central Tax dated 08.10.2024 — allowing a registered person against whom an order under s.73, s.74, s.107 or s.108 was issued confirming demand for wrong availment of credit on account of s.16(4), and where no appeal against the order was filed, to apply for rectification electronically within six months of the notification.

The proper officer was to decide the application, ordinarily within three months, and issue a rectified order in DRC-08.

That window has closed. What remains available is the substantive defence in any live proceeding — s.16(5) and 16(6) are on the statute book and apply from 1 July 2017, so a pending notice, adjudication or appeal based solely on s.16(4) for those years should not survive.

Where the relief does not reach

Refunds of tax already paid. Section 150 of the amending Act bars them expressly.

Credit never taken in any return filed by 30 November 2021. Section 16(5) validates credit taken; it does not create a fresh right to claim.

FY 2021-22 onwards. Ordinary s.16(4) applies.

Denials on other grounds. A demand raised because the supplier did not file GSTR-1 (s.16(2)(aa)), or because the tax was not paid to the Government (s.16(2)(c)), or because the credit is blocked (s.17(5)), is untouched. Section 16(5) addresses timing only.

Cases where an appeal was filed. The special rectification procedure was expressly limited to orders against which no appeal had been filed. Those cases proceed in appeal, where the amendment is a substantive ground.

Key takeaways

• s.16(5) validates credit for FY 2017-18 to 2020-21 taken in any s.39 return filed up to 30.11.2021.
• s.16(6) restores credit for the period between cancellation and revocation of registration.
• Both are retrospective from 01.07.2017.
• No refund of tax already paid or credit already reversed — s.150 of the amending Act.
• The Notification 22/2024-CT rectification window applied only to orders with no appeal filed, and has closed.
• The relief covers timing only — other grounds of denial are unaffected.

Read next

• Four Conditions for Claiming ITC Under Section 16(2)
• The ITC Time Limit Under Section 16(4)
• Section 16 CGST Act: ITC Eligibility
• Revocation of Cancelled GST Registration

Disclaimer: Positions stated as on 5 September 2026, based on the CGST Act as amended to 31 March 2026 (ICAI Bare Law, 12th edition). The Notification 22/2024-CT rectification window has closed.