Section 16(4) vs 16(5): Can a Late GST Return Still Cost You Input Tax Credit?

Section 16(4) of the CGST Act sets a hard deadline for claiming input tax credit on an invoice: the earlier of the due date for filing the November return of the following financial year, or the date of filing the relevant annual return. For years, GST authorities and courts applied this deadline strictly, and businesses that filed GSTR-3B even a few days late — often due to portal glitches, cash flow gaps, or simple oversight — found entire quarters of input tax credit denied through demand notices, sometimes running into lakhs of rupees.

This strict application generated widespread litigation, with businesses arguing the deadline was procedurally unfair when the delay was minor and the underlying purchase was never in dispute. In response, the government introduced Section 16(5), which retrospectively extended the ITC claim deadline for financial years 2017-18 through 2020-21 to a fixed later date, specifically to relieve businesses caught by the earlier, stricter cutoff for those years.

The practical question for most businesses now is not whether Section 16(5) exists, but whether their specific demand notice or rejected credit actually falls within its scope. Section 16(5) only covers the specified financial years and only addresses the time-limit ground for denial — it does not cure an ITC claim that was rejected for an entirely different reason, such as a mismatched invoice or a non-existent supplier. Businesses that received a Section 16(4) demand need to check the financial year in question and the actual ground stated in the order before assuming Section 16(5) resolves it.

For demands relating to later financial years, or for claims rejected on grounds other than the time limit, Section 16(5) offers no relief, and the original appeal or litigation route — now increasingly through the newly functional GST Appellate Tribunal — remains the only path. If you have a pending or already-paid Section 16(4) demand, it is worth having it specifically reviewed against Section 16(5)'s window rather than assuming either that it is automatically resolved or that nothing can be done. Our GST & Tax practice reviews Section 16(4) demands to determine whether Section 16(5) applies, and represents clients on appeal where it does not.