Relaxation under Section 16(4) of the GST Act is provided in two scenarios: belated ITC claims for FYs 2017-21 (filed by 30-11-2021) and claims after the revocation of registration cancellations, subject to specific timelines. Taxpayers seeking this relaxation must file rectification applications or submit letters based on their case. For demand orders under Sections 73/74 without filed appeals, rectification applications can be submitted electronically within six months from 08-10-2024. In cases where no orders are issued, a letter to the concerned officer suffices. Taxpayers must address only the Section 16(4) issue while adhering to other demand provisions and can seek pre-deposit refunds if eligible. However, refunds for taxes already paid against Section 16(4) violations are disallowed under Section 150 of the Finance Act, 2024. Litigations may arise due to constitutional concerns under Article 265. For detailed filing steps, refer to GSTN’s advisory. Relevant sources include Notification No. 22/2024 and Circular No. 237/2024, among others.
A. When the relaxation from violation of section 16(4) is available to the taxpayer?
1. Claim of ITC in Belated Returns [Section 16 (5)]
The relaxation is available for FYs 2017-18, 2018-19, 2019-20 and 2020-21 provided the ITC of such FYs is availed in GST returns filed upto 30-11-2021.
2. Claim of ITC after restoration of cancelled registration [Section 16 (6)]
Where registration is cancelled and subsequently the cancellation is revoked by any order and where availment of input tax credit in respect of an invoice or debit note was not restricted under section 16(4) on the date of order of cancellation, the said person shall be entitled to take the input tax credit in respect of such invoice or debit note for supply of goods or services or both, in GSTR 3B,
(i) filed upto thirtieth day of November following the financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier; or
(ii) for the period from the date of cancellation of registration or the effective date of cancellation of registration, as the case may be, till the date of order of revocation of cancellation of registration, where such return is filed within thirty days from the date of order of revocation of cancellation of registration, whichever is later.
B. How to avail such relaxation?
| Sr. No | Particulars | Procedure to be followed |
| 1. | Where demand order u/s 73 or 74 has been passed against the taxpayer but no appeal to first appellate authority u/s 107 has been filed |
(Annexure A can be downloaded from GSTN portal) |
| 2. | Where first appellate authority u/s 107 or revisional authority u/s 108 has passed its order against the taxpayer but no appeal has been filed with the appellate tribunal. | |
| 3. | Where no demand notice has been issued u/s 73 or 74 i.e where investigation proceedings for violation of section 16 (4) has been initiated or where DRC 01A has been issued
OR · Where demand notice u/s 73/74 has been issued but no order u/s 73/74 has been passed. OR · Where order u/s 73/74 has been passed and appeal has been filed to appellate authority and appellate authority has not passed the order |
Submit a simple letter to the concerned officer where proceedings are pending.
The letter should state that assessee is eligible to avail the relaxation of section 16(4) in terms of section 16 (5) /(6) of the CGST act. The concerned officer shall take the cognizance of the relaxation and take further appropriate action and pass orders. |
C. Some more key insights
1. Example: Total amount of tax payable as per notice/ demand is Rs 150. Out of such demand Rs 50 relates to contravention of section 16(4) for which relaxation as detailed above is available and Rs 100 pertains to some other issues. The taxpayer want to avail amnesty from interest and penalty u/s 128A. To avail the amnesty u/s 128A, he needs to pay Rs 100 tax amount. Also he is not required to file rectification application for Rs 50 as detailed in Point B of the above article.
2. Where the order (demand order or appellate order) involves multiple issues in which one of the issue is of section 16 (4) in respect of which relaxation is available to the taxpayer, then the order shall be rectified only with respect to issue of section 16(4). Demand in respect of other issues have to be dealt with in accordance with other provisions of law.
3. Don’t forget to claim the refund of pre-deposit paid in appeal, after getting the relief from section 16(4) demands.
4. Where the concerned officer rectifies the order in such a way that rectified order in adversarial to the taxpayer, the taxpayer may file the appeal to the appellate authority or appellate tribunal, as the case may be, against such rectified order.
5. In terms of section 150 of the finance (No.2) act, 2024 if the tax amount relating to contravention of section 16(4) has already been paid, then refund of such tax paid shall not allowed.
Author’s note:
This provision is prone to litigation since as per Article 265 of the Constitution of India, “No tax can be collected without the authority of the law”.
D. Step by step process of filing rectification application
Please access the following link
https://tutorial.gst.gov.in/downloads/news/step_by_step_process_filing_rectification _application.pdf
E. Sources summarized
1. Notification No 22/2024-Central tax dated 08-10-2024
2.Circular No 237/31/2024 dated 15-10-2024 as corrected by corrigendum F. No CBIC 20001/6/2024 dated 25-10-2024
3. Recent advisory of GSTN dated 07-01-2025
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