Delhi GST Update: New Window Opened to Rectify Orders Denying ITC u/s 16(4)

Is your business stuck with a GST demand solely because you claimed Input Tax Credit (ITC) after the statutory deadline?

For years, the time limit under Section 16(4) of the GST Act has been a major litigation point, leading to the denial of genuine credit simply due to delayed return filings. However, the Government of NCT of Delhi has now operationalized a crucial relief measure.

Through Notification No. 22/2024-State Tax dated December 1, 2025, the Delhi Finance Department has notified a “special procedure” to rectify assessment orders and allow businesses to reclaim this blocked credit.

As a practicing Chartered Accountant, I view this as a one-time “clean slate” opportunity for many taxpayers in the NCR region. Here is what you need to know.

The Background: Why This Matters

Previously, tax officers issued orders under Sections 73, 74, 107, or 108 confirming demands for “wrong availment of ITC” if the credit was taken after the due date (typically September or November of the following year).

With the recent insertion of Section 16(5) and Section 16(6) into the DGST Act, the law now retrospectively allows ITC for FY 2017-18 through 2020-21, provided the GSTR-3B was filed by 30th November 2021. This notification provides the procedural mechanism to apply this change to past adverse orders.

Eligibility for Rectification

You are eligible to apply under this special procedure if:

1. Order Issued: An order has been passed against you confirming a demand.
2. Sole Reason: The demand is only on account of contravention of Section 16(4) (time-barred ITC).
3. No Appeal: You have not filed an appeal against the said order.
4. Covered Period: The ITC in question is now legally available under the retrospective benefit of Section 16(5) or 16(6).

The Procedure & Timeline

The notification mandates a strict timeline. Taxpayers cannot afford to sleep on this.

• Application Method: You must file an application electronically on the GST common portal.
• Deadline: The application must be filed within six months from the notification date (i.e., on or before May 31, 2026).
• Rectification Process: The authority who issued the original order will review the application. If the claim is verified correct under the new provisions, they will issue a rectified order.
• Resolution Time: The officer is expected to dispose of the application within three months.

Actionable Steps for Taxpayers

If you have paid a demand or are facing recovery proceedings due to Section 16(4) issues:

1. Identify Orders: Audit your records for any assessment orders received between 2017 and 2024 where ITC was denied based on time limits.
2. Check Appeal Status: Confirm that no appeal is currently pending for that specific order.
3. Prepare Documentation: Collate your GSTR-3B filing dates to prove that returns for the relevant financial years were filed before November 30, 2021.
4. File Immediately: Do not wait for the last date. The portal traffic often increases near deadlines.

Conclusion

This notification acts as a bridge between the retrospective amendment in the law and the practical reality of existing tax demands. It is a welcome move for the “Ease of Doing Business” in Delhi.