Section 16(4) and the ITC Time Limit: The Defence That Wins DRC-01s
When late-availed input tax credit is still valid, how the time limit works, and how to frame a Section 16(4) defence to a mismatch demand.
Many ITC-mismatch demands assume that any credit not matching the current year's 2A/2B is 'excess'. Often it isn't — it is prior-period credit availed within the Section 16(4) time limit.
How the time limit works
Section 16(4) sets the outer date by which credit for a financial year may be availed. Credit relating to earlier invoices, availed within that limit, remains eligible even if it lands in a later return period.
Framing the defence
Identify the invoices, show they pertain to the earlier year, and demonstrate they were availed within the limit. Present this as an invoice-wise reconciliation rather than a general assertion — it is worth more than case law by itself, though on-point precedent strengthens it.
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