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A supplier invoice remains unpaid for more than 180 days, and the finance executive does not know whether the input tax credit already claimed is still safe.
The second proviso to Section 16(2) and Rule 37 require reversal of ITC on any unpaid portion after 180 days from the invoice date, with interest under Section 50; credit is re-claimed proportionately on payment.
An accounts payable ageing report with a flag at 150 days, showing invoice date, amount unpaid and GST on the unpaid share for every supplier.
Reversals reported in GSTR-3B Table 4B on time, re-claims in Table 4A when paid, and fewer reversals because ageing is acted on before day 180.
Yes. If you do not pay a supplier the value of the invoice plus tax within 180 days of the invoice date, you must add the input tax credit (ITC) back to your tax liability, with interest. You can claim it again once you pay. Part payments bring back a matching part of the credit.
Where does the rule come from?
The condition is in the second proviso to Section 16(2) of the CGST Act, 2017. The mechanics are in Rule 37 of the CGST Rules, 2017, which was simplified from 1 October 2022. Since then you report the reversal in the GSTR-3B for the tax period immediately after the 180 days end, and interest under Section 50 is payable on the credit reversed.
The rule does not apply to supplies on which you pay tax under reverse charge, or to certain supplies without consideration listed in Schedule I.
How are the 180 days counted, and what happens with part payment?
The clock starts on the invoice date shown by the supplier. It does not wait for delivery or for the date you booked the invoice. Payment means the value of the supply plus the tax on it, and amounts paid on your behalf by agreement count too.
If you pay part of the invoice within 180 days, only the unpaid share of ITC is reversed. The share is worked out in proportion to the amount unpaid.
| Payment situation by day 180 | ITC treatment |
|---|---|
| Paid in full | Keep all ITC; no action |
| Part paid | Reverse ITC on the unpaid share only |
| Unpaid | Reverse all ITC on the invoice, with interest |
| Paid after reversal, in full | Re-claim all reversed ITC in the month of payment |
| Paid after reversal, in part | Re-claim ITC on the part paid |
Worked example
A Chennai manufacturer receives an invoice dated 1 April for ₹5,90,000: ₹5,00,000 value plus GST at 18 percent of ₹90,000. The ₹90,000 ITC was claimed in April’s GSTR-3B. The invoice is still unpaid on day 181.
- Reversal: add ₹90,000 back in GSTR-3B Table 4B for the next tax period, with interest at 18 percent a year under Section 50.
- Later payment: the company pays ₹2,95,000, half the invoice.
- Re-claim: half the ITC comes back. ₹90,000 × ₹2,95,000 ÷ ₹5,90,000 = ₹45,000, claimed in Table 4A for the month of payment.
- Still pending: ₹45,000 of ITC waits for the second ₹2,95,000.
Check: ₹45,000 re-claimed + ₹45,000 still reversed = ₹90,000.
Where do I report the reversal, and how do I track ageing in my books?
Report reversals in GSTR-3B Table 4B and re-claims in Table 4A. In the books, set a flag at around 150 days in the accounts payable ageing report in Tally or Zoho Books. That gives the team a month to pay or to plan the reversal. Keep a small register of reversed invoices so the credit is not forgotten when payment finally goes out.
Do not confuse this with Rule 37A. Rule 37A deals with a different case: credit claimed on invoices where the supplier has not filed GSTR-3B by 30 September of the following year.
What to read next
- Next in this series: Rule 37 and Rule 37A ITC reversal for supplier default
- Recovery rules side by side: ITC recovery under Rule 36(4) and Rule 37
- Earlier in this series: Can I claim ITC on an invoice not in my GSTR-2B?
- Matching at volume: GST reconciliation software
Inward GST matching (GSTR-2A, GSTR-2B, ITC and IMS) is on the TransactIG roadmap.
Content authored by practitioners with experience at Amazon India, Intuit QuickBooks, and the Tata Group. Meet the team →