Rule 37: ITC Reversal on Non-Payment Within 180 Days

🔄 Rule 37: ITC Reversal on Non-Payment Within 180 Days – What Businesses Must Know

Claiming Input Tax Credit (ITC) is a major benefit under the GST regime, but it comes with specific conditions. One such important compliance requirement is laid out in Rule 37 of the CGST Rules, which mandates reversal of ITC if payment to suppliers is not made within 180 days from the date of the invoice.

📌 What is Rule 37?

Rule 37 of the Central Goods and Services Tax (CGST) Rules, 2017 states:

If a recipient fails to pay the value of supply along with GST to the supplier within 180 days from the date of issue of invoice, the ITC claimed on such supply must be reversed, along with applicable interest.

🧾 Key Points of Rule 37 Compliance

✅ Applicable To:

• Registered taxpayers who have availed ITC on inward supplies

📅 Time Limit:

1. 180 days from the invoice date to make full payment to the supplier (including GST)

🔁 ITC Reversal:

1. ITC must be added back to output liability (via Table 4(B)(2) of GSTR-3B)
2. Interest under Section 50 must also be paid for the delayed period

🔄 Reclaiming Reversed ITC:

1. Once the payment is made to the supplier (including GST), the reversed ITC can be reclaimed in any subsequent month

🧮 Example

If you availed ITC of ₹50,000 on an invoice dated 1st January 2025, but haven’t paid your supplier by 30th June 2025, then:

1. ITC of ₹50,000 must be reversed in GSTR-3B for June 2025
2. Interest is applicable from the date of availing ITC until the reversal month
3. If payment is made later, you can reclaim the ITC in the month of payment

⚠️ Exceptions

1. No reversal is required for import of goods (as IGST is paid directly to Customs)
2. Partial payment made within 180 days? Then reverse ITC proportionately

✅ How ThinkBizFilings Can Help

Managing ITC compliantly is crucial to avoid penalties and interest. At ThinkBizFilings, we assist with:

1. Regular ITC reconciliations
2. Automated 180-day tracking reports
3. GSTR-3B filing with accurate reversals and reclaim entries
4. Expert advisory on interest calculations and ITC optimization

📞 Stay GST Compliant – Partner with ThinkBizFilings for Smart ITC Management