GST Rule 37: ITC Reversal if Supplier Is Not Paid Within 180 Days
GST Rule 37 requires proportionate ITC reversal where value plus tax is not paid to the supplier within 180 days, subject to specified exceptions and re-availment rules.
GST Rule 37 links input tax credit with payment to the supplier.
What is the 180-day rule?
Where a registered person has availed ITC but fails to pay the supplier the value of supply plus tax within 180 days from the invoice date, the proportionate ITC relating to the unpaid amount must be reversed or paid in the prescribed manner.
Partial payment means proportionate reversal
The rule applies proportionately. If only part of the invoice remains unpaid, the reversal should relate to the unpaid portion rather than automatically reversing the entire credit.
Can the ITC be reclaimed later?
Yes. Once the payment condition is subsequently satisfied, the credit can generally be re-availed subject to the applicable law.
Important exception
The 180-day payment condition does not apply in the same way where tax is payable under reverse charge.
Practical control
Maintain an ageing report of invoices on which ITC has been claimed but vendor payment remains pending. This is different from normal creditors ageing because the ITC-reversal clock runs from the invoice date.
Rule 37 is easiest to manage monthly. A year-end manual review of thousands of invoices creates avoidable risk.