ITC Reversal Under GST: Supplier Not Paid in 180 Days (Rule 37) and Supplier Not Filing GSTR-3B (Rule 37A)

GST gives you credit on purchases on trust that you will pay the supplier. If a bill stays unpaid for too long, or the supplier never pays the tax he collected, the law asks you to give the credit back for a while. Both rules are easy to follow once you watch two lists every month: old unpaid bills and suppliers who have not filed GSTR-3B.

Rule 37: unpaid for 180 days

• If you do not pay the supplier the bill value including tax within 180 days from the invoice date, the ITC on the unpaid part must be reversed.
• Show the reversal in GSTR-3B of the tax period right after the 180 days end, in table 4(B)(2), and pay interest under section 50 from the date the credit was taken.
• When you pay the supplier later, reclaim the credit in table 4(A)(5) and show it in 4(D)(1). The portal's Electronic Credit Reversal and Re-claimed Statement keeps the running balance.
• Part payment: reverse only the ITC on the part that is unpaid.
• Not covered: reverse-charge supplies, deemed supplies without consideration (Schedule I), and amounts added to value under section 15(2)(b) that you paid the supplier.

Rule 37A: supplier collected tax but did not file GSTR-3B

• If a supplier reported your bill in GSTR-1 (so it is in your 2B) but has not filed GSTR-3B for that period by 30 September after the year ends, you must reverse that ITC.
• Reverse it in a GSTR-3B filed on or before 30 November of that year, in table 4(B)(2), with interest if the credit was used.
• Reclaim it once the supplier files his GSTR-3B.
• The portal informs you through GSTR-2B; still keep your own list, because the credit and the interest are yours to handle.

A worked example (rule 37)

How to track it in BUSY

1. Keep creditors bill-by-bill

   Purchase bills must be adjusted bill-by-bill against payments, or ageing will be wrong. See bill-by-bill outstanding in BUSY.

2. Monthly ageing of creditors

   Run the creditors' ageing with a 150-day bucket. Bills crossing 150 days are your warning list: pay them or prepare the reversal.

3. Reversal journal

   Post the reversal and reclaim through a GST journal with clear narration (bill number, date, days). Keep a separate ledger such as "ITC reversed - rule 37" so the balance always equals the credit waiting to be reclaimed.

4. Supplier filing check

   Every month, look at suppliers whose bills appear in GSTR-2B and check their return filing on the portal for the big ones. Rule 37A cases usually come from the same few suppliers.

5. MSME suppliers

   Income-tax has its own 45-day rule for MSME suppliers: see section 43B(h). Paying MSME suppliers on time solves both problems.

Clean ITC starts with clean matching: the credit you take should first match GSTR-2B bill by bill.

Tables, dates and interest rules are as notified at the time of writing and are amended from time to time. Confirm with the current notification or your CA.

Need help setting this up in BUSY? Our team installs and trains remotely anywhere in India. Call +91-93149 87634 or see BUSY services.

Related: Supplier not filed GSTR-1 · MSME 45-day rule · Bharat GST Champ

Updated 11-11-2026 · Bharat Busy Care, Authorised BUSY Platinum Partner