The rule
The second proviso to Section 16(2) of the CGST Act requires you to pay your supplier the value of the supply and the tax on it within 180 days of the invoice date. If you do not, the credit you took on that invoice must be reversed. Rule 37 of the CGST Rules sets out how.
How to reverse
From 1 October 2022, Rule 37(2) requires you to report the credit, in proportion to the amount not paid, as ITC reversed in the GSTR-3B for the tax period immediately following the 180th day, along with interest under Section 50. Partial payments count: if you paid 60% of the invoice value and tax, you reverse 40% of the credit.
| Invoice date | 180 days ends | Reverse in GSTR-3B for |
|---|---|---|
| 10-01-2026 | 09-07-2026 | July 2026 (filed in August) |
| 31-03-2026 | 27-09-2026 | September 2026 (filed in October) |
Use the ITC deadline calculator for any invoice date.
Interest
Interest under Section 50 runs from the date the credit was availed to the date it is reversed. Under Rule 88B, interest on wrongly availed credit is charged only where the credit was also utilised, for example where your electronic credit ledger balance fell below the amount at some point.
Getting the credit back
Once you pay the supplier, Rule 37(4) lets you re-avail the credit you reversed. There is no time limit on re-availing after payment, so the credit is not lost; it is deferred, at the cost of interest.
What the rule does not cover
- Supplies on which you pay tax under reverse charge.
- Supplies made without consideration that are still treated as supplies under Schedule I.
- Amounts added to the value of a supply under Section 15(2)(b), that is, amounts the supplier owed but you paid on its behalf.
In practice
- Keep a payment-date column in your purchase register so unpaid invoices can be aged against the invoice date.
- Review invoices crossing 150 days each month and decide: pay, or plan the reversal.
- Where you are holding back payment because the supplier has not filed their return, consider paying the value and holding only the GST; that still leaves the tax unpaid, so this rule continues to apply to the tax portion.
- Payments to micro and small enterprises have a much shorter clock under income tax. See the 45-day rule.
Frequently asked questions
Is the 180 days counted from the invoice date or the date of receipt of goods?
From the invoice date.
Do I lose the ITC permanently if I pay after 180 days?
No. You reverse it with interest, and re-avail it once you pay the supplier.
Does Rule 37 apply to reverse charge purchases?
No. Supplies on which tax is paid under reverse charge are excluded.