GST ITC Reversal After 180 Days - citizen guide 2026

If you claimed input tax credit (ITC) on a purchase but did not pay your supplier the invoice value plus tax within 180 days of the invoice date, you must reverse that ITC by adding it to your output tax liability in your next GSTR-3B, and pay interest on it. The good news: once you actually pay the supplier, you can re-claim the same credit, and there is no time bar on this re-availment. This is the rule under the second proviso to Section 16(2) of the CGST Act, read with Rule 37 of the CGST Rules.

GST input tax credit is meant to flow only when the supply chain is genuinely paid for. The law assumes that if you have taken credit on an invoice, you will actually pay the supplier so the supplier can deposit the tax. The 180-day rule stops a buyer from sitting on credit while never paying the vendor. If the payment does not happen in time, the credit is treated as unearned and must be given back, with interest, until you settle the bill.

What counts as payment. You must pay the supplier the full value of the supply plus the tax charged on the invoice. Paying only the base amount and holding back the GST portion does not satisfy the rule. The clock runs from the date of issue of the invoice, not from the date you received the goods or filed your return.

For every purchase invoice on which you have taken ITC, note the invoice date and add 180 days. If the supplier is still unpaid (in full or in part) on the 181st day, the reversal is triggered for the unpaid portion.

You must reverse the credit while filing the GSTR-3B for the tax period immediately following the expiry of the 180 days. Report the reversal in Table 4(B) of GSTR-3B (ITC reversed). This adds the amount back to your output tax liability for that month, so you effectively pay it out through your return.

Interest is payable under Section 50 of the CGST Act at 18 percent per year on the reversed amount. There has been some dispute over the exact start date for the interest, so compute it carefully and keep your working; if in doubt, a tax professional can confirm the period for your facts. Pay the interest along with the reversal in the same GSTR-3B cycle.

When you finally pay the supplier the value plus tax, you become entitled to take the credit back. Re-avail it in a later GSTR-3B once payment is made. Importantly, the normal time limit for claiming ITC under Section 16(4) does not block this re-availment, so even a credit reversed long ago can be reclaimed once the bill is settled.

If you are unsure how reversals and re-claims interact with mismatches in your credit ledger, see our guide on a GST ITC mismatch and CBIC complaint.

Partial payment means proportionate reversal. Since the rule was substituted with effect from 1 October 2022 (Notification 19/2022-Central Tax), reversal is required only on the portion of the credit relating to the amount not paid, not the whole credit. So if you have paid 60 percent of an invoice within 180 days, you reverse only the ITC linked to the unpaid 40 percent.

Exceptions where the 180-day rule does not bite. Rule 37 itself carves these out:

• Reverse charge supplies. Where you, the recipient, are the one paying GST on a reverse charge basis, the 180-day reversal rule does not apply.
• Supplies without consideration under Schedule I. For deemed supplies made without consideration as specified in Schedule I of the CGST Act, the value is treated as having been paid, so no reversal is triggered.
• Section 15 additions. Amounts the supplier was required to add to value under Section 15(2)(b) are also deemed to have been paid.

Dr. Shrawan Kumar Pathak, who runs a small trading firm, once held back a vendor payment over a quality dispute that dragged past six months. His accountant flagged the looming 180-day reversal, they reversed the proportionate credit in GSTR-3B with interest, and when the dispute settled and the vendor was paid, they simply re-claimed the credit in a later return. No credit was lost, only the interest for the delay.

For the wider picture on registering and complying under GST, see our guides on how to apply for GST registration and on claiming a refund of excess balance in your cash ledger via RFD-01.

From the date of issue of the invoice. Add 180 days to the invoice date. If the supplier is still unpaid on the 181st day, you must reverse the related ITC in your next GSTR-3B.

You reverse only the proportionate ITC linked to the unpaid portion. The credit on the part you actually paid (value plus tax) stays with you. This proportionate treatment has applied since the rule was amended with effect from 1 October 2022.

Yes. Once you pay the supplier the value plus tax, you can re-avail the credit in a later GSTR-3B. The Section 16(4) time limit for claiming ITC does not apply to this re-availment, so there is no separate deadline blocking the re-claim.

Yes. Interest under Section 50 of the CGST Act applies at 18 percent per year on the amount you reverse. Pay it together with the reversal in the same GSTR-3B. The exact start date for interest has been debated, so keep your computation on record.

No. Supplies on which you pay GST on a reverse charge basis are excluded from the 180-day reversal rule under Rule 37. Schedule I supplies made without consideration are also treated as paid and do not trigger reversal.

Run a simple ageing report of your purchase invoices and flag any approaching 180 days with the supplier still unpaid. Reverse the proportionate ITC with interest in the right GSTR-3B, keep the payment proof so you can re-claim once you settle, and document your interest computation. For a plain-language walkthrough of your wider rights as a taxpayer and citizen, read The RTI Playbook.

• CGST Act 2017, Section 16(2) second proviso and third proviso; Section 50.
• CGST Rules 2017, Rule 37 (substituted with effect from 1 October 2022 by Notification 19/2022-Central Tax).
• Central Board of Indirect Taxes and Customs (CBIC), GST rule repository.

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