180 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Credit is taken when the invoice is received. Payment to the supplier can come much later. The second proviso to s.16(2) sets an outer limit on that gap — and the consequence of missing it is not a deferral, it is a reversal with interest.
Where a recipient fails to pay the supplier the value of supply along with tax within 180 days of the date of the supplier's invoice, an amount equal to the credit availed shall be paid by him along with interest under s.50. The third proviso then allows the credit to be re-availed on payment, with no time limit. Rule 37, substituted with effect from 01.10.2022, requires the reversal to be made in GSTR-3B for the tax period immediately following the 180-day period, and it is proportionate to the amount unpaid. Reverse charge supplies are excluded.
The clock
180 days from the date of issue of the invoice by the supplier — not from receipt of goods, not from the due date under the contract, not from the accounting entry.
What must be paid within that window is the value of supply along with the tax payable thereon. Paying the base and withholding the GST does not stop the clock.
What Rule 37 requires
The substituted Rule 37, effective 1 October 2022:
Rule 37(1) — a registered person who has availed credit on an inward supply, other than one on which tax is payable on reverse charge, but fails to pay the supplier the amount towards the value of supply along with the tax within 180 days from the date of issue of the invoice, shall pay an amount equal to the input tax credit availed in respect of such supply, proportionate to the amount not paid, along with interest under s.50, in FORM GSTR-3B for the tax period immediately following the period of 180 days.
Two changes from the pre-2022 version worth noting:
"Proportionate to the amount not paid." A part payment reduces the reversal proportionately. Under the earlier drafting the position was less clear and departments sometimes sought full reversal for a partial default.
Reversal in GSTR-3B, not as an addition to output tax liability. The Finance Act, 2023 aligned the second proviso to s.16(2) with this, substituting "added to his output tax liability, along with interest thereon" with "paid by him along with interest payable under section 50".
The practical effect is the same in cash terms, but the characterisation matters — it is a payment of an amount equal to the credit, not an output tax liability, which affects how it appears in the return and in reconciliations.
The reclaim
Rule 37(4) and the third proviso to s.16(2): the registered person shall be entitled to re-avail the credit on making the payment to the supplier of the value along with tax.
Critically, Rule 37(4) provides that the time limit in s.16(4) shall not apply to a claim of re-availing under this rule.
So there is no deadline on the reclaim. Credit reversed in FY 2023-24 for non-payment can be re-availed in FY 2027-28 if the supplier is paid then.
The interest, however, is not refunded. The cost of the delay is real.
What is excluded
Reverse charge supplies. Expressly excluded from Rule 37(1). The recipient pays the tax itself, so there is nothing turning on payment to the supplier.
Supplies under Schedule I made without consideration. The second proviso to Rule 37(1) deems the value to have been paid for supplies made without consideration as specified in Schedule I. A branch or group supply with no payment does not trigger reversal.
The value of supplies on which tax is payable in full by the recipient. Same reasoning as reverse charge.
Amounts added to value under s.15(2)(b). The second proviso to Rule 37(1) also deems the value added in terms of s.15(2)(b) — the supplier's liability discharged by the recipient — to have been paid. That covers free-issue material situations where the value was notionally added but no payment passed. Free-issue materials and works contract value →
Rule 37A: a different, and easier, reversal to miss
Do not confuse Rule 37 with Rule 37A, inserted with effect from 26.12.2022.
Rule 37A deals with the supplier's failure to file GSTR-3B. Where the supplier furnished the invoice details in GSTR-1 but did not file GSTR-3B for that period by 30 September following the end of the financial year in which the credit was availed, the recipient must reverse the credit by 30 November of that year. Failing that, the amount is payable with interest.
And the credit can be re-availed once the supplier files that GSTR-3B.
Two different triggers — your non-payment under Rule 37, and your supplier's non-filing under Rule 37A. Both produce a reversal; only Rule 37 carries a 180-day clock. ITC where the supplier defaults →
Practical controls
- Run a 180-day ageing on the creditors ledger, keyed to the invoice date, not the accounting date.
- Include the tax in the payment test. Value paid, tax withheld, is a default.
- Track part payments — the reversal is proportionate.
- Watch retention money in works contracts. Retention held beyond 180 days is unpaid consideration and triggers proportionate reversal on the retained portion.
- Disputed invoices are the classic exposure. A quality dispute that parks an invoice for eight months produces a reversal even if the dispute is later resolved in the supplier's favour — the reclaim follows payment.
- Record the reclaim with the payment reference, since there is no time limit and the audit trail may be needed years later.
Key takeaways
- 180 days from the supplier's invoice date to pay value and tax.
- Failure → reverse an amount equal to the credit, proportionate to the unpaid amount, with interest under s.50.
- Reversal is made in GSTR-3B for the period immediately following the 180 days.
- Reclaim on payment, with no time limit — s.16(4) does not apply.
- Reverse charge and Schedule I supplies without consideration are excluded.
- Rule 37A is a separate reversal triggered by the supplier's non-filing of GSTR-3B.
Read next
- Four Conditions for Claiming ITC Under Section 16(2)
- ITC Where the Supplier Defaults in Paying Tax
- Interest on Delayed GST Payment: Section 50
- Free-Issue Materials and the Value of a Works Contract
Disclaimer: Positions stated as on 5 September 2026, based on the CGST Act and Rules as amended to 31 March 2026 (ICAI Bare Law, 12th edition).