Under the second proviso to Section 16(2) of the CGST Act, 2017, read with Rule 37 of the CGST Rules, a recipient who fails to pay the supplier the value of the supply along with the tax within 180 days from the date of the invoice must add the input tax credit availed on that invoice to its output tax liability (reverse it), with interest under Section 50 from the date of availing the credit. Once the recipient pays the supplier, it may re-avail the credit, and the usual time limit for availing ITC does not apply to such re-availment.
How the 180-day rule works in India
The buyer claims ITC when the invoice appears in GSTR-2B. If 180 days pass without payment to the supplier, the buyer must, in the GSTR-3B for the month after the 180 days expire, add the ITC to its output tax and pay interest at 18% a year from the date it originally took the credit. The reversal is proportionate where part of the invoice has been paid. When the buyer eventually pays the supplier, it re-avails the credit in that month. Auditors check creditor ageing for invoices over 180 days during GST audits, and departmental audits routinely demand this reversal with interest.
Why it matters for getting paid
An invoice unpaid for 180 days costs the buyer the tax credit and 18% interest on it, on top of whatever interest the supplier claims. For a ₹10 lakh invoice at 18% GST, that is ₹1,80,000 of credit lost until payment, plus interest. Mentioning the reversal in a reminder or legal notice brings the buyer's tax team into the conversation. The rule also makes the GSTR-2B record a useful piece of evidence: the buyer claimed credit on the invoice it says it disputes. See tax invoice.
How FundRaksha uses it
FundRaksha's notices to corporate buyers set out the 180-day position for each old invoice and, for MSME clients, combine it with Section 16 interest and Section 43B(h). The combination reaches finance heads quickly, which is one reason about 60% of cases settle without filing. Fee: 30% of recovery only.
Worked example (hypothetical)
A Pune auto-parts supplier issues an invoice dated 1 January for ₹10,00,000 plus 18% GST (₹1,80,000), total ₹11,80,000. The buyer claims ITC of ₹1,80,000 in its January return. By 30 June (180 days) nothing is paid. In its return for July the buyer must reverse ₹1,80,000 and pay interest at 18% from the date of availing (say 20 February) to the date of reversal (say 20 August): ₹1,80,000 × 18% × 181/365 ≈ ₹16,100. The buyer loses the use of ₹1,80,000 until it pays the supplier. The supplier's notice on 5 July points this out alongside its own interest claim; the buyer pays ₹11,80,000 on 25 July and re-avails the credit.
Last reviewed: 2026-10-08. Information for Indian businesses; not legal advice.