Rule 37A of GST - ITC Reversal on Non Payment of Tax

Rule 37A - Reversal of Input Tax Credit in Case of Non-Payment of Tax by the Supplier and Re-Availment Thereof:

Where a registered person has availed Input Tax Credit (ITC) in the GSTR-3B return for any tax period concerning invoices or debit notes, for which details have been furnished by the supplier in GSTR-1 or IFF (Invoice Furnishing Facility). However, if the supplier has not submitted the GSTR-3B return for supplies related to those invoices or debit notes by the end of the relevant financial year until 30th September, then in such cases, the registered person who claimed ITC against those invoices or debit notes must reverse the claimed ITC by the end of the relevant financial year or before filing the GSTR-3B, whichever is earlier.

But if the ITC is not reversed within the prescribed time frame, interest will be charged as per Section 50 at the time of making the payment.

Provided further that if the supplier subsequently furnishes the GSTR-3B return for that tax period, the registered person may re-avail the credit of ITC.

In simple terms, if a registered person has claimed ITC based on invoices or debit notes, but the supplier hasn't filed their GSTR-3B return for those supplies by the end of the relevant financial year until 30th September, the registered person must reverse the ITC claimed by the earlier of the end of the relevant financial year or before filing their GSTR-3B return. If they don't reverse it in time, interest will be charged as per Section 50. However, if the supplier later files the GSTR-3B return for that tax period, the registered person can re-avail the ITC.

https://taxinformation.cbic.gov.in/view-pdf/1009584/ENG/Notifications

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