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GST · Input tax creditSupplier has not filed GSTR-3B: what happens to the recipient's ITC?
Your supplier reported the invoice in GSTR-1, you claimed ITC – but the supplier never filed GSTR-3B or paid the tax. Rule 37A now requires you to reverse that credit. Here is how the rule works, when you can re-claim, and how to protect yourself.
Under Section 16(2)(c) of the CGST Act, ITC is available only if the tax charged has been actually paid to the government by the supplier. The recipient cannot see the supplier's cash ledger, so the GST system uses the supplier's GSTR-3B filing as the proxy, through Rule 37A.
How Rule 37A works
| Step | Date |
|---|---|
| Supplier reports invoice in GSTR-1; it appears in your GSTR-2B | Monthly |
| You claim ITC in GSTR-3B | Monthly |
| Supplier has not filed GSTR-3B for that period by 30 September of the following year | Trigger |
| Portal communicates the details in GSTR-2B | — |
| You reverse the ITC in GSTR-3B (Table 4(B)(2)) | By 30 November of the following year |
| Supplier later files GSTR-3B | You re-claim in Table 4(A)(5) |
Worked example
Example: Orbit Engineering (India) Pvt Ltd bought services worth ₹20,00,000 + ₹3,60,000 GST from a vendor in August 2025 and claimed ITC in August 2025. The vendor filed GSTR-1 but not GSTR-3B for August 2025, even by 30 September 2026.
- Reversal of ₹3,60,000 is required by 30 November 2026.
- If the ITC was used to pay output tax in August 2025, interest at 18% from 20 September 2025 (date of utilisation) to the date of reversal applies – roughly ₹70,000 for 13 months.
- If the vendor files the August 2025 GSTR-3B in January 2027, Orbit Engineering can re-claim ₹3,60,000 in its January 2027 GSTR-3B. Interest already paid is not refunded.
Beyond Rule 37A: department notices
The department also raises demands under Section 73/74/74A where the supplier is found non-existent or did not pay tax, using data analytics. Common allegations: "ITC availed on invoices of cancelled/non-existent dealers" or "supplier has not discharged tax". Responses should establish genuineness.
Evidence that helps
- Tax invoice and e-way bill;
- Lorry receipt, transporter's bill, toll receipts;
- Goods receipt note and stock register entry;
- Payment through bank, including the GST portion;
- Supplier's GSTIN status on the date of transaction;
- Communications and purchase orders.
The legal position
- In Arise India (Delhi High Court, 2017) the court read down the requirement for genuine buyers in the pre-GST VAT context, a principle frequently cited.
- Under GST, High Courts such as Calcutta (Suncraft Energy, 2023) and Madras have held that the department should first proceed against the defaulting supplier and cannot mechanically deny ITC to a bona fide recipient; other courts have upheld the statutory condition. The Supreme Court dismissed the department's appeal in Suncraft without deciding the larger issue.
- Practically, keep strong evidence and contest demands where the transaction is genuine.
Protective measures
- Vendor onboarding: check GSTIN status, filing history and physical existence.
- Pay GST portion on reflection: pay the tax component only after the invoice appears in GSTR-2B and the supplier has filed GSTR-3B (commercial clause in contracts).
- Indemnity clauses: supplier indemnifies for ITC loss due to its non-compliance.
- Monthly monitoring: check supplier GSTR-3B status for high-value vendors.
- Annual review: before 30 November, list suppliers with missing GSTR-3B and decide reversal.
Common mistakes
- Ignoring Rule 37A communications in GSTR-2B.
- Reversing late and paying more interest.
- Not re-claiming after the supplier files.
- Paying full invoice value to doubtful suppliers in advance.
Key takeaway
If a supplier does not file GSTR-3B by 30 September of the next year, reverse the ITC by 30 November and re-claim when they file. Keep evidence of genuine purchases to defend against demands. Our GST notice team handles supplier-default ITC cases and replies.
Official references
Provisions discussed (summaries in our Law Library):
- CGST Rules, 2017 – Section 37 / 37A: Reversal for non-payment to supplier / supplier non-filing
Official sources to verify the current text, notifications and circulars:
Frequently asked questions
What is Rule 37A?
It requires a recipient to reverse ITC where the supplier has not filed GSTR-3B for the period by 30 September of the following year. The reversal must be made by 30 November of that year, and ITC can be re-claimed when the supplier files.
Will I get interest liability on Rule 37A reversal?
Interest applies if the ITC was utilised, from the date of utilisation to the date of reversal, under Section 50(3).
Do courts protect genuine buyers?
Several High Courts have held that a genuine buyer who paid tax to the supplier and has evidence of the transaction should not suffer for the supplier's default, but the issue is not uniformly settled. Evidence of genuineness is essential.
How do I know which suppliers have not filed GSTR-3B?
The GST portal provides the filing status of suppliers; GSTR-2B also communicates Rule 37A information. Many accounting tools show supplier filing status.
Will Rule 37A reversal be auto-calculated?
The portal communicates supplier non-filing details in GSTR-2B, but the recipient must report the reversal in GSTR-3B.
Can I withhold payment to a non-filing supplier?
Commercially, yes, if your contract allows. Many businesses pay the GST portion only after the supplier files GSTR-3B.
Is interest refundable after re-claim?
No. Interest paid on reversal is not refunded when ITC is re-claimed.
This article is general information on the law as on 10 November 2026, written for educational purposes. It is not professional advice for your case. Section numbers under the Income-tax Act, 2025 should be confirmed with the official section mapping on the Income Tax Department website before use in filings.
Have a tax, GST or business question?
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