Between the 14th and the 20th of every month, accounts teams review purchase registers against auto-populated numbers. Often, credit previously reversed must be brought back into the electronic credit ledger. Businesses face temporary reversals for unpaid vendor invoices beyond 180 days or year-end adjustments. Reclaiming this credit requires following the exact reporting mechanics in GSTR-3B so you avoid automated scrutiny under DRC-01C.
The legal basis for reclaiming reversed ITC
The rules governing the input tax credit reclaim procedure stem directly from the CGST Act and CGST Rules. Understanding which reversals are temporary versus permanent determines whether you can legally re-avail credit.
Under the second proviso to Section 16(2) of the CGST Act, if a recipient fails to pay the supplier the value of supply along with tax within 180 days from the invoice date, the availed credit must be paid along with interest under Section 50. The third proviso to Section 16(2) provides the legal right to reclaim:
“the recipient shall be entitled to avail of the credit of input tax on payment made by him to the supplier of the amount towards the value of supply of goods or services or both along with tax payable thereon.” Section 16(2) third proviso, CGST Act
This statutory mechanism is implemented by Rule 37(2) of the CGST Rules, which confirms that upon making payment to the supplier, the registered person is entitled to re-avail the input tax credit. If you make a partial payment, you are entitled to reclaim credit proportionate to the amount paid.
In practice, temporary reversals also occur under Section 16(2)(b) when goods or services have not yet been received in full, or under Section 16(2)(c) pending supplier tax payment. Once those conditions are satisfied, the credit becomes reclaimable.
Permanent reversals cannot be reclaimed: Reversals under Section 17(5) for blocked credits, banking reversals under Rule 38, or exempt supply portions under Rule 42 and Rule 43 are permanent. They are declared in Table 4(B)(1) of GSTR-3B. Never attempt to reclaim amounts reversed under Table 4(B)(1).
How GSTR-3B handles temporary reversals and reclaims
The GST portal distinguishes between permanent and temporary reversals in Table 4 of GSTR-3B. According to the official GSTN GSTR-3B user manual, reporting reclaims involves two specific steps across Table 4:
| GSTR-3B Table | Nature of entry | Effect on electronic credit ledger |
|---|---|---|
| Table 4(B)(1) | Permanent reversals (Rule 38, 42, 43 and Section 17(5)) | Reduces eligible credit permanently |
| Table 4(B)(2) | Temporary reversals (Rule 37 180-day delay, goods not received) | Reduces credit for current tax period; eligible for future reclaim |
| Table 4(A)(5) | All other ITC (includes current period 2B credit + reclaimed ITC) | Increases gross credit before reversals |
| Table 4(D)(1) | ITC reclaimed which was reversed under Table 4(B)(2) earlier | Informational disclosure matching the reclaim in Table 4(A)(5) |
When you reverse credit temporarily under Rule 37, you place the amount in Table 4(B)(2). In the tax period when you subsequently clear the supplier invoice, you reclaim this credit by adding it to the auto-populated value in Table 4(A)(5). At the same time, you enter the exact reclaimed amount into Table 4(D)(1).
Table 4(D)(1) is an informational disclosure field, but it is critical. It explains to the GST portal why your Table 4(A)(5) claim may exceed the auto-populated figure from your current GSTR-2B. Without reporting in Table 4(D)(1), an upward modification in Table 4(A)(5) triggers automated red flags and DRC-01C mismatch notices.
Step by step: how to file a reclaim in GSTR-3B
Follow these steps on the GST portal when preparing your monthly return:
- Identify cleared payments in books by extracting vendor payments made during the tax period where the underlying invoice previously suffered a Rule 37 reversal.
- Download and reconcile GSTR-2B against your current month purchase register. Our guide on ITC conditions outlines how GSTR-2B governs fresh inward credits.
- Log in to the GST portal, navigate to Services > Returns > Returns Dashboard, select the tax period, open Form GSTR-3B and click Prepare Online.
- Update Table 4(A)(5) by adding your verified reclaim amount to the pre-filled number from GSTR-2B. The tile may turn red because you modified the auto-populated figure upwards.
- Report in Table 4(D)(1) under the label "ITC reclaimed which was reversed under Table 4(B)(2) in earlier tax period" by entering the exact reclaimed credit figure.
- Verify that net ITC in Table 4(C) equals Table 4(A) minus Table 4(B), then save the form before proceeding. Check our walkthrough on GSTR-3B tables format for full structural checks.
Worked example: Rule 37 reversal and subsequent reclaim
Consider a distributor, Bharat Logistics, purchasing commercial packing materials. Here is how the transactions and tax filings play out across several months:
- 15 October 2025: Bharat Logistics receives invoice INV-401 for ₹1,00,000 plus 18% IGST of ₹18,000. Total payable is ₹1,18,000. Bharat Logistics claims ₹18,000 ITC in its October 2025 GSTR-3B filed in November 2025.
- 13 April 2026: The 180-day window expires without Bharat Logistics paying the supplier due to a commercial dispute.
- April 2026 GSTR-3B (filed May 2026): Under Rule 37(1), Bharat Logistics reverses ₹18,000 in Table 4(B)(2) and pays the mandatory interest under Section 50 via the cash ledger.
- 10 September 2026: Bharat Logistics settles the dispute and pays the complete invoice amount of ₹1,18,000 to the vendor via bank transfer.
- September 2026 GSTR-3B (filed October 2026): Bharat Logistics reclaims the ₹18,000 credit.
| GSTR-3B September 2026 Table | Auto-populated from 2B | Adjusted / Reported | Remarks |
|---|---|---|---|
| Table 4(A)(5) (All other ITC) | ₹1,20,000 | ₹1,38,000 | Added ₹18,000 reclaimed credit to current 2B |
| Table 4(B)(2) (Others reversal) | ₹0 | ₹0 | No new temporary reversals this period |
| Table 4(C) (Net ITC available) | ₹1,20,000 | ₹1,38,000 | Credited directly to electronic credit ledger |
| Table 4(D)(1) (Reclaimed ITC) | ₹0 | ₹18,000 | Mandatory disclosure explaining the upward edit |
In this example, the net credit credited to the electronic credit ledger is ₹1,38,000. Because Table 4(D)(1) explicitly declares ₹18,000, tax authorities can trace the reclaim back to the original Table 4(B)(2) reversal in April 2026.
Audit trails and common mistakes to avoid
Handling reclaims carelessly can lead to scrutiny notices and demand orders. Keep these operational safeguards in place:
- Omitting Table 4(D)(1) entries is dangerous. If you increase Table 4(A)(5) without declaring the amount in Table 4(D)(1), GST automated systems treat your claim as an unexplained excess over GSTR-2B. This frequently triggers an automated DRC-01C notice under Rule 88D. You can read our guide on how to reply to DRC-01C notices.
- Never confuse Table 4(B)(1) and 4(B)(2). Never book temporary reversals in Table 4(B)(1). Table 4(B)(1) is reserved for permanent reversals under Section 17(5) and Rule 38. Reclaiming an amount previously reported in 4(B)(1) invites immediate audit objections.
- Remember that Section 50 interest cannot be reclaimed. When you reversed ITC after 180 days, you paid interest on the delayed tax payment. While you can re-avail the principal tax credit of ₹18,000 upon payment, the interest paid under Section 50 is never refundable or reclaimable.
- Maintain bank payment proof for every invoice. Always link your payment voucher, bank debit advice, and original vendor invoice. If a tax officer audits your annual return or issues an intimation, you must produce proof that consideration and tax were actually paid to the supplier.
- Handle annual return reporting correctly. In Form GSTR-9, Table 8C records ITC on inward supplies received during the financial year but availed in the next financial year. Crucially, as clarified in GSTN guidance, Table 8C strictly excludes ITC that was reversed in Table 4(B) and subsequently reclaimed.
Related guides
- ITC reclaim lapsed time limit: can you reclaim lapsed input tax credit in GST
- GSTR 3B Table 11 adjustments for credit debit notes quarterly
- How to calculate input tax credit and the order in which it is set off
- Format of GSTR-3B tables explained
Frequently asked questions
Can you reclaim ITC that was reversed under Rule 37 after paying the supplier?
Yes. Under Section 16(2) second and third provisos of the CGST Act and Rule 37(2), you are entitled to re-avail the input tax credit once you pay the invoice value and tax to the supplier.
Does the Section 16(4) time limit apply to reclaiming reversed ITC?
The statutory deadline under Section 16(4) applies to taking initial input tax credit on invoices or debit notes. Re-availing credit previously reversed under Rule 37 upon clearing supplier dues is an explicit statutory right without the annual return cutoff.
Where do you report reclaimed ITC in GSTR-3B?
You include the reclaimed amount in Table 4(A)(5) under All other ITC to add it to your electronic credit ledger, and you simultaneously declare the exact figure in Table 4(D)(1) as reclaimed ITC.
Can ITC reversed under Section 17(5) or Rule 38 be reclaimed later?
No. Reversals under Section 17(5) and Rule 38 are permanent and absolute reversals. They are reported in Table 4(B)(1) and cannot be reclaimed.
Reconcile your purchase register with GSTR-2B
Before preparing your GSTR-3B return and calculating eligible credit, ensure your purchase register matches your auto-populated inward data. gstr2bmatch.in is a free GSTR-2B reconciliation tool for Indian accountants, small CAs and SMB owners. It reads their GSTR-2B and purchase register in the browser and shows, with rupee figures, which invoices are missing, mismatched or stuck in IMS Pending. Your GSTR-2B and purchase register files are read in your browser and never uploaded to any server.
Last checked: 13 October 2026. Sources: CBIC Section 16 CGST Act, GSTN GSTR-3B User Manual, Notification 19/2022-Central Tax (Rule 37).